MANHATTAN (CN) — Nearly a decade after Sergei Magnitsky unraveled a tax-fraud scheme linked to the Kremlin and was then beaten to death in jail, a chapter of the explosive accounting saga concluded Friday in U.S. federal court.
Magnitsky was jailed and killed in Moscow shortly after completing an investigation for the hedge fund Hermitage Capital Management, whose stolen corporate identities were used by a Russian criminal organization to funnel about $230 million in fraudulent tax refunds into New York real estate.
Neither Hermitage CEO Bill Browder nor U.S. authorities let the tax lawyer’s 2009 death end the case.
In 2013, a year after President Barack Obama signed into law the Sergei Magnitsky Rule of Law Accountability Act, then-U.S. Attorney Preet Bharara brought a forfeiture action in New York against the Russian real estate firm Prevezon.
Obama’s successor fired Bharara in March 2017, however, and Prevezon struck a $5.9 million settlement two months later.
With the deadline for Prevezon to pay up having lapsed on Oct. 31, however, U.S. District Judge William Pauley III granted a motion by the government Friday to enforce the settlement.
Prevezon, which is owned by Russian businessman Denis Katsyv, defended its delay by saying U.S. prosecutors showed bad faith in assisting Dutch law enforcement with a parallel investigation that froze Prevezon’s assets.
Pauley nixed this argument Friday as “mere innuendo and speculation.”
“The government’s assistance in providing non-confidential information to Dutch authorities about a case that has been well-publicized for several years is not an act of bad faith,” the 18-page order.
Pauley noted that Hermitage’s Browder had been championing Magnitsky’s cause globally, making himself a “thorn in Prevezon’s side.”
“This court doubts that Prevezon was oblivious to the possibility that Browder had contacted other law enforcement agencies about the subject matter of this action, or that such agencies were conducting their own investigations based merely on the attention this case received,” the judge added.
At a hearing in November, Prevezon’s attorney Faith Gay complained that the Dutch government’s asset freeze cut off the company’s ability to pay the settlement, and insisted that the U.S. government should have disclosed their involvement in that investigation.
Pauley countered that U.S. law enforcement had good reason to keep it quiet.
“Such a disclosure would have jeopardized the Netherlands’ then-covert investigation,” he noted.
Browder’s attorneys at the Manhattan-based firm Kobre & Kim LLP did not immediately respond to a telephone request for comment, nor did representatives for Prevezon at the public relations firm Weber Shandwick.
The U.S. Attorney’s Office for the Southern District of the New York declined to comment.
As with many of the entities Magnitsky tied to the accounting fraud, Prevezon has an indisputable Kremlin tie. Denis Katsyv, the Prevezon CEO’s father, is a former minister of transportation closely aligned with Russian President Vladimir Putin.
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