May 31, 2018

Understanding the Magnitsky Act, the Dark Matter of Trump / Russia


If you know even a bit of Trump / Russia 101, or if you’ve read award-winning AP reporter Seth Hettena’s book on the subject, you will recall how Donald, Jr. met with a group of Russians at Trump Tower, after they claimed to have dirt on Hillary Clinton — a meeting that would later become one of the touchstones of the ongoing collusion investigations by Special Counsel Robert Mueller.

In Trump / Russia 201, the Russian motives for this meeting are pulled up by the root. It’s not just that the Kremlin was trying to do its favorite American family a solid in the hope of having a simpatico ear in the Oval Office — though that. Additionally, many high-ranking, influential, and wealthy Russians were, and presumably still are, hoping to overturn the Magnitsky Act, an Obama-era piece of legislation critical to understanding the Russian side of the Trump / Russia story.

I bring up the Magnitsky Act because earlier this week, the AP broke the news, later fleshed out by Jon Henley of the Guardian, that American-British entrepreneur Bill Browder had been arrested and briefly detained in Spain on an Interpol warrant issued by Russia. Browder doesn’t command US headlines like Paul Manafort or Michael Cohen, but he should. Browder is, in essence, the Bilbo Baggins of this story — not quite part of the Fellowship of the Trump / Russia ring, but key in that he definitely took something very precious from the Gollum Kremlin.

As Hettena explains in Trump / Russia: A Definitive History, Browder, the founder and CEO of Hermitage Capital Investment, was once the largest foreign investor in Russia — that is, until 2005, when murky circumstances led Russian authorities to being permanently bar him from entering the country, labeling him a threat to national security. The Kremlin claimed Browder had been evading tax payments; Browder claimed he had uncovered some deep corruption involving the state. Whatever the reason, Hermitage was somehow able to continue operating Russian companies already under its holdings, a situation about as promising as trying to run a church in ISIS-occupied territory.

Sergei Magnitsky.

Then, in 2007, these same Hermitage companies were raided, their assets seized, and their managers and executives thrown in prison. One such case involved an electric company called Kamaya, which authorities accused of underpaying its taxes even though Russian tax officials had in fact flagged it for overpaying its taxes. A lawyer named Sergei Magnitsky was assigned to investigate the matter. He soon discovered not only that the raids had been conducted illegally, but that officials from Russia’s Ministry of the Interior, who oversaw Hermitage Capital’s Russian holdings, had handed control over to businessmen with ties to organized crime, who in turn claimed that these businesses were in debt, and who received a massive tax rebate, $230 million, from the state.

In essence, Russian officials had created an elaborate scam at the highest level to rob the Russian people. For uncovering it, Magnitsky would be thrown in prison and tortured until, just eight days before his statutory release date, he died.

Hettena elaborates on how Magnitsky’s death and its aftermath have given rise to some of the most contentious issues in US-Russian relations.

Browder became the driving force behind the Magnitsky Act, a 2012 measure intended to punish the Russian officials believed responsible for Magnitsky’s death. According to the US Justice Department, some of the money stolen in the tax scam Magnitsky had uncovered was being laundered by the Manhattan offices of a Russian-owned, Cyprus-based realty firm called Prevezon Holdings. Though the Act initially barred only eighteen Russians from entering—and banking on—US soil, it sent a message to the Kremlin. Russia’s kleptocrats, some of whom (like President Vladimir Putin himself) were high-ranking Kremlin officials, could no longer use the US to store their looted assets. It was the first time the corrupt operatives at the top of Russian society had even been slapped on the wrist, so to speak, for stealing money from their own country.

Bill Browder. Via Twitter.

As Hettena points out, all of this underlies the Trump Tower meeting. In exchange for more Hillary dirt, Russia was hoping to negotiate for the overturn of the travel ban. A key participant in that meeting, Russian lawyer Natalia Veselnitskaya, claimed one of Hillary Clinton’s campaign donors had in fact been Bill Browder, who had contributed funds he owed to Russia. But Veselnitskaya had brought no proof, nor was she making much sense. Even Donald, Jr. wasn’t dumb enough to take the bait, though he would be later made to testify before Congress.

Browder was released yesterday, explaining that Interpol’s General Secretary in Lyon had advised operatives not to act on the warrant. Still wanted in Russia, he otherwise walks the Earth a free man. And much to the chagrin of Russian oligarchs, it doesn’t look like the Magnitsky Act is going anywhere. The first of what appears to be growing trouble for the kleptocrats.



Michael Barron is an editor at Melville House.