Mr. William Browder (Founder and Chief Executive Officer, Hermitage Capital Management):
Thank you very much, honourable members of the subcommittee on human rights. I'm very grateful for the opportunity to speak to you and to speak about Sergei Magnitsky.
I'd like to tell the story about Sergei, and to tell the story about Sergei, let me just tell you a few bits and pieces about myself, how I got to know Sergei, and how this whole story came about.
I'm William Browder. I'm the chief executive officer of a firm called Hermitage Capital Management, which at one time was the largest foreign portfolio investor in Russia. I went out there in 1996 and started investing. What I discovered early on in the process was that many of the companies I was investing in were involved in very significant amounts of corruption. As a result of that, I became a shareholder rights and anti-corruption activist in the Russian Federation.
Over the course of years, my welcome in the Russian Federation became more and more tenuous, and in November 2005 I was expelled from the country, declared a threat to national security, and never allowed to return. I thought that was bad at the time, but I had no idea how bad things were going to get. Eighteen months after my expulsion, my offices in Moscow were raided by 25 members of the Moscow Interior Ministry--the police department--and 25 officers from the Interior Ministry raided the offices of my law firm, Firestone Duncan, as well.
In the process of raiding the office, the officers took away all the certificates, stamps, seals, and articles of association for the companies through which we made our investments in Russia. Three months after the seizure of all of these documents, which were the official documents of our companies, we discovered that we no longer owned our companies. Our companies had been fraudulently re-registered out of our name and into the name of somebody named Viktor Markelov, a man who had been convicted of murder. The only way the re-registration could have taken place was with the documents that had been seized by the police when they raided our offices in June of 2007.
Because of this unpleasant circumstance, we ended up going out and hiring a number of lawyers, including a young man named Sergei Magnitsky. He was a 36-year-old tax lawyer from the Firestone Duncan law firm. Sergei, together with a number of other lawyers, conducted a very detailed investigation into what was going on with the theft of our companies. Sergei discovered that in addition to the companies being stolen, the documents that had been seized by the police had been used to create $1 billion of fake liabilities for our companies.
Those documents were then presented in a Russian court. Fake defence lawyers whom we had never hired showed up in court and pleaded guilty to $1 billion of fake liabilities. Those fake liabilities were then used by the police to go around to all of our banks to try to find all the assets that we had in Russia. Fortunately, by the time they tried to pull off this scam, all our assets were no longer in the country, because we suspected something like this might happen.
We thought that was the ugly end to the story, but Sergei kept on investigating, and he discovered something most profoundly disturbing, which was that the $1 billion of fake liabilities and the companies that they stole from us were then presented at the tax office in Moscow. They went to the tax office and said that when these companies paid $230 million in taxes a year ago, it was a mistake. They said the companies shouldn't have paid those taxes because there was $1 billion in losses. They applied for a tax refund, the largest refund in Russian history, and the refund was granted in one day, on Christmas Eve of 2007. On Christmas Eve of 2007, the largest refund in Russian tax history was granted with no questions asked.
Sergei, along with the other lawyers we had hired, helped us prepare a criminal complaint, which we filed with every law enforcement agency in Russia. Following that criminal complaint, which was filed in July of 2008, we expected that there would be a massive swoop and an investigation and conviction of the police officers and other officials who were involved in this crime. However, instead of doing an investigation into the police officers involved in the crime, the police opened an investigation--criminal cases--against all seven of our lawyers from four different law firms. I felt very disturbed by this and very upset with the possibility that something could happen to our lawyers. I asked them to leave the country and come to the United Kingdom, where I could provide them sanctuary and shelter from any danger they might encounter in Russia.
Six of the seven lawyers reluctantly agreed to my proposal. It was a very difficult conversation to have. Sergei Magnitsky said, “No. I've not broken any laws. I'm not leaving the country. Moreover, I'm a patriot, and it upsets me that $230 million was stolen from my country with the involvement of police.”
In October 2008 Sergei Magnitsky testified against the police officers who had raided the office and seized the documents. Literally one month later, the same officers--actually, three officers who reported to one of the officers he testified against--came to his home at eight o'clock in the morning, arrested him in front of his wife and two children, and put him in pretrial detention in Moscow. They arrested him and then tried to get him to withdraw his testimony against the police officers. In order to do that, they tortured him.
They put him in a cell with eight inmates and four beds and left the lights on 24 hours a day to deprive him of sleep. After a few weeks of this, they moved him to a cell with no windowpanes in the Moscow winter, in December. The cold air flowed right in, and they were basically living in below-zero conditions with nothing to keep themselves warm. They all developed various upper respiratory infections. They then moved him to a cell with no toilet. There was just a hole in the floor. The sewage would bubble up through the floor.
Every time they moved him from cell to cell to cell, they would lose his belongings. One of his most precious belongings was a metal coil that you could plug into the wall and use to boil water. The reason it was so important was that the Moscow prisons don't have water that you can drink safely, because the water contains bacteria and other parasites.
After six months of sleep deprivation, freezing temperatures, unsanitary conditions, and bacteria-ridden water, Sergei became sick. He lost 48 pounds and started having severe abdominal pains. He went to the prison hospital and was diagnosed with pancreatitis complicated by gallstones. They prescribed an operation on August 2, 2009.
Shortly before his operation was to happen, he was again confronted with the possibility of withdrawing his testimony and pleading guilty to a number of falsified crimes in order to justify his detention. Throughout this process, no matter what kind of physical pain he was suffering, he refused to perjure himself and sacrifice his integrity.
One week before his operation was due, the investigator abruptly moved him out of the prison he was in, which had a medical facility, to a maximum security prison called Butyrka, which is one of the toughest prisons in Russia. Most importantly, Butyrka doesn't have any medical facilities. At Butyrka his health spectacularly broke down. He went into constant agonizing and unbearable pain. There were accounts that his cellmate would bang on the door for hours trying to get medical attention. When a doctor would come, the doctor would say things like, “You should have been treated before you got arrested.”
The pain became worse and worse. Finally things went over the edge. On November 16, 2009, he went into critical condition. It was only then that they moved him back to a prison that had a hospital. They moved him to Matrosskaya Tishina prison, but at Matrosskaya Tishina they didn't treat him. They put him into a straitjacket, put him into an isolation cell, and left him for one hour and 18 minutes, until he died.
He was 37 years old. He left a wife and two children.
Everybody has their own way of dealing with adversity, and the reason we know all this is that Sergei's way of dealing with adversity was to write it all down in the form of complaints about misuse of the justice system.
Sergei wrote, in his time in detention, 450 complaints in the 358 days that he was detained. We have an absolutely perfect record of all the torture and abuse he was subjected to in retaliation for his exposing the corruption and criminality of police officers in Russia.
The day he died, we released one of the most heartbreaking of these documents, which was a 40-page handwritten letter he wrote to the general prosecutor that describes some of the things I've just told you about. We released it to a number of newspapers, including Novaya Gazeta newspaper, which is one of the last remaining independent newspapers in Russia. Novaya Gazeta published his account in this 40-page letter in its entirety, calling it “Sergei's Prison Diaries”.
This document truly upset everybody who read it in a way that was unexpected for Russia. People in Russia have very thick skin and are often very cynical. But what this document showed was that the gulags that people thought were long gone were still alive and well in Russia.
Moreover, what this document showed and what Sergei's death showed was that the social contract that people thought existed in Russia no longer existed. People thought the social contract in Russia was that if you kept your head out of politics, human rights, and other sensitive matters, you could enjoy the fruits of an authoritarian regime. What Sergei's death, torture, and horrifying conditions proved was that even a young tax lawyer who had nothing to do with any of those controversial professions, if he happened to be working for the wrong client and happened to be a patriot and stood up against corruption, could have his entire life turned upside down, be taken out of his normal life, in which he buys his Starbucks coffee in the morning, and be sent to the worst possible dungeon in Russia to die.
After this Novaya Gazeta article appeared, the President of Russia called for an investigation into Sergei's death. Unfortunately, the people who were responsible for his death seem to have more power than the President of Russia. After he died, first of all, they never allowed any type of autopsy; they never allowed any kind of independent observer of the state's autopsy; they changed the version of his death from rupture of his abdominal membrane to heart failure and said he died of natural causes. They then held public hearings in which they said that Sergei had never complained about his health, in spite of these 450 documented complaints about his health and many other things.
We're now almost a year after his death and not a single person has been charged. Moreover, the people Sergei testified against have all been promoted—every single one of them has been promoted.
What it shows is that there's huge corruption in Russia, there are terrible and fatal consequences to the corruption in Russia, and there's total impunity for the people who have done this.
But we've decided that we're not going to let Sergei's death go unpunished. I'm going around the world, which is why I'm testifying in front of your committee today, to tell this story and to try to find justice outside of Russia.
One of the most important things we've done so far is that I gave similar testimony in front of the human rights subcommittee of the U.S. Congress and I asked them to impose visa sanctions and financial sanctions on the individuals concerning whom we have documentary evidence of the torture and death of Sergei Magnitsky. As a result of that testimony and that request, we now have in the United States two bills—one in the Senate and one in the Congress—called the Justice for Sergei Magnitsky Act of 2010. In the Senate it's sponsored by Senator Cardin, who's a Democrat and head of the Helsinki Commission, and by Senator McCain, who's a Republican. In the House of Representatives it's sponsored by Jim McGovern from Massachusetts, who's a Democrat, and Darrell Issa, who's a Republican. This is a bipartisan, bicameral bill, which has been submitted to both houses and will be debated and hopefully passed.
I'm calling on you today to help me with this cause and show the Russians that even though it's far away, and even though perhaps these people don't have much to do with the United States or Canada, this type of action won't be tolerated.
Sergei Magnitsky is no different from thousands of other people like him, with one exception, which is that we have all this documentary evidence and we have me ready to speak about it. I'm hoping that we can use this as a symbol for all the other people who are suffering in silence and be able to do something about it.
Thank you very much for taking the time and hearing my story.
Mr. William Browder:
First of all, I agree with your point entirely about the business climate in Russia, and with any chance I have I'm telling people that it's essentially Russian roulette; that there might be six chambers that are empty, but with the seventh one you'll blow your head off, if you've crossed the wrong people or you have something they want.
So I would encourage everybody I come across not to invest in Russia, because of the level of danger—not just financial danger, but physical danger—which is untenable for any civilized person to be involved with. People try to cover it up and people try to make it as if there aren't these problems.
And most people don't talk about it; people are afraid to talk about it. I've been threatened on eight different occasions with death for doing what I'm doing, but it's important that I talk about it. The fact that other people don't talk about it doesn't mean it doesn't exist.
Coming to the specifics of the law, I have spoken with Professor Cotler and have asked him whether we can take what's being done in the U.S. and modify it, based on whatever the circumstances are of your legislative process, and put in place something that is the same or similar, which makes this point: they may choose not to prosecute evil wrongdoers in Russia who have done this thing, but there's no reason why we should grant them the luxury of entering our civilized countries, spending their money in our countries.
The way the Justice for Sergei Magnitsky Act of 2010 works is very simply that it will be a law that will require the State Department to come up with a list of the people for whom they believe there's evidence of involvement in the fraud that Sergei Magnitsky exposed and in his false arrest, his torture, and his death.
Because there's so much documentary evidence in this case—we have the signatures of the doctors who refused him medical treatment, the signature of the investigator who moved him before his operation, the signature of other officials who were involved in raiding the offices—these lists are pretty easy to create. Once the list has been created, then it would be a requirement for the Secretary of State to make a list of these people and for their visas to be permanently cancelled, and all of their relatives and dependants would also have their visas cancelled. So you can't be a torturer and murderer and send your kid to boarding school in Canada or the United States in an ideal world.
Mr. William Browder:
I should clarify that I've also had the same conversation with the head of the subcommittee on human rights of the European Parliament, Heidi Hautala, and she supports the idea of a resolution at the European Parliament. We're gathering support from different factions of the European Parliament. Hopefully by the end of the year we'll have a similar parliamentary resolution.
I was in Berlin about three weeks ago and met with the heads of each faction's subcommittee on human rights. They're going to hold hearings, hopefully in January, as we're doing right now, to discuss the idea of visa bans. We're also beginning the process of working with the British Parliament on the same thing.
I've been in touch with the Polish foreign minister, who has publicly stated that if other countries—and he was specifically referring to the U.S.—were to put in place visa bans, Poland would follow. The reason Poland is important is that it's a member of the Schengen region, which means that if the visas are taken away for these officials in Poland, they can no longer travel to any Schengen country, which includes all of Europe. We're working on a few other Schengen countries at the moment as well.
So this is a widespread activity that we're doing with many different countries. The idea is that we want to create essentially a domino effect whereby bad guys won't be able to travel. This scares the hell out of not just the bad guys who did this, but other bad guys, because if other bad guys see that this is a viable weapon against human rights abuses—and there are no weapons at the moment against human rights abuses.... Everybody makes condemnations but does nothing about it. This is the first time I've seen something really tangible that will affect the human rights abusers.
I should say one other thing, which is that all of the community of people who fight human rights abuses in Russia are hugely in favour of this, and they beg every foreign dignitary, every president, every congressman who visits Russia to put in place this type of thing. We have Lyudmila Alexeyeva, who is one of the most important human rights activists in Russia, head of the Helsinki Group in Russia, who met with the German President and asked for this and met with officials from the U.S. state department to ask for this.
This is something they are screaming for. They are screaming for its consequence, for the end of impunity. So if I can collect like-minded people around the world who want to do something to really touch human rights abuses, this is what it would be.
This is starting out with Sergei Magnitsky, but my intention is that this be not just a Sergei Magnitsky law but eventually become an amendment we can apply to other human rights abuse cases and to other countries, so that eventually people who abuse human rights are no longer able to travel and spend their money and would have to think twice before they start torturing people in jail.