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Hermitage Reports a Third Major Tax Refund Fraud Perpetrated by Moscow Tax Official Exposed by Sergei Magnitsky

From: "Katie Fisher" <Katie.Fisher@hermitagefund.com>
Subject: Hermitage Reports a Third Major Tax Refund Fraud Perpetrated by Moscow Tax Official Exposed by Sergei Magnitsky
Date: Thu, 08 Sep 2011


For Immediate Distribution

Hermitage Reports a Third Major Tax Refund Fraud Perpetrated by Moscow Tax Official Exposed by Sergei Magnitsky

8 September 2011 - Today, lawyers acting for Hermitage Capital have filed a criminal complaint with the Russian State Investigative Committee showing evidence of $42 million in illegal tax refunds approved by Moscow Tax Office No 28. This is the third major illegal tax refund that was uncovered as part of the investigation launched by the late Hermitage lawyer Sergei Magnitsky. The refund was made to a company called TekhProm in late 2007 and early 2008. The refund was checked by the same Russian Interior Ministry department that was responsible for falsely arresting and tortured Sergei Magnitsky.

Earlier, Hermitage Capital lawyers filed similar complaints with the Russian authorities showing that the same Russian officials from Tax Inspection No 28 approved the fraudulent tax refund of $230 million in 2007 from companies stolen from Hermitage Capital and another fraudulent refund of $107 million from companies previously owned by Renaissance Capital in 2006.

"This new fraudulent refund shows a systematic pattern of organized criminal activity at the highest level of the Russian Tax and Interior Ministries. It also shows the motivation of Russian law enforcement officials to falsely arrest and torture Sergei Magnitsky to coerce him to change his testimony about Interior Ministry officers," said a Hermitage Capital spokesperson.

In all three cases, the fraudulent tax refunds were granted by Moscow Tax Inspection No 28, which was headed by Ms Olga Stepanova at the time of the frauds. She has subsequently been appointed earlier this year as an advisor to the CEO of RosOboronPostavka the multi-billion suppler to the Russian Defence Ministry.

In all three cases, the fraudulent tax refunds were laundered through the Universal Savings Bank, a small Russian bank beneficially owned by the convicted felon, Dmitry Kluev.

At the end of 2007, Moscow Tax Office No 28 approved the largest portion of a $230 million profits tax refund that had been previously paid by the Hermitage Fund's Russian companies. These companies had been expropriated using documents seized by Interior Ministry officers for the purpose of this illegal refund.

A year before the fraud against Hermitage, Moscow Tax Office No 28 also approved the largest portion of a $107 million fraudulent tax refund to Financial Investments and Selen Securities, at the end of 2006. These two companies were previously owned by Rengaz (a Renaissance Capital Gazprom structure).

The new evidence in today's criminal complaint shows that in 2007, Moscow Tax Office No 28 also approved $42 million in a fraudulent VAT refund to a little-known company, Tekhprom, on an application from its sole shareholder and general director, Gulsina Akhmetshina. Notably, the application approved by the Moscow Tax Office No 28 a year previously, in 2006, on behalf of Financial Investments, was submitted by Mrs Akhmetshina's husband, Gasim Akhemtshin.

According to documents cited in today's filing, in granting the tax refund approvals, Moscow Tax Office No 28 relied on the checks into the legitimacy of persons filing the refund claims carried out by officers of the Tax Crime Department of the Moscow Branch of the Interior Ministry. This is the branch which employed Lt Col Artem Kuznetsov, implicated by Sergei Magnitsky as complicit in the theft of Hermitage Fund's companies and the subsequent theft of public funds.

The criminal complaint filed today with the Russian Investigative Committee contains evidence that TekhProm received a refund of $42 million on tax that it had never paid. The refund to TekhProm was authorized by Olga Stepanova, then head of the Moscow Tax Inspection No 28.

Tax Inspection No 28 used only fraudulent documents supplied by TekhProm itself, and willingly ignored documents from third parties in their possession, which showed that the transactions stated to justify the refund had never taken place. For example, Moscow Tax Inspection No 28 relied on statements from the suppliers of TekhProm that they had paid $12 million in VAT, when Moscow Tax Inspection No 28 had a full history of all taxpayers which showed clearly that the suppliers had paid only $ 1,000 of VAT previously and therefore couldn't be refunded amounts that had never been paid.

The refund was made by Olga Stepanova using a document from a company called OOO Onega, which supposedly supplied TekhProm with 1.3 bln roubles of goods. However, according to Onega's own filings with the Russian State Statistics Committee, its total company revenue in 2007 was only 800 million rubles, which was 500 million roubles less than the amount that it supposedly supplied TekhProm to justify the illegal tax refund.

Olga Stepanove also relied on forged documents from another supplier, OOO Gulliver, which supposedly supplied TekhProm with goods worth 412 million roubles from another company called SANGLIER LLC, based in the US. However, according to corporate filings in the US, Sanglier LLC had been liquidated a year before the supposed transaction took place.

Finally, Ms. Stepanova made the refund based on evidence that a large range of consumer goods worth 6.5 billion roubles ($ 263 million) were supposedly kept at an 1,700 square meter warehouse (40 sq m x 40 sq m) located in the Dmitrovsky district of Moscow. However a rudimentary check on the warehouse's own disclosure documents during the stated period say it was used for storing vegetables.

"We insist on full, transparent and thorough investigation of the role of current and former employees of tax officials from the Moscow Tax Office No 28," said Hermitage Capital lawyers in their filing.

Please find a full text of the complaint http://russian-untouchables.com/rus/docs/D269.pdf

For further information please contact:

Hermitage Capital
M+44 207 440 17 77
Facebook: http://on.fb.me/f16tRA
Twitter: @KatieFisher__
Livejournal: http://hermitagecap.livejournal.com/


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