Hermitage Capital's legal opponents have stepped up their efforts to eradicate evidence that may expose the people behind one of the country's largest tax frauds, the company said Monday.
A man convicted of defrauding the government of $230 million in tax rebates has hired two new lawyers to represent him in a related case that is key to recovering further evidence in the sham, said Hermitage founder and chief executive William Browder. A Kazan court that is considering the case adjourned hearings for a month on technicalities Monday, he said.
Hermitage filed the lawsuit in an effort to prove that the felon, Viktor Markelov, illegally acquired three Hermitage subsidiaries back in 2007 in a deal that made the tax scam possible, it said. A court sentenced Markelov to five years in jail last year after being convicted of arranging $230 million worth of fraudulent tax rebates for the companies, a crime that appears a bit sophisticated for a former sawmill foreman, the investment fund maintains. It accuses several police and tax officials of complicity.
The Kazan lawsuit — now including two “eminent” local lawyers on the opposite side — is part of a broader courtroom campaign that Hermitage is waging against the people it describes as illegal proprietors of its stolen companies to recover the assets and trace the fraud's details, Browder said.
“There's a big legal battle where they are trying basically to destroy all evidence in this crime,” he said by phone from London. “These companies contain the evidence of everybody's involvement in this crime.”
From his prison cell, the former lumber worker hired “top-flight counsel” from the Kazan-based law firm StroiKapital, attorneys Konstantin Yegorov and Marat Fetyukhin, Hermitage said in a statement Monday. Yegorov is also a member of the Russian Academy of Justice, a research and education center founded by the Supreme Court and the Supreme Arbitration Court. Fetyukhin has a second job as an associate professor at Kazan State University. Last week, they first stepped into the trial to defend the deal to buy the Hermitage subsidiaries, which the fund said were sold by a man with counterfeit power of attorney.
Yegorov said by phone from Kazan that Pluton, the vehicle Markelov used to buy the Hermitage subsidiaries, believes that the man who identified himself as a Hermitage representative back in 2007 had legitimate powers to sell the assets. In a twist, he said Hermitage didn't have the right to sell one of those three companies, a deal that Pluton contested in the court Monday.
The trial was adjourned because the judge's mother had died shortly before, and the court handed the case over to another judge who said he needed until April 15 to study the case, the lawyer said.
The Kazan proceedings, which have now taken more than a year, are important because another judge — in the appeals department of the Moscow Region Arbitration Court — is waiting for their outcome to rule on whether to return the three disputed companies to Hermitage, said Vadim Kleiner, another Hermitage executive. In its decision, the Moscow region court would rule on an appeal Markelov filed against the same court's ruling that in September awarded the companies back to Hermitage.
A different judge in the same court earlier formally dissolved the companies after ruling that they were insolvent — using what Hermitage said were forged liabilities. Even so, if Hermitage succeeds in regaining ownership over the now nonexistent firms, it can obtain all possible records of their activity from either the Central Bank or the Federal Tax Service, Browder said.
Hermitage has said a criminal group seized the assets after prompting a police raid on the fund's offices in Moscow, which helped it lay hands on the fund's corporate documents, seals and tax certificates. The group then used the papers to steal the subsidiary companies and file for the tax refunds on their behalf, Hermitage has said.