American officials are seeking to seize $23.7 million in high-end Manhattan real estate they say were purchased with money from a huge fraud exposed by a lawyer who later died in prison.
U.S. Attorney Preet Bharara filed a civil forfeiture complaint Monday against properties held by nine offshore companies and the assets of two other companies they say laundered part of the proceeds of a huge Russian tax fraud that caused a rift in U.S.-Russian relations.
“Today’s forfeiture action is a significant step towards uncovering and unwinding a complex money laundering scheme arising from a notorious foreign fraud,” Bharara said in a statement. “A Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate. While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place.”
The complaint says that the real estate was purchased with money traced to a $230 million Russian tax fraud known as the “Magnitsky case” for the whistle-blowing lawyer who uncovered it. Sergei Magnitsky alleged in 2008 that corrupt officials and criminals conspired to steal subsidiaries of his client, Hermitage Capital Management, and claim a $230 million tax refund. He was jailed by the same officials he accused and died in prison a year later, aged 37. A report by Russia’s presidential human rights council in 2011 found that he had been systematically tortured, but President Vladimir Putin has repeatedly denied there was any criminality in Magnitsky’s death.
Hermitage’s owner, London-based investor William Browder, has spent the years since Magnitsky’s death campaigning to bring the officials to justice and attempting to trace the $230 million. Congress passed a law named after Magnitsky last year introducing sanctions and visa bans against 18 officials accused of human rights violations, including some of those named in the fraud. Russia responded by banning all adoptions of Russian children by Americans and filing separate tax evasion charges against Browder and Magnitsky, who by then had been dead for over three years. A Moscow court convicted both men in July.
“It became clear that we needed to get justice outside of Russia, and one way to get justice outside of Russia was to track the money,” Browder told BuzzFeed. Browder’s lawyers were helped by Swiss banking documents provided by Alexander Pereplichny, another whistleblower who died in unexplained circumstances in Britain late last year, before lobbying the U.S. to file charges. Switzerland has frozen bank accounts linked to the fraud.
Three Russians are named in the complaint, including Denis Katsyv, the son of a former deputy governor of Moscow province. Katsyv is the owner of Prevenzon Holdings, a Cyprus-based company U.S. officials say laundered money from the fraud. He has denied being involved with the fraud or benefiting from the case.