US Congress began steps to battle corruption in Russia. Senator Benjamin L. Cardin (D-MD), Chairman of the Commission on Security and Cooperation in Europe (Helsinki Commission), and U.S. Representative James P. McGovern (D-MA), Chairman of the Tom Lantos Human Rights Commission, yesterday introduced bills that would freeze assets of and block visas to individuals responsible for the 2009 death of Russian anti-corruption lawyer Sergei Magnitsky, related to a $234 million tax fraud scheme against Hermitage Capital.
This bill would bar all individuals connected to the 2009 death of Sergei Magnitsky from receiving U.S. visas and accessing U.S. financial markets.
As the US Congress tries to fight corruption from abroad, Russian authorities continue to tighten their grip on political discourse. This week Russia President Dmitry Medvedev fired Moscow mayor Yuri M. Luzhkov. In early September Luzhkov criticized Medvedev on his management of a highway between Moscow and St. Petersburg and seemed to call for Putin’s return to power. Some say this crack in Kremlin leadership left Medvedev no choice but to let Luzhkov go, but he needed affirmation by Putin, the real power in the Kremlin.
As authoritarianism calcifies in Russia, financial markets and public discourse suffers. Despite Medvedev’s grand tour of Silicon Valley and his musing on legal nihilism, the status quo in Russia remains strong.
Accounting Firm Drops Audits Under Pressure from Kremlin
PricewaterhouseCoopers (PWC) today finds itself thrust into the middle of the world’s highest-profile political show trial – accused by the defendant, Mikhail Khodorkovsky, former Yukos Oil CEO, of improperly withdrawing ten years of certified financial audits to keep PWC executives out of deadly Russian prisons. As the “trial” in Moscow edges towards the end of its critical defense phase, lawyers for Khodorkovsky and his co-defendant Platon Lebedev are engaged in proceedings in the U.S. to show that PWC executives caved to threats by corrupt government officials to help prosecutors bolster their fabricated case, which numerous independent courts and political observers have dismissed as a farce. The stakes are running high as a guilty verdict in the Moscow trial would land Khodorkovsky and Lebedev in prison for another 15 years and thwart much-needed investment in Russia. In the U.S., Khodorkovsky’s defense team has asked the California Board of Accountancy to revoke the licenses of Douglas Miller, the then-PWC partner who approved the audit-opinion withdrawal, and requested the U.S. District Court in Manhattan to order PWC to produce documents related to its decision.
This situation symbolizes why the Russian business community is not free — a business leader is jailed because he is viewed as a political threat and then his company’s independent auditor, a leading international firm, is attacked and forced to choose between its professional integrity and its professional survival in Russia,” said Pavel Ivlev, Chairman, Committee for Russian Economic Freedom.