Patterico's Pontifications

9/19/2017

The Magnitsky Act And The Woman Who Met With Trump Jr.: Part Two Of A Six-Part Series

Filed under: General — Patterico @ 9:00 am

This is Part Two of a six-part series on the death of Sergei Magnitsky, what he uncovered before his death, and how it all relates to Natalia Veselnitskaya, the Russian woman who met with Trump Jr., Manafort, and Jared Kushner in June 2016. The springboard for the series of posts is this Michael Weiss article about Veselnitskaya and how she is connected to the Magnitsky case.

In Part One, I introduced the series and Weiss’s conclusions.

Today, in Part Two, I discuss the background of the entire Magnitsky affair, as set out in Browder’s book Red Notice.

THE BACKGROUND

The story begins with Bill Browder, a finance guy who was interested in emerging markets in Eastern Europe and Russia. He made millions buying shares in Russian companies that the government sold at a fraction of their true value. He made still more money by exposing the actions of corrupt oligarchs who were stealing from companies in which his fund had an ownership stake.

Everything was going great for Browder. He was a multimillionaire with a new attractive Russian wife. Then it all changed in 2005. Upon returning to Moscow from a trip to his home in London, Russian authorities detained him in immigration for hours without explanation, let him sweat it out overnight without food and water, and then dumped him on a plane back to London. He was told he was a threat to national security.

Authorities then raided offices of holding companies connected to Browder’s fund, and seized corporate documents with seals and signatures of the corporate founders. The justification for the raids was trumped-up: a claim of underpaid taxes that was disputed by the actual tax authorities, who said the companies had actually overpaid their taxes. But the raids allowed authorities to seize the sort of documents you would need if you wanted to change the ownership of the companies.

Browder, working with a team of lawyers including tax lawyer Sergei Magnitsky, learned that the ownership of the companies had indeed been transferred to Viktor Markelov, a man with a manslaughter conviction, and two other criminals who had been granted an early release from prison by Russian authorities.

But the thieves and criminals who had stolen Browder’s companies, using documents that had been seized by police, had a problem. Browder had long since pulled all assets from these companies. For a while, Browder believed that whoever had stolen his companies had done it all for nothing — that they had no way to profit from the theft of the companies.

But Browder was wrong. The thieves had concocted a very clever scheme involving tax fraud. If you prefer to see things in video form, the scheme is described in this video, which was produced before Magnitsky was killed:

Here’s how the tax fraud scheme worked: the thieves had filed phony lawsuits against all of the holding companies, based on forged contracts. The thieves hired lawyers who pretended to represent the interests of Browder’s companies, but who instead affirmed the validity of the fraudulent claims against those companies. In this way, bogus multi-million dollar judgments were secured against Browder’s companies. Since Browder had already taken the companies’ assets out of Russia, these phony judgments could not be collected from the holding companies. But the new owners had a different scheme in mind.

Magnitsky, the tax lawyer, figured out the scheme. He learned that the amounts of the judgments were for the precise amounts of profits that the companies had earned each year. Now each company had a new liability exactly matching the amount of their annual profits. Their new profits for each year were exactly zero, after the phony judgments were applied against the profits.

This meant that the new owners of the companies could apply for a tax refund. Their companies had overpaid their taxes! And they claimed that all the taxes the companies had paid on their profits should be “returned” to them. Sure enough, on Christmas Eve, 2007, the tax “refund” was processed. The total amount of loot stolen by these thieves was $230 million. It was the largest tax refund in Russian history, and was granted without a single question asked — three days after the application for the tax refund had been filed.

The record-setting tax refund was processed in record time by two tax offices, one run by a woman named Olga Stepanova. The money was wired to a bank account at a small bank called the Universal Savings Bank, owned and controlled by a man named Dmitry Klyuev. Weiss, the author of the recent piece on Veselnitskaya, laid out the money trail in this fascinating and detailed piece in the Daily Beast in March 2014, which named the co-conspirators, including tax office head Stepanova and recipient Klyuev:

The conspirators allegedly included the heads of Moscow Tax Offices 28 and 25, Olga Stepanova and Elena Khimina, respectively; Klyuev’s own attorney, Andrey Pavlov; and an Interior Ministry official, Major Pavel Karpov, who had previously investigated Klyuev for attempting to steal $1.6 billion worth of shares of a profitable Russian iron ore company. (Klyuev received a two-year suspended sentence in that case.)

Weiss lays out the damning actions of the co-conspirators after the $230 million fraud was accomplished on Christmas Eve 2007:

Karpov, Pavlov, and Pavlov’s wife vacationed in Istanbul on New Year’s Day 2008. Days later, the Pavlovs flew to Dubai where they met Klyuev, Stepanova and [Stepanova’s husband Vladlen] Stepanov. The husband-and-wife accountancy team reportedly drew on funds from their Swiss bank account to buy $6 million worth of luxury real estate in artificial archipelago Palm Jumeirah. And please keep in mind that, according to Russian Untouchables, the Stepanovs’ combined declared income in 2008 was just under $40,000.

Weiss cites court documents that show that these same conspirators had previously been involved in a similarly fraudulent tax refund scheme worth $107 million involving a company called Renaissance Capital. After that scheme was carried out, Weiss reports,

Klyuev, Stepanova and Stepanova’s husband Vladlen Stepanov all went on holiday together to Dubai, as plane records obtained and published by Russian Untouchables demonstrate. From there, Klyuev and the Stepanovs traveled to Switzerland, where the husband-and-wife team reportedly kept deposits at Credit Suisse in the names of their offshore shell companies. They all returned to Moscow on the same flight. Karpov, Pavlov and Pavlov’s wife, Yulia Mayorova, meanwhile, took a five-day trip to London.

Browder has documented that the officers behind the raids on Browder’s holding companies, Artem Kuznetsov and Pavel Karpov, ended up living extravagant lifestyles on very meager salaries. Kuznetsov’s parents ended up with fancy condos and other land worth $3 million, despite a combined income of only $4500 per month. Artem Kuznetsov’s wife had a Land Rover worth $131,000 and a new Mercedes worth $81,000. Kuznetsov’s wealth was detailed in this video released by Browder in 2010:

Browder writes that Kuznetsov “made more than thirty trips to eight different countries, including Dubai, France, Italy, and the United Kingdom.” According to the above video, he flew to Cyprus by private jet and stayed in a five-star hotel. Browder writes that Kutnetsov would have to work for 145 years on his salary (about 600 Euros a month) to pay for the assets owned by his family.

The other official involved in the seizure of corporate documents from Browder, Pavel Karpov, was an equally extravagant spender despite a small income. Browder writes in his book that Pavel Karpov had traveled to “the United Kingdom, the United States, Italy, the Caribbean, Spain, Austria, Greece, Cyprus, Oman, Dubai, and Turkey.” He ate at expensive restaurants in Moscow and partied at the best nightclubs, posting pictures on social media of himself with various scantily clad, attractive women. This video contains some of the details of Karpov’s wealth. The beginning of the video re-tells much of the story that the Kuznetsov video shows, so I am beginning the video for you at 1:48:

According to the video, Karpov’s pensioner mother had a $930,000 condo, other valuable pieces of land, a $47,000 Audi, and a $41,000 second-hand Porsche, despite a monthly income of only $500. Karpov, with a declared income of only $535 a month, somehow managed to drive a $72,000 Mercedes (paid off in one year) and a $126,000 Porsche. Altogether, the Karpov family’s assets were over $1.3 million.

The same pattern followed with Stepanova. Browder released this video that similarly described her astounding wealth despite a small official salary. You have to watch the video to believe it. The amounts of money involved are staggering — even compared to the luxurious lifestyles of Karpov and Kuznetsov. The video accuses the couple of having nearly $39 million in undeclared, illicit income:

As an aside, it’s interesting to note that both officers involved in the fraud — Artem Kuznetsov and Pavel Karpov– visited Cyprus, which is “a Mediterranean island nation often used for Russian money transfers.” It was reported in March that a Cyprian bank was looking into possible money-laundering by Paul Manafort, who is now a target of Robert Mueller’s investigation into possible misconduct by Trump advisers connected to Russia.

Tomorrow, in Part Three, I will discuss what Sergei Magnitsky did when he learned about this scheme — and how he suffered as a result.

[Cross-posted at RedState and The Jury Talks Back.]

73 Responses to “The Magnitsky Act And The Woman Who Met With Trump Jr.: Part Two Of A Six-Part Series”

  1. Ah renaissance capital, that happens to be the bank that hired bill Clinton for 500 k, that was involved in the uranuym one deal and was the base of operations for the Humpty Dumpty hacker gang.

    narciso (d1f714)

  2. According to the video, Karpov’s pensioner mother had a $930,000 condo, other valuable pieces of land

    She was just holding it for him – and maybe would be less likely to get questioned, or an investigation could be stopped before it reached that point. Any connection to Karpov also might not be obvious.

    There also might be more obscurities as to where money could possibly have come from (although nobody in Russia had any money before 1991)

    Chinese officials do this too (put money in other people’s names)

    And this also is what Natalia Veselnitskaya’s purchase of property could be. Not her at all. Or her future husband.

    Sammy Finkelman (02a146)

  3. @Sammmy: (although nobody in Russia had any money before 1991)

    I don’t believe this. There weren’t billionaires, to my knowledge, but the nomenklatura government officials had ways to squirrel away money and other assets.

    Frederick (64d4e1)

  4. That’s no way to run a government. A government whose first concern is not the collection of every penny of taxes is not worthy of the name, and what’s more, it won’t last for long.

    nk (dbc370)

  5. 4. I mean they didn’t have any legal money.

    In the 1920s the government wnet after gold, and arrested and tortured people,so there wasn’t any old money.

    Sammy Finkelman (02a146)

  6. This is not Kafakesque. In Kafka’s story nothing makes any sense. Here what’s going on makes sense. It’s just that official versions are very dofferent from reality.

    Sammy Finkelman (02a146)

  7. And they banked through narodny (people’s bank?) There are many pieces to this puzzle.

    narciso (cec177)

  8. Yes. Plenty of pieces to jumble or parse into chaos. Good strategery..

    Ben burn (b3d5ab)

  9. But why? Cui bono Trump. Every bank bridge burned except Russian. The VIG is big with Russian lenders.
    https://www.google.com/amp/s/amp.theguardian.com/business/2017/feb/16/how-donald-trump-became-deutsche-bank-biggest-headache

    Ben burn (b3d5ab)

  10. @Sammy:I mean they didn’t have any legal money.

    What? Yes, there was money in the Soviet Union.

    Frederick (64d4e1)

  11. Sorta OT on this very scary thread.

    “But now, Putin finally has an American president who considers national sovereignty as the end of the discussion, or at least in the cases where it serves their purposes. Trump’s call for a “respect for law, a respect for borders, a respect for culture” sounds unobjectionable – until it becomes clear that Iran, Cuba, Venezuela, and North Korea will enjoy no such respect from Washington for their own sovereignty. Much as Putin said in 2015 that Russia recognizes “the fact that we can no longer tolerate the current state of affairs in the world,” Trump’s conception of sovereignty is inevitably reserves the U.S. the right to impose its will.”

    http://www.thedailybeast.com/trump-uses-putins-arguments-to-undermine-the-world

    Ben burn (b3d5ab)

  12. “Trump is a Russian Spy!”

    -Patterico

    jcurtis (00837a)

  13. Manafort squeaks..

    “If true, it is a felony to reveal the existence of a FISA warrant, regardless of the fact that no charges ever emerged,” Manafort spokesman Jason Maloni said in a statement released Tuesday. “The U.S Department of Justice’s Inspector General should immediately conduct an investigation into these leaks and to examine the motivations behind a previous administration’s effort to surveil a political opponent. Mr. Manafort requests that the Department of Justice release any intercepts involving him and any non-Americans so interested parties can come to the same conclusion as the DOJ – there is nothing there.”

    Ben burn (762dec)

  14. The husband-and-wife accountancy team reportedly drew on funds from their Swiss bank account to buy $6 million worth of luxury real estate in artificial archipelago Palm Jumeirah.

    Con men love to con other con men. “Flush from your last scam? Have I got a time-share condo for you, my friend! Buh-lieb me!”

    Beldar (fa637a)

  15. Well it makes sense Dubai dredged it from the ocean, and promptly went bankrupt

    narciso (d1f714)

  16. Martin Cruz Smith, the author of the popular “Gorky Park”, wrote another Arkady Renko novel, “Wolves Eat Dogs”, just before the time of Mr. Browder’s troubles. It’s fiction and popular fiction at that, but the title pretty much says what happens when Western capitalists who think themselves hard guys because they “buy low and sell high” meet Russian gangsters whose business motto is “You have it? I take it from you”.

    nk (dbc370)

  17. He also did one whose main character wee slightly based on politsjayava, ghelfi was on a similar wavelength, khodokorsky berezovsky knew the game well.

    narciso (d1f714)

  18. I liked “Havana Bay” (despite him killing off poor Pribluda) because he very entertainingly showed how those numerous “CIA plots” (600 plus?) to kill Castro were likely to have been organized by Castro himself.

    nk (dbc370)

  19. Well. There’s more than little overkill, but certainly cubela was a double agent, this was a problem in eastern Europe as well, the polish win element of the nts

    narciso (d1f714)

  20. It’s fine if you don’t want to bother to read this very interesting post, jcurtis, but why bother to post a nonsense comment that proves you didn’t read it?

    DRJ (15874d)

  21. Can we note this resembles the raid on hermitage capital:
    dailycaller.com/2017/09/19/report-fbi-agents-entered-paul-manaforts-home-with-guns-drawn

    narciso (d1f714)

  22. this is a lot like Dynasty except for everyone’s Russian

    happyfeet (28a91b)

  23. the fbi’s way more corrupt than these russian losers and an infinitely greater threat to America, to democracy, and to freedom

    happyfeet (28a91b)

  24. There is a certain animal farm happening, certain targets like podesta inc and mercury mm
    Llc are off limits

    narciso (d1f714)

  25. Or let us say, don’t receive due scrutiny.

    narciso (d1f714)

  26. Can we note this resembles the raid on hermitage capital:
    dailycaller.com/2017/09/19/report-fbi-agents-entered-paul-manaforts-home-with-guns-drawn

    narciso (d1f714) — 9/20/2017 @ 5:18 am

    How so? Did the FBI seize Manafort’s personal documents for the purpose of enriching themselves with a complex tax refund fraud scheme?

    Patterico (ac5491)

  27. You find it ok, for manafort to receive the cyndi archer treatment based on dubious warrants, because you don’t Luke trump, he complied with records and this is what he got.

    narciso (d1f714)

  28. Did they beat the occupants of Manafort’s home, the way Russian police beat people present during the Hermitage capital holding company raids who objected to the illegal nature of what was happening?

    Or did they just execute a search warrant signed by a judge in a completely standard manner?

    Comparisons like this are absurd and trivialize the evil of the entire Magnitsky affair. It is a Trumpy “you think we don’t kill people too?” kind of deflection.

    Patterico (ac5491)

  29. And aside from the nature of the warrant’s execution, please tell me how it was “dubious.”

    *puts hand on chin and waits expectantly*

    Patterico (ac5491)

  30. narciso, I take it that you have never seen police execute a search warrant. I’m surprised they picked the lock on the Manaforts’ door. The standard operating procedure is to smash it with a battering ram. If it’s an apartment, they will have also smashed the building’s entry door*. When they leave, half the place is smashed and the other half is slashed, and the contents of closets, cabinets, drawers, refrigerators are on the floor. Except any cash, jewelry and other small things of value which are in their pockets**.

    * Seen it personally.
    ** In one of my cases, that included a roll of stamps and a Tekna flashlight, as my client was looking on.

    nk (dbc370)

  31. “puts hand on chin and waits expectantly*”

    They might catch scabies..

    Ben burn (762dec)

  32. Based on 10 year old allegations, that hadn’t passed muster before, until the trust I mean akmetshin dossier, that steele was the pass through. The kind of thing derwuck partners has done in Venezuela time and again. The problem of dubious Russian moneys is as plentiful as rain.

    narciso (d1f714)

  33. Cops must supplement their meager incomes “This yours? Mine now”

    Ben burn (762dec)

  34. For delayed foreign registration filings, Nk, Shirley, taibbi is the kind of whelp volodya didn’t bother with

    narciso (d1f714)

  35. @Patterico:And aside from the nature of the warrant’s execution, please tell me how it was “dubious.”

    Narcisco will have a tough time with that, according to Andrew McCarthy in NRO today:

    “As I pointed out in the aforementioned column, the criminal search warrant executed at Manafort’s home on July 26 would give us insight into what suspected crimes Mueller is investigating. There would have to have been a probable-cause showing of specific crimes before a judge authorized the warrant; and the warrant itself had to have described the evidence the agents expected to find. We still do not know what crimes are under investigation, because the Justice Department did not comply with a regulation that calls for it to provide a factual description of the criminal investigation the special counsel has been authorized to conduct. But Manafort has a good idea of what Mueller is after, because the agents were required by law to provide Manafort with a copy of the warrant and an inventory of what they seized. These have not been publicly revealed.”

    A non-lawyer might be forgiven, I think, for thinking this sort of proceeding is “dubious”, when in fact this sort of thing happens all the time.

    “Dubious” can mean different things to different people. A lot of us think it is “dubious” that police can seize our assets without any kind of a conviction, or that police are allowed to lie to us, yet these things are perfectly legal, as far as the courts are concerned.

    Frederick (eed46a)

  36. In addition, we don’t yet know why Manafort has not made his copy of the warrant public; if the agents decided to dispense with that part of the law too, then he would in that case have no such copy.

    I doubt that agents would disregard the law so far as to not leave him a copy the warrant though.

    Frederick (eed46a)

  37. Because this is what loretta lynch decided, and we can trust her judgement right?

    The 14 contributors to red queens campaign among Mueller’s staff, they would show great discretion right.

    Just like a certain garden slug is only subject to civil not criminal punishment, no matter how many lives hers ruined.

    narciso (d1f714)

  38. Robert Mueller’s as corrupt as they come – way more sleazy than your regular fbi agent –

    Our sleazy Attorney General (Rod Rosenstein) made sure the rules won’t apply to him and Mueller knows it.

    happyfeet (28a91b)

  39. Narciso is absolutely acerbic over developments. Buddhists say that when you’re upset, it’s only because things aren’t going your way.

    Ben burn (762dec)

  40. In Louisiana a sheriff raided the home a blogger who criticized him. Was this “dubious”? He had a legal warrant, signed by a sure-enough judge, who stands by the decision:

    Bethancourt countered that Louisiana’s criminal defamation statute is “pretty broad” and said he would allow the state to “take a look-see at these computers that might have defamatory statements on them.”

    After the fact, the 5th Circuit Court of Appeal said there was insufficient probable cause and the search was unconstitutional. So it seems it was in the end “dubious” enough, but there was a long time between the raid and the court saying that.

    And of course that sheriff and that judge can continue to engage in the same behavior, it’s not like they are paying the settlements.

    Frederick (eed46a)

  41. buddhists are stupid

    happyfeet (28a91b)

  42. We can trust there won’t be degenerate witness like William Allen, who had a 50 shades thing with his FBI handler, on which the Stevens indictment based.

    narciso (d1f714)

  43. This story might be instructive. Federal prosecutors stretch the the secrecy of grand jury proceedings like a three-way Playtex girdle on Melissa McCarthy, including intimidating the subjects of search warrants and subpoenas into not revealing them with spurious, but legal-sounding, verbiage.

    nk (dbc370)

  44. Hell, they burned a baby’s face off with a flashbang and got away with it.

    nk (dbc370)

  45. That would be the ever wise salon preet bhaara no,?

    When I see the battwri g ram in chappaqua, ask me why.

    narciso (d1f714)

  46. Far too many cops think they’re still in Fallujah.

    If their personal safety is more important than public safety, they should look at another profession.

    Ben burn (762dec)

  47. do the Fallujah cops share the dog-shooting predilection of America’s feral popo?

    wait don’t tell me

    happyfeet (28a91b)

  48. Yeah, Patterico blogged about the Reason case where they also tried to do the same thing. But it is generally difficult to challenge, or even scrutinize, warrants before there is an arrest or indictment.

    nk (dbc370)

  49. it’s not like the FISA judges aren’t every bit as corrupt as the sleazy lawless FBI

    happyfeet (28a91b)

  50. After Cyndi archer, after Stephen hatfill, ted, Stevens you would think we would be a little less definitive in our statements, considering some of the foundation actually comes from a Russian spy.

    narciso (f787e5)

  51. PTSD and Police is a bad combo.

    Ben burn (762dec)

  52. Or did they just execute a search warrant signed by a judge in a completely standard manner?

    They executed a search warrant in Wisconsin too.

    http://www.nationalreview.com/article/440692/wisconsin-john-doe-investigations-partisan-witch-hunt-ends-victims-pain-lingers

    harkin (9803a7)

  53. Even the Congressional investigation is being conducted in secret.

    https://www.newyorker.com/news/ryan-lizza/why-is-congress-conducting-its-russia-investigation-in-
    secret?

    The answer really should be obvious. It’s probably because there is a special counsel. (this article by the way is very anti-Trump)

    Sammy Finkelman (02a146)

  54. yes, harkin, Cyndi archer was the prime target there, and Chisholm’s behavior was ratified by 7th circuit judge, because in the end they did yield convictions, sorry about that old girl, think of England,

    narciso (d1f714)

  55. In addition, we don’t yet know why Manafort has not made his copy of the warrant public; if the agents decided to dispense with that part of the law too, then he would in that case have no such copy.

    The warrant is not public? Then on what basis does narciso proclaim it dubious?

    Patterico (115b1f)

  56. @Patterico:Then on what basis does narciso proclaim it dubious?

    Secret warrants I think are inherently “dubious” to most non-lawyers.

    Frederick (626da3)

  57. “Secret” is of course the wrong word. We don’t know why the warrant is not public, only that the public doesn’t know what’s in it. We don’t know why “the Justice Department did not comply with a regulation that calls for it to provide a factual description of the criminal investigation the special counsel has been authorized to conduct”, only that they didn’t, and the public does not know what kind of criminal investigation it is. We don’t know who can make them comply, if they choose not to.

    We don’t know a lot of things. Except for the trifling matter of not describing the criminal investigation as require, all these things are perhaps perfectly legal, and maybe to a lawyer anything legal can’t be “dubious”. But for non-lawyers, yeah, they might well use “dubious” according to its dictionary definition to describe this state of affairs and not be wrong.

    Frederick (626da3)

  58. Seeing as the last two was attempts were turned down, the dossier had to be the key element, it east a secret he had worked for derisha, that was known ten years ago. Thus charming lady was allowed into the country by preset bhaara

    narciso (d1f714)

  59. Probable cause can be dubious. In fact, it is dubious. If reasonable doubt is 95% sure he’s guilty; and preponderance of the evidence is 50.1% sure he’s guilty; then probable cause is 25%. Not to bet the farm on. But that’s the standard we use.

    nk (dbc370)

  60. everything corrupt FBI turdboy Robert Mueller does is inherently dubious

    happyfeet (28a91b)

  61. Is that General Clapper’s least untruthful statement now? Did anybody believe him in the first place? That guy must have dossiers on everybody in DC to keep getting away with all the lies he keeps getting caught on.

    nk (dbc370)

  62. American STASI Season 1 soon to DVD…

    Colonel Haiku (2601c0)

  63. The lives of others
    big sardine anchovy stink
    teh lawless lawmen

    Colonel Haiku (2601c0)

  64. I dubbed him general mcgoo, Michael waller is much less charitable.

    narciso (d1f714)


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