The Magnitsky Affair and Russia’s Original Sin
Sergei Magnitsky's death at the hand of the state exposed the rot at the heart of Moscow. Its ripple effects have shaped Russian foreign and domestic policy ever since.
Americans may have been shocked that, by his own account, the son of a U.S. presidential candidate found himself being hectored by a group of shady Russians about an 8-year-old case he had likely never heard of. Donald Trump Jr. had come to the meeting last June, after all, baited by promises of something much better: compromising material about Hillary Clinton. Yet the fact that a Russian lawyer reportedly spent what face time she had with Donald Trump’s campaign lobbying for the repeal of the Magnitsky Act should not surprise anyone who has spent the past decade observing her country. What Trump Jr. found himself unexpectedly ensnared by last year was, in a way, the original sin of Vladimir Putin’s Russia. Before there was Syria, before Ukraine, before election meddling, there was the case of the murdered lawyer Sergei Magnitsky.
Compared with the other, more recent ugly episodes in U.S.-Russia relations, the ripple effects of the Magnitsky affair have been less discussed, at least in the West. But the story of the $230 million stolen from Russian taxpayers, the lawyer who died in prison for uncovering the scam, and the sanctions and countersanctions that ensued is a case study in the dynamics of modern Russia: how the tangled web of greed, opportunism, corruption, and fatal negligence that sits at the heart of the Russian government not only shapes policy but sometimes drives it outright. The episode derailed the country’s foreign and domestic policy for years, poisoned relations between Russia and the United States, and created a moral vacuum that, in the years since, has corroded Putin’s regime from within. As the latest revelations from the Trump scandal show, it continues to exert a gravitational pull on Russian politics and Moscow’s relations with Washington today.
The story of the Magnitsky episode began sometime in 2005-2006, when William Browder, an American-born investment fund manager who once told me that, up until the travesty, he believed his interests “aligned” with Putin’s, somehow ran afoul of someone close to the Kremlin. The result was that his fund, Hermitage Capital Management, suddenly became fair game in a typical tax fraud racket. According to U.S. investigators and independent Russian groups that have monitored the affair, in 2007, the Klyuev Group, a Russian criminal network, colluded with tax and law enforcement officials to embezzle some $230 million by setting up shell companies using the stolen identity of Hermitage Capital.
From the very start, the scam began to sprawl, sucking in those at the highest levels of government. That it was protected from up on high was the very reason why blowing the whistle on the scheme was dangerous, and why it would be so hard to prosecute later on. The scheme involved Olga Stepanova, who headed Tax Office 28, responsible for the shell companies’ tax returns. Stepanova was a former underling of Defense Minister Anatoly Serdyukov, a former tax chief himself, and under his protection; Serdyukov would later be sacked by Putin, over a separate Defense Ministry corruption scandal in 2012.
The tax fraud was uncovered in 2007 by a lawyer working for Hermitage Capital, Sergei Magnitsky. In his allegations, he accused two Interior Ministry officials — Maj. Pavel Karpov and Lt. Col. Artem Kuznetsov — of being involved in the scam together with tax officials and judges. In a response typical of Russian law enforcement, Karpov and Kuznetsov countered by going after Magnitsky himself, accusing him of tax fraud. Magnitsky was placed in pretrial detention despite suffering from acute pancreatitis. In November 2009, after spending a year in jail, he died from what was, officially, a sudden heart attack. A Russian Presidential Human Rights Council committee found that Magnitsky had been denied medication, allegedly to pressure him to confess, and that prison guards had even handcuffed Magnitsky, who was suffering from excruciating abdominal pain, to his bed and beaten him.
Magnitsky was not the only person held on dubious charges in a state of ill health and suffering from negligence amounting to torture by doctors, prison officials, investigators, and judges. But because he had worked for a major Western investor, the case sparked an outcry, revealing a systemic attitude toward prisoners that denied them their basic rights because neither doctors nor investigators nor judges really believed in the presumption of innocence. What was more, Magnitsky’s death turned into a rallying cry for what would become then-President Dmitry Medvedev’s campaign to fight corruption. When it became clear the campaign achieved little but cosmetic changes like renaming the police force, it was Magnitsky’s picture that accompanied cries to stop corruption during the biggest protest wave against Putin’s regime in 2011-2012.
Initially, the rhetoric coming from Medvedev and Investigative Committee chief Alexander Bastrykin was promising, and there were signs that those involved in Magnitsky’s death would be brought to justice. “When we met in the past, [Bastrykin] was very keen on pursuing this case,” Valery Borshchev, a human rights advocate who led a Russian presidential investigation into Magnitsky’s death, told me in 2013. “But now there is no more reaction.”
And so, as is often the case with original sin, there was an attempt at redemption — but one that would eventually backfire, creating a snowball effect. Having little faith the case would be brought to justice in Russia, Browder sought justice in America, lobbying hard for Congress to punish those involved. “I’ve spent every day thinking what I could have done that could have saved [Magnitsky’s] life,” Browder told me in 2011. In December 2012, Congress passed the Magnitsky Act barring U.S. entry and prohibiting the use of American banks for those alleged to be involved — the number currently stands at 44 — along with other Russians seen as violators of human rights. A victory? Not quite. Given Russia’s track record at the time — and, in particular, the high-placed protection those involved in the Magnitsky affair enjoyed — there was a slim chance that the perpetrators would be brought to justice. But the Magnitsky Act dashed any hopes outright.
The move infuriated Putin, who earlier that year had returned for a third presidential term despite a mass protest wave questioning his legitimacy. And it was easy to see why. The ban was a direct blow to Putin’s power base: The kleptocratic elite was used to enjoying Western real estate, vacations, medical service, and even its legal system — while plundering public coffers back home.
“Thanks to the Magnitsky Act, if there was some work being done … after the law was passed, the attitude changed,” Kirill Kabanov, the head of the National Anti-Corruption Committee, who investigated the Magnitsky affair, told me at the time. “Now it’s like this: We’re not going to listen to orders from the State Department.”
Russia retaliated with the “anti-Magnitsky law,” blacklisting U.S. officials as a tit-for-tat measure. But there was more to the revenge. Not only would the Russian government refuse, largely out of spite, to pursue the case seriously — it passed, as a direct result, some of the most tragic legislation to come out of Putin’s third term: the ban on Americans adopting Russian children. The anti-Magnitsky law, also known as the Dima Yakovlev law, ostensibly banned the adoptions because 19 Russian children died while in the care of American adoptive parents between 1998 and 2012. But statistically speaking, given that more than 1,000 children had died while in Russian foster care during a similar period, according to figures from the Moscow office of the Ombudsman for Children’s Rights, the likelihood of death for Russian orphans who would not be adopted as a result of the law increased dramatically. During his December 2012 press conference, a defiant Putin insisted that the law was necessary retaliation, reflecting the deep-seated resentment in the elites. “Do you think this is normal?” Putin said then of the Magnitsky Act. “How can it be normal when you are humiliated? Do you like it? Are you a masochist? They shouldn’t humiliate our country.”
It was the last nail in the coffin of the “reset” in U.S.-Russia relations that had been touted in 2009 by President Barack Obama. But more than that, it sparked anew a particularly vicious form of anti-American resentment among elites — the kind that was not above harming one’s own country just to prove a point. In another show of spite, a Russian court found Magnitsky guilty of tax evasion in 2013, four years after his death. A year later, Ukraine descended into political turmoil, and, with paranoia running deep by that point, the news of a Western-backed coup took root on fertile ground; many Russians eagerly believed the propaganda that the West was waging a proxy war against Russia in Ukraine. While it would be a stretch to attribute or connect Russia’s annexation of Crimea to the Magnitsky affair, the latter certainly created a potent and unprecedentedly anti-Western climate.
Even now, five years later, the case will not die. In the personalized system that is Putin’s Russia, it draws in independent actors hustling for money and for Kremlin favor, who wind up tendering their services in the name of interests that Putin’s government might not even know it had, creating headaches it may have never wanted. That a Trump scion was caught in the Magnitsky web is testament to its both intricate and massive sprawl — connecting Russian and U.S. businessmen and state officials in a tangle of financial and political interests. Trump Jr. found himself inadvertently linked to the case via Natalia Veselnitskaya, a family lawyer for Denis Katsyv, the son of a former Moscow region minister. Katsyv’s real estate firm, Prevezon, came under investigation last year by the U.S. Department of Justice for allegedly laundering money obtained through the Magnitsky scam by buying up U.S. real estate. The initial case against Prevezon had been launched by U.S. Attorney Preet Bharara, who had been blacklisted by Russia as part of the anti-Magnitsky law. After Bharara was fired by Trump in March, Prevezon settled the case with U.S. federal prosecutors.
But more importantly, either because Prevezon itself wanted to retaliate against U.S. prosecution or because it saw an opportunity to curry favor with Kremlin interests, the firm jumped on the chance to lobby for the repeal of the Magnitsky Act. In February 2016, it registered a nonprofit called the Human Rights Accountability Global Initiative Foundation, which sought to end the adoption ban by repealing Magnitsky. Prevezon, its nonprofit, and the lawyer Veselnitskaya thus became part of a swarm of both government and nongovernment actors promoting Kremlin interests abroad. The unsuspecting son of a presidential candidate was simply another potential instrument in these efforts. (The latest revelations that Trump and Putin discussed the adoption ban at the G-20 meeting this month should, too, come as no surprise.)
The most tragic implications of the Magnitsky affair, however, hit at home, in Russia, where the case continues to fundamentally undermine faith in the rule of law. During Medvedev’s anti-corruption campaign, his detractors claimed that by issuing threats and promising justice, without eventually meting it out, he was undermining his own power; Putin, by contrast, either followed up on his threats or tried not to threaten at all. The Magnitsky affair in part became a big deal because Medvedev, the Russian president at the time, made it a big deal. Medvedev joined the outcry, calling Magnitsky’s death “criminal.” The failure, then, to bring those responsible for the crime to justice made it acceptable to ignore injustice outright — both legally and factually. It set an important precedent that drives Kremlin policy today, a precedent that allows it to muddle and reject responsibility in everything from its incursion into eastern Ukraine to the downing of civilian flight MH17 to the allegations about its meddling in the 2016 U.S. election.
In a perverse irony, Veselnitskaya recently updated her Facebook profile picture with a quote from a Russian TV series: “Truth is higher than law. Justice is higher than truth. Mercy is higher than justice. Love is higher than mercy.” While not intended as such, the quote inadvertently explains the nihilistic logic that made the Magnitsky affair possible: Law, truth, justice, and mercy don’t really matter in the grand scheme of things. And love can mean anything you want it to: love of country, love of power — even love of money.
Image credit: ANDREY SMIRNOV/AFP/Getty Images