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Russia Accuses Magnitsky Boss Browder of Gazprom Fraud

Russian investigators said Tuesday they were probing the involvement of UK-based Hermitage Capital head William Browder in a scheme to “illegally purchase” Gazprom shares.

MOSCOW, March 5 (RIA Novosti) – Russian investigators said Tuesday they were planning to bring fresh criminal charges against UK-based businessman William Browder, the ex-boss of a Russian lawyer whose 2009 death in a Moscow jail triggered a furious diplomatic row between Moscow and Washington.

The latest allegations have to do with Browder’s one-time ownership of a stake in Russia’s state-run energy giant Gazprom.

Investigators said in a statement that Browder, the head of equity fund Hermitage Capital, “ran companies that took part in the purchase of Gazprom shares in 1999-2004 at domestic-market prices, obviating a ban on their sale to foreigners.” They likewise said “he tried to get access to the company’s financial reporting documents” and to influence decision-making via the board of directors.

The Interior Ministry, which is in charge of the investigation, declined to comment more specifically by telephone on the precise nature of the charges that would be brought against Browder.

The development comes less than a week before Browder and the deceased lawyer, Sergei Magnitsky, are due to face trial in a separate case on charges of tax evasion. Magnitsky was detained in November 2008 after alleging a $230 million tax-embezzlement scheme by Russian officials and died less than a year later in a pre-trial detention center. Russian officials have denied his claims.

Magnitsky’s family is boycotting the March 11 trial, believed to be the first time a dead man has faced legal prosecution in either Russian or Soviet history. Browder will be tried in absentia.

The causes of Magnitsky’s death have been a source of contention. Investigators initially said the 37-year-old lawyer had died of “heart failure,” but in 2011 the Kremlin’s human rights council said there were “grounds to suspect that Magnitsky’s death was the result of a beating” and the denial of medical assistance. Late last year, however, Russian President Vladimir Putin reverted to the heart-failure explanation in a nationally broadcast press conference, seemingly dismissing the findings of his ombudsmen. Two prison officials were investigated in connection with Magnitsky’s death, but one was acquitted and the other not charged.

Browder has alleged Magnitsky was murdered as revenge for uncovering the purported embezzlement scheme. Russian officials have repeatedly denied the claim.

New Charges

The new charges against Browder are linked to a scheme in which he allegedly used Russian front companies controlled by other entities, including foreign ones, to “illegally purchase” Gazprom shares, a senior police official in charge of investigating organized crime and corruption told reporters Tuesday.

Until 2005, foreign investors registered in Russia were prohibited by presidential decree from purchasing stock in Gazprom unless they had written permission from the state or bought shares through so-called American Depositary Receipts, which sold at prices higher than in Russia, the police said.

Hermitage Capital has called the new allegations unfounded.

“The ownership of Gazprom shares was completely legal,” the company said in a statement. “It was approved by the Russian authorities and the Russian Federal Securities Commission as well as Gazprom itself. If one took these accusations seriously then every foreign investor in Russia should be under arrest.”

The police official, Mikhail Alexandrov, said Browder’s aim was “not only to benefit personally,” but to influence Gazprom and gain information about the company, which is “of strategic significance” to Russia.

“Mr. Browder’s appetite for organizing influence over the activities of this company clearly grew,” he said at Tuesday’s press conference.

Russian police have estimated that Browder’s activities caused “damages” to the tune of 3 billion rubles (about $98 million at today’s rate), but how that sum was calculated is not clear.

The Interior Ministry said it has informed Browder that he is a suspect in the case through the British Embassy, as Browder, who is US-born, holds British citizenship. Investigators also said they would issue an international arrest warrant after charges have been brought and hoped for cooperation from Great Britain, the European Union and the United States.

Browder has been barred from Russia since 2005 on national security grounds. Formerly the largest foreign investor in Russia, he has spearheaded a massive campaign to punish those he alleges are responsible for Magnitsky’s death.

“These absurd allegations are clearly motivated by the retaliation to our global campaign for justice for Sergei Magnitsky,” Browder said in a statement. “Our campaign angers and scares the Russian officials who want to keep their criminally obtained wealth abroad.”

Dead Man on Trial

The upcoming trial against Magnitsky was made possible after Russia’s top court ruled in 2011 that relatives of deceased suspects could seek to clear their loved ones’ names. The decision to go ahead with the trial was made despite objections from Magnitsky’s mother.

Amnesty International has slammed the decision to push ahead with the trial, calling it an indication of Russia’s “worsening human rights record.”

The pro-Kremlin NTV channel – notorious for a string of sensational exposes of Kremlin critics – is due to air a program devoted to Browder and the Magnitsky case on Wednesday, just four days ahead of the trial.

“Who benefited from Sergei Magnitsky’s death?” says a trailer for the program. “No one but Browder.”

US-Russia Tensions

Magnitsky’s death sparked tension between Russia and the United States, which late last year introduced sanctions against Russian officials accused of human rights violations.

The adoption of the so-called Magnitsky Act came after heavy lobbying from Browder and anti-Putin protest movement figures, notably Boris Nemtsov, a former deputy prime minister who in 2012 met with senior members of Congress to push for the law.

Just weeks after the law was enacted, Russia banned US nationals from adopting Russian children. Putin’s spokesman, Dmitry Peskov, said the ban had been triggered by the Magnitsky Act, although this was later denied by other officials, including Prime Minister Dmitry Medvedev.

Putin said late last year that the “politicization” of Magnitsky’s death “is not our fault.”

“Magnitsky was not some human rights activist, he was not fighting for the rights of all,” Putin told journalists at a massive news conference on December 20. “He was a lawyer for Mr. Browder, whom our law enforcement agencies suspect of committing economic crimes in Russia.”

Updated with comments from Hermitage Capital, police and background, and recast throughout.

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