February 8th, 2012

Interior Ministry plans to put Magnitsky on trial

Sergei Magnitsky

Courtney Weaver of the Financial Times reports that, in a development that defies words, Russian investigators are planning to posthumously prosecute Sergei Magnitsky, the Hermitage Capital lawyer and whistleblower who uncovered a $230 million fraud, only to be locked up in Russian prison, where he died after being beaten and undernourished.

Some Kremlin observers believe, and Interior Minister officials have acknowledged, that this prosecution is a way for Moscow to counter the various legal actions being brought by Magnitsky’s family and Hermitage Capital against those responsible for his death. But Hermitage chief Bill Browder believes a formal case against Magnitsky would have the opposite effect:

The lack of concern about how this appears abroad is astounding. This will only harden the position of foreign governments and parliaments who we have approached to impose sanctions across the world.

The implications extend to the investment community, which remains concerned that baseless actions like these demonstrate “the gap between Putin’s [pro-reform] rhetoric and reality,” said Tom Mundy of Otkritie Capital in Moscow.

Putin has been working overtime to attract foreign investment but has yet to see the fruits of his labor: the Russian equity market, Weaver writes, “still trades at a price-to-earnings ratio of 5.4, a 47 percent discount to the MSCI emerging market index.”

Click here for the New York Times article on the potential Magnitsky trial.

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