The former attorney general of Great Britain has been representing the lawyer for an alleged Russian crime family, The Daily Beast has learned, based on a tranche of email correspondence leaked online.
Lord Peter Goldsmith, who served for six years under Tony Blair’s premiership and is now a senior partner at the London office of U.S. law firm Debevoise & Plimpton, was retained in March 2014 by Andrey Pavlov to act as “legal advisor.” Pavlov for years acted as legal counsel for Russian crime boss Dmitry Klyuev; he was also directly implicated by whistleblower Sergei Magnitsky as being an accomplice in the theft of public Russian money. Pavlov has denied all these accusations.
Goldsmith—who provided the Blair government with the legal justification for Britain’s participation in the 2003 Iraq War—was tasked with helping Pavlov evade possible sanction by the European Parliament for being complicit in Magnitsky’s death in prison, and for “the subsequent judicial cover-up and for the ongoing and continuing harassment of his mother and widow,” as the text for the European parliamentary resolution stated.
Magnitsky, himself a Russian tax attorney, was found dead after being beaten by eight guards while in pretrial detention in Moscow’s Mastrosskaya Tishina prison in 2009, as Russia’s Presidential Human Rights Council found. Anti-corruption crusaders, backed by evidence compiled by Hermitage Capital, Magnitsky’s client, argue that the slain lawyer was framed for uncovering a series of tax frauds, collectively equaling almost $1 billion. The alleged fraud was perpetrated by Pavlov’s employer, the Klyuev Group, which Sen. John McCain has called a “dangerous transnational criminal organization” (PDF) that has “colluded with senior Russian officials to engage in bribery, fraud, embezzlement, company thefts, and other serious financial crimes.” (Full disclosure: I am an uncompensated member of the advisory board of the Justice for Sergei Magnitsky Inter-Parliamentary Group.)
According to the leaked emails, Pavlov sought, in retaining Goldsmith and Debevoise, to stave off any EU sanctions list and also to respond directly to allegations made against him by William Browder, the CEO of Hermitage Capital. Browder, relying on evidence uncovered by Magnitsky, accused Pavlov of being consigliere to the organized crime syndicate responsible for raiding Hermitage Capital’s offices, stealing three of its subsidiary companies, and perpetrating a $230 million tax fraud. Magnitsky was then arrested for tax evasion.
Email documents show that Debevoise arranged to contract Crosby Textor, a campaign strategy firm, to verify Browder’s claims and isolate those made against Pavlov, and to conduct “in-depth interview(s) with [Pavlov] including asking [him] ‘the difficult questions.’” In the event that the European Parliament passed a resolution naming Pavlov as a co-conspirator in Magnitsky’s plight, then Debevoise would represent him across all bodies of the EU governing apparatus, according to the emails.
A resolution was indeed passed in April 2014, a month after Pavlov hired Debevoise, recommending that the EU Council issue targeted sanctions against 32 members of the Klyuev Group, including Pavlov. To date, however, the Council has not made good on the parliament’s recommendations—no sanctions have been issued against Pavlov or anyone else on the so-called “Magnitsky List.”
Goldsmith’s hourly rate, according to the engagement letter he signed on behalf of Debevoise, is £960, ($1,400). Other lead counsel, Matthew Getz and Robin Lööf, would get £670 ($936) and £470 ($675), respectively. Pavlov also paid the firm a retainer of £75,000 ($108,000).
In 2010 Goldsmith testified before a British inquiry that he had initially counseled the government to seek a new UN Security Council resolution authorizing military action against Saddam Hussein’s regime before changing his mind and deciding that UN resolution 1441, from 1991, was sufficient grounds. He strenuously denied that his volte-face owed to political pressure.
Goldsmith was unavailable for comment on this story. A media spokesman from Debevoise did not respond to The Daily Beast’s request for an interview by time of publication.
The Magnitsky affair, an elaborate and extensively reported tax refund fraud, initially involved the theft, in 2007, of three subsidiary companies owned by Hermitage Fund and tasked with trading Russian energy securities. The companies were Rilend, Makhaon, and Parfenion, and they were stolen, according to evidence uncovered by Magnitsky, with the involvement of officers of Russia’s Interior Ministry. These officers, Major Pavel Karpov and Lt. Col. Artem Kuznetsov, had ties to Klyuev, a onetime petty crook who then recruited the very men assigned to investigate him for prior financial crimes.
Klyuev had been arrested in 1998 for beating a man he discovered exiting from his then-girlfriend’s apartment. Magnitsky found Russian court records showing that Klyuev had spent the early 2000s working for an investment bank and former officers in the KGB to concoct elaborate tax refunds using “court judgments.”
Pavlov appeared to act as consigliere to this alleged mafia, which also included officials from two Moscow tax bureaus. According to Magnitsky, Pavlov’s role was contriving civil lawsuits by third parties (controlled by Klyuev’s accomplices) seeking damages for purportedly breached business deals. Documentary evidence does establish that Pavlov represented parties on both sides in these interlinked lawsuits. In swift legal proceedings, sometimes lasting a mere five minutes, judges would rubber-stamp the awards asked for in full, making the defendant companies legally eligible for tax refunds based on these incurred on-paper losses.
In 2004, Klyuev was accused of trying to steal shares from a Russian iron ore company called Mikhailovsky GOK, worth $1.6 billion, through collusive lawsuits based on forged documents. Major Karpov had investigated this case, but then went to work for the chief suspect anyway. Karpov and his chief suspect Klyuev even vacationed in Larnaca, Cyprus. The man whom Karpov and his colleague ultimately identified as the mastermind behind the conspiracy was Klyuev’s personal driver, who subsequently turned up dead—the official cause was heart failure. The Mikhailovsky GOK case ended with Klyuev receiving a suspended sentence while the CEO and chief accountant of Universal Savings Bank—a Moscow bank Klyuev owned—were imprisoned. Records show that Karpov also traveled extensively with Pavlov, to London, Larnaca, Istanbul, and Madrid, between 2007 and 2009 despite Karpov’s modest policeman’s salary.
Klyuev denies that Pavlov was ever his attorney, saying in an interview with Vedomosti newspaper in July 2012, “I turned to him for complicated matters, and he worked jointly with me for my clients.” Nevertheless, Pavlov was seen accompanying Klyuev to a meeting of the OSCE Parliamentary Assembly in Monaco that same month.
Hermitage Fund was the actual owner of Rilend, Makhaon, and Parfenion, all three of which were misappropriated and re-registered in the name of a company owned by Viktor Markelov, a man convicted previously for manslaughter and described subsequently in the sentencing verdict as a sawmill worker. Hermitage says that it had no idea that its properties were involved in any litigation, much less that exorbitant judgments had been levied against them. No money from Hermitage was ever stolen apart from remaining account balances. The resulting court rulings were used to justify fraudulent refunds, which totaled $230 million. This is why the Magnitsky affair has become one of the most notorious financial scandal in Putinist Russia—because every taxpayer is a victim.
Publicly available Russian court and legal documents seen by The Daily Beast establish that Pavlov was involved either directly or indirectly in four separate court cases related to the Hermitage Capital subsidiaries, representing either the plaintiff or defendant. In one extraordinary circumstance, Pavlov virtually represented both at the same time.
In July 2007, a company called Logos Plus sued Rilend in the Arbitration Court of St. Petersburg, claiming that Rilend had not supplied securities in Gazprom, Russia’s state-owned gas giant, as per a 2005 contract the two parties had signed. The contract, in fact, was a back-dated forgery because in 2005 Hermitage was still in legal possession of Rilend and had never entered into any such transaction.
The original claim sought by Logos Plus, citing a contract cancellation fee, was $152,000. Pavlov openly “defended” Rilend, although only in a very lax definition of the word because he consented to an increase in damages his own client would have to pay to a whopping $325 million. Logos Plus was awarded that full amount on Sept. 3, 2007.
Remarkably, Pavlov appears to have instructed the other side, too. Anton Turukhin, the lawyer for Logos Plus, later testified to Russia’s FBI-like Investigative Committee after Magnitsky exposed the sham:
“I got acquainted with A. Pavlov in Moscow in 2006. On his request I represented the interests of Logos Plus in the court hearing at the St. Petersburg Arbitration Court. On August 27, 2007, A. Pavlov explained to me that it was necessary to go with him to the court for participation in the hearing as Plaintiff, while he would be representing the interests of the Defendant. At the meeting with A. Pavlov prior to the hearing, he gave me the lawsuit and Power of Attorney where I wrote down my details in the Power of Attorney. He then explained to me that these organizations: Logos Plus and Rilend had the same owner and doing this was necessary to improve they financial ratios and balance sheets. He also explained that I would be required to read out loud the lawsuit and that all of the explanations and the answers retired to be given to the judge would be provided by Pavlov himself.”
That same month—July 2007—Logos Plus brought a second case in St. Petersburg against a third Hermitage subsidiary, Makhaon. This time, Pavlov’s wife and law partner, Yulia Mayorova, represented Makhaon, the defendant. Logos Plus again initially sought six-figure damages ($128,000) before ratcheting up its claim to $73 million. Pavlov’s wife agreed on Makhaon’s behalf to the new figure without protest. The court awarded it on Sept. 3, 2007. The entire hearing lasted all of five minutes.
Kirill Yakovlev, the other lawyer representing Logos Plus, testified to the Investigative Committee that Pavlov had actually financed the purchase of the company from its prior owner—it was even his idea for Yakovlev to buy Logos Plus. Earlier in 2007, Yakovlev said, “Pavlov approached me with the request to find for him a company that was ready for sale without any liabilities. He did not explain his reasons for the request. Executing Pavlov’s request I approached my university friend Osman Adel Ali, knowing that he has a law firm Logos and that he is dealing with the registration of legal entities. Osman Adel Ali said to me that he just has a company that he is ready to sell. It was named Logos Plus. I informed Pavlov about it.
“Some time later Pavlov gave me the details of a new General Director, I can’t recall his name now, which I handed over to Osman Adel Ali. I paid the purchase monies for the company to Osman. Either Pavlov gave me the purchase monies or I paid them myself and he reimbursed later on, but I cannot now remember which.”
Even Pavlov admitted, on the record to Investigative Committee investigator Stanislav Gordievsky, that he didn’t know much about his own client or the transaction over which the latter was being taken to court. “How can you explain the fact that Logos Plus was purchased in the summer of 2007?” Gordievsky asked Pavlov in March 2008, according to Investigative Committee documents also leaked online and seen by The Daily Beast, “and filed claims soon thereafter on behalf of this company against Parfenion, Makhaon and Rilend, based on existing contracts that had been concluded much earlier?” Pavlov’s response was: “I didn’t have an opportunity to read in detail the documents.”
In a separate case, this one filed in arbitration court in Tatarstan, a company called Grand Activ sued Parfenion, another Hermitage subsidiary purloined by the Klyuev Group. The entire case was a replica of the Rilend one—a Gazprom securities transaction gone bad—only this time Pavlov represented the plaintiff. The legal documents, including the back-dated forged contracts, were also identical but for the names of the parties, dates, and ruble amounts. They were signed for Grand Aktiv by A. Sheshenya, even though according to Russian state registry of companies, he became director of Grand Activ only in 2007, i.e. two years after the date of the purported contract. The escalation of the claim also followed the Rilend script: Grand Activ first sought $294,000 from Parfenion. Then, again with the consent of both plaintiff and defendant, the figure was wildly inflated to $573 million. On Nov. 13, 2007, the Tatarstan court awarded it in full to Grand Activ.
Yulia Mayorova took part in a second lawsuit, this one filed by G.N. Plaksin, the general director of a company called Instar, which charged that Rilend had failed to satisfy another Gazprom securities transaction in 2005. (Plaksin is also the nominal owner and chairman of the board of Universal Savings Bank, Klyuev’s bank, which Magnitsky believed housed a large portion of the $230 million tax refund. The bank was liquidated in 2008.)
Mayorova represented Rilend in this case, tried in the Arbitration Court of Moscow in October 2007. The court awarded Instar $325 million in a verdict that once again noted that the defense didn’t put up a fight: “The defendant appeared in the judicial session, he did not present his opinion, and he did not in essence present an objection to the demands of the statement of claim.”
Hermitage Capital CEO William Browder has waged an extensive international campaign to clear his former attorney’s name and bring those responsible for his arrest and death to justice, the details of which are told in his bestselling memoir Red Notice. He has successfully lobbied U.S. Congress into passing the Magnitsky Act, which annually sanctions the alleged conspirators in the $230 million tax fraud and cover-up; and is now attempting to do likewise in Europe at both the state and EU levels. “We’ve been fighting legal nihilism inside of Russia for many years,” Browder emailed The Daily Beast in reaction to the revelation that Debevoise was representing Pavlov. “Now the Russians are trying to export these practices to the West. It doesn’t help that they’re finding western enablers who are willing to lend their good names.”
In 2013, a Russian court convicted Magnitsky posthumously of the $230 million tax fraud in a ruling Amnesty International deemed “Kafkaesque” and “deeply sinister.” It also sentenced Browder, who was also tried in absentia on charges of tax evasion, to nine years in prison. The American-born Browder is a British citizen and lives in London. He has beaten numerous Kremlin attempts to have him extradited to Russia.