(Bloomberg) -- Swiss prosecutors are close to ending a decade-old probe into alleged money laundering tied to a $230 million tax-fraud case pursued by Sergei Magnitsky, whose death in a Russian jail prompted the U.S. to enact laws targeting those responsible.
The Swiss federal prosecutors outlined their intention to close the case soon in a Nov. 6 letter to Hermitage Capital Management, a London-based firm founded by Bill Browder, which made the allegations in the wake of Magnitsky’s 2009 death.
Before his 2008 arrest in Russia, Magnitsky had been investigating what he believed was a conspiracy to take control of three Hermitage companies and then fraudulently claim back $230 million in refunds from taxes Hermitage had previously paid. The Magnitsky Act was passed in 2012 and allows the American government to punish people it sees as human-rights violators by freezing their assets and denying them entry to the U.S.
The Swiss prosecutors said they intend to confiscate as much as $4 million from Swiss bank accounts controlled by entities in the case. Those are the same entities that Hermitage Capital says are controlled by Russians who laundered $24 million in proceeds from the tax scheme through Swiss banks.
Hermitage Capital’s status as plaintiff is also to be reviewed following challenges from third parties in the case, the prosecutors said.
Hermitage Capital said it will challenge the decision to confiscate such small amounts and also request further investigation before a Dec. 8 deadline. Swiss prosecutors are ducking their responsibility and trying to prematurely wrap up the case, the firm says.
“The Swiss General Prosecutor’s office also wants to avoid being held to account,” Hermitage said in a statement. “In the same letter, they also wanted to kick Hermitage off of the case so we could not challenge them.”
In a statement, the Attorney General’s office said that it was justified to close the case against “persons unknown” after concluding its investigation. It planned to order the forfeiture of money “insofar as a link can be established” between the assets in Switzerland and crimes committed in Russia, it said.
The prosecutors’ office also said it had a procedural obligation to “investigate any issues raised by the parties” and that Hermitage has been given the opportunity to respond. Browder, who ran one of the largest foreign funds investing in Russia in the 1990s, has alleged that Magnitsky, a tax lawyer, was jailed because he was trying to expose the fraud.
Hermitage has expressed frustration that the Swiss investigation is on the verge of being closed with minimal assets confiscated, saying that Swiss law enforcement “capitulated to the Russians.”
To be sure, a Fedpol official working on the money-laundering case, who can only be identified as S., was fined in 2019 and put on a two-year probation for accepting an offer to go on a bear-hunting trip in Russia’s Far East in 2016.
Shortly after his return from Kamchatka, S. then summoned Andreas Gross, a former Swiss member of parliament who had authored a report highly critical of Russia’s mistreatment of Magnitsky, to give testimony in the case.
“It’s absolutely clear now that he went to Russia to get advice to undermine the credibility of my report,” Gross said in a telephone interview. Gross, who retired in 2015 after 24 years in parliament, also acted as a Russia monitor at the Council of Europe monitor for nearly a decade.
Dominic Nellen, S.’s lawyer, said he filed an appeal of his client’s conviction in September to the Swiss supreme court, declining to comment further.
In 2014, the U.S. Treasury announced sanctions against 12 Russians implicated in what it said was the “detention, abuse or death” of Magnitsky. Hermitage said that two of them control accounts that were in the Swiss probe soon to be closed.
The investment firm says it’s written to Credit Suisse Group AG and UBS Group AG, telling the banks that any release of funds to the pair would constitute an “explicit violation” of the Magnitsky Act.
That would open the banks, its officers and employees “to civil and criminal penalties in the United States, as well as to civil actions by third parties with an interest in this matter,” Hermitage said.
Credit Suisse said it couldn’t comment on client relationships but “is committed to operating its business in strict compliance with all applicable laws, rules and regulations.”
UBS said it can’t comment on matters involving customers. But in regards to the possibility of sanctions, it said it has a “a globally effective standard according to which UBS takes into account and implements worldwide at least the sanctions currently imposed by Switzerland, the U.N., the EU and the U.S.”
(Adds details on U.S. sanctions at bottom of story)
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