As Putin Edges Out Obama In Syria Crisis, US Moves To Seize $US230 Million From Alleged Russian Fraudsters

The Russia-U.S. relationship is the focus of a lot of attention this week, with President Vladimir Putin widely perceived
to have out-maneuvered President Barack Obamaand winning
respect from unlikely corners.

Syria, however, is not the only issue between Russia and the U.S. at the moment.

Manhattan U.S. Attorney Preet Bharara announced Tuesday that authorities are seeking to seize luxury apartments and other property said to be used to launder funds by Russian criminal networks.

According to a 63-page lawsuit, Cyprus-based company Prevezon Holdings Ltd. and its New York affiliates must hand over more than $US230 million for trying to launder tax fraud money with the purchase of real estate in the U.S. — notably the Alexander Condominium building at 250 East 49th street.

The case relates specifically to the notorious case of Sergei Magnitsky, the Moscow-based lawyer who was imprisoned and died mysteriously in jail after calling attention to an alleged Russian tax fraud scheme.

Magnitsky had been working for Hermitage Capital, a fund managed by American Bill Browder. After Hermitage’s Moscow offices were raided in 2007, Magnitsky began investigating and later testified that he had uncovered a huge scam by top police officials to embezzle $US230 million in taxes from money that Hermitage Fund companies had paid in 2006.

Magnitsky alleged that the corrupt cops had used corporate seals and documents seized in the raid on Hermitage’s Moscow office and set up fake companies under the same names, which then received a full tax rebate.

The story quickly turned tragic. In November 2008, Magnitsky himself was charged with tax evasion and taken to prison, before he unexpectedly died in November 2009. His death was originally attributed to a an abdominal membrane rupture before officials changed that to a heart attack.

Magnitsky is one of four witnesses in the tax fraud who have died in mysterious circumstances. While an official investigation into his death in 2009 yielded little results, last year a new report, supported by Russia’s Presidential human rights council, found that police torture appeared to have contributed to Magnitsky’s death. Russian officials have never admitted any wrongdoing. Magnitsky himself was later found guilty of tax fraud.

Magnitsky’s death and the events surrounding it significantly soured relations between the U.S. and Russia, effectively derailing Obama’s ballyhooed “reset.” Hermitage founder Browder lobbied tirelessly for harsher sanctions on the alleged perpetrators, and last year he succeeded in getting a law passed that effectively blacklisted officials involved in the case from the U.S. and from holding American assets — what has become known as the “Magnitsky Act.”

Of course, Russia didn’t take this lying down. In response to the 18 names on the U.S. list, Russia released its own list of US officials barred from Russia for alleged human rights abuses. The Russian Duma also responded by banning the adoption of Russian orphans by American families.

Now U.S. authorities believe that Prevezon Holdings is part of the network of companies set up by suspects in the Magnitsky case. The action seems likely to be controversial, but U.S. authorities seem steadfast — despite what may be bad timing.

“As alleged, a Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate,” Bharara said in a statement obtained by Reuters. “While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place.”

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