Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice (31 page)

It wasn’t obvious, and I realized that I needed to take a step back and have another look at everything to see if I could spot any patterns or connections that we might have missed.

On a Saturday morning at the end of May 2008, I asked Ivan to come to the office and bring all of our new legal documents, the bank statements, and the warrants to our big boardroom. We unloaded the box with all the documents on the long wooden table and made a number of piles. One for each judgment, one for each bank raid, and one for each criminal case. When it was all laid out, we started constructing a timeline of what had happened.

“When was the last Kuznetsov raid on our banks?” I asked.

Ivan shuffled through the stack of papers. “August seventeenth.”

“Okay. What were the dates of the fake court judgments?”

“Saint Petersburg was September third, Kazan was November thirteenth, and Moscow was December eleventh.”

“So let me get this straight—the bad guys went to all the courts and spent all sorts of money to get these judgments, even
after
they knew there were no assets or money left in our companies?”

“Apparently so,” Ivan said, noticing this inconsistency for the first time.

“Why would they do that?”

“Maybe they wanted to use the judgments as collateral to borrow money,” Ivan suggested.

“That’s ridiculous. No bank would lend money off the back of one of these amateurish judgments.”

“What about them trying to seize your personal assets abroad?”

The thought was horrifying, but I knew it was impossible. I’d confirmed this with my British lawyers as soon as we learned about the claims in Saint Petersburg.

We sat in silence for several moments, then a lightbulb went on over my head. “How much were the Hermitage profits in 2006?”

“Just a sec.” Ivan opened his laptop and retrieved a file. “Nine hundred and seventy-three million dollars.”

“And how much did we pay in taxes that year?”

He consulted his laptop again. “Two hundred and thirty million dollars.”

“This may sound crazy. But do you think . . . do you think they’re going to try to get that two hundred and thirty million dollars refunded to them?”

“That
is
crazy, Bill. The tax authorities would never do that.”

“I don’t know. I think we should ask Sergei.”

That Monday, Ivan called Sergei to test this theory. But like Ivan, Sergei was completely dismissive. “Impossible,” he said without even thinking about it. “The idea that someone could steal past taxes is preposterous.”

But an hour later, Sergei called back. “Perhaps I was too hasty. I’ve looked at the tax code, and what you’re describing is theoretically possible. Although in practice, I can’t imagine it ever happening.”

During those weeks, while I was sitting in my office dreaming up theories, Sergei was in the trenches conducting his own investigation. More than anything else, he wanted to know about everyone who was involved with this crime. He’d written to the government office in Moscow where our stolen companies were registered, demanding all the information it had. While he got no response, the perpetrators did
something telling. They immediately moved the stolen companies to an obscure town in southern Russia called Novocherkassk. Sergei’s letter had obviously spooked them. He then wrote to the registration office in Novocherkassk, requesting the same information. While the officials there were just as silent as they were in Moscow, the criminals moved the companies again. This time to Khimki, a suburb of Moscow. This game of cat and mouse was clearly getting to the bad guys, so Sergei kept it up and wrote to the Khimki registrar too.

Sergei understood that while the people we were fighting had no respect for the law, they had an almost slavish respect for procedure and bureaucracy. Just as he’d rattled the bad guys into moving the companies around, he thought he would rattle the police by inserting more evidence about their own involvement in the crime into the case file. Sergei knew that once something went into the case file, procedure dictated that it would stay there forever. Sergei hoped that, even though the investigation into our stolen companies was going nowhere, in the future an honest investigator might take over and do the right thing. This mere possibility would leave the conspirators constantly on edge.

Sergei set up an appointment at the Investigative Committee for June 5, 2008. When he arrived at its building, he was met by the detective in charge and taken to his office. Just before the detective opened the door, Sergei noticed that the man’s hand was shaking nervously.

He pushed open the door, and it immediately became apparent why. There, sitting at the desk, was Lieutenant Colonel Artem Kuznetsov.

Sergei was startled. He looked straight into the eyes of the detective and said, “What’s he doing here?”

The detective avoided Sergei’s glare and said, “Lieutenant Colonel Kuznetsov has been assigned to assist the investigative team for this case.”

First Karpov had been assigned to investigate himself, and now Kuznetsov was doing the same!

“I won’t talk to you in front of him,” Sergei said forcefully.

“Okay,” the detective said uncertainly. “Then you’ll have to wait in the hall until we finish our meeting.”

Sergei sat on an uncomfortable metal chair for an hour, clutching his files in his lap. Kuznetsov and the detective probably hoped that Sergei would abandon his plan, but he didn’t. When Kuznetsov finally left, Sergei rose and went inside. He sat in the chair, provided the evidence, and gave his witness statement, explicitly naming Kuznetsov and Karpov in the crimes. Following procedure, the detective had no choice but to accept this and put it into the case file.

Sergei left the Investigative Committee’s headquarters and hopped on the Metro. What had just happened was beyond comprehension. Sergei had expected his testimony to go nowhere. He had expected his witness statement to be ignored. He had even expected to be treated rudely. What he hadn’t expected was to find the very man he was giving evidence against to be part of the investigation team.

It took the whole ride back to the office and a couple of laps around the block for Sergei to calm down, but when he returned to his desk at Firestone Duncan, he found something else he didn’t expect. A letter from the Khimki tax office, one of the registration offices he had previously sent a letter to looking for information on our stolen companies.

Sergei tore it open. For once, someone had actually done his or her job. There was information, there were names, but most importantly the letter showed that the people who’d stolen our companies had set up accounts at two obscure banks: Universal Savings Bank and Intercommerz Bank.

This was a huge breakthrough. Why would three companies with $1 billion of fake liabilities and no assets need bank accounts? Sergei immediately logged on to the Russian Central Bank website. He typed in Universal Savings Bank and found that it was so small that it had capital of only $1.5 million. Intercommerz was only slightly bigger, with $12 million of capital. They could hardly even be called banks.

But then he noticed something extremely interesting. Because these two banks were so small, the moment they received any money, he could see the spike in deposits right there on the website. And indeed, there were some big inflows. In late December 2007, shortly after these bank accounts were opened for our stolen companies, Universal Savings Bank received $97 million in deposits, and Intercommerz received $147 million.

It was then that Sergei remembered our question about the tax rebates. The amount these two banks had received was roughly the same amount the Hermitage companies had paid in taxes in 2006. This couldn’t just be coincidence. He quickly gathered all of the judgments and laid them side by side with our companies’ tax filings. At that moment everything crystallized for Sergei.

The Saint Petersburg judgment against Mahaon was for $71 million, and sure enough Mahaon’s profits for 2006 were exactly $71 million. Parfenion’s judgment in Kazan was for $581 million, and the 2006 profits were identical. It was the same story in Moscow with our third stolen company, Rilend. In total, the conspirators had created $973 million of judgments to offset $973 million of real profits.

Sergei called Ivan immediately, and after a few minutes of explanation Ivan jumped up and waved over Vadim and me. “Look at this, guys,” Ivan said excitedly, pointing toward his screen.

Ivan brought the Central Bank website up, and we looked at the two spikes in deposits that Sergei had uncovered.

“Son of a bitch,” I said.

“Bill, Sergei figured it out,” Ivan said.

“This is great, but how can we prove that this money actually came from the tax authorities?” I asked.

Vadim said, “I’ll ask several sources in Moscow if they can verify the wire transfers. Now that we know the names of the banks, we can probably figure out where the money came from.”

Two days later, Vadim rushed into my office and laid out several sheets of paper on my desk. “These are the wire transfers,” he said with a satisfied grin.

I grabbed the papers, which were all in Russian. “What do they say?”

He flipped to the last page. “This confirms a tax refund payment of one hundred and thirty-nine million dollars from the Russian tax service to Parfenion. This one is for seventy-five million for Rilend. And this is sixteen million dollars for Mahaon. That’s two hundred and thirty million dollars in total.”

This was the same amount of money—$230 million—that we had paid in taxes.
The same.

We assembled in my office and called Sergei to congratulate him on his amazing detective work, but even though he’d solved the riddle, he was distraught. These people had stolen from the Russian taxpayers—from him, his family, his friends. Everyone he knew.

“This has to be the most cynical thing I’ve ever seen,” he said.

It was the largest tax refund in Russian history. It was so big and so brazen that we were sure we had them. This had to be a rogue operation, and we now had the evidence to expose it and bring these guys to justice.

Which was exactly what we intended to do.

In my opinion, Vladimir Putin had authorized my expulsion from Russia, and he probably approved the attempts to steal our assets, but I found it inconceivable that he would allow state officials to steal $230 million from his own government. I was convinced that as soon as we shared the evidence of these crimes with the Russian authorities, then the good guys would get the bad guys and that would be the end of the story. In spite of all that had happened, I still believed that there were some good guys left in Russia. So on July 23, 2008, we started filing detailed complaints about the tax rebate fraud, sending them to every law enforcement and regulatory agency in Russia.

We also gave the story to the
New York Times
and to Russia’s most prominent independent news outlet,
Vedomosti
. The articles were explosive, and the story quickly got picked up widely, both in Russia and internationally.

Several days after the story broke, I was invited by Echo Moscow, Russia’s leading independent radio station, to give a forty-five-minute phone interview. I accepted and, in a live broadcast on July 29, methodically went through the whole ordeal: the raids, the theft of our companies, the false court judgments, the involvement of ex-convicts, the police complicity, and most importantly, the theft of $230 million of taxpayer money. The interviewer, Matvei Ganapolsky, a veteran reporter who had years of experience with Russian venality and corruption, was noticeably shocked. When I had finished, he said, “If our broadcast hasn’t been switched off, then tomorrow some arrests must be carried out.”

I thought so too—except nothing was done. The hours passed into days, and there was nothing. The days passed into weeks, and there was still nothing. It was hard to believe that such a huge story about the theft of government money would elicit no response.

But then there
was
a response—just not the one I was expecting. On August 21, 2008, during an unusually still and hot summer day in London, the phone in my office started to ring. First it was Sergei, calling from Firestone Duncan; then it was Vladimir Pastukhov, calling from his home office; then it was Eduard, calling from his dacha just outside Moscow. Each of our lawyers had the same message: a team from the Russian Interior Ministry was raiding his office.

Eduard’s message was the most disturbing. While he wasn’t at his office, a DHL package arrived at 4:56 p.m. Thirty minutes later, a large group of police officers showed up to his workplace to conduct a search. No sooner had they started their search than they “found” the DHL package and seized it. As soon as they had it in their possession, they concluded their raid and left.

Obviously, the whole episode was constructed around the arrival of this mysterious package. Thankfully, Eduard’s secretary had had the foresight to make a copy of the waybill and faxed it to us. We were shocked when we logged on to the DHL website, entered the waybill number, and got the return address for the package: Grafton House, 2-3 Golden Square, London W1F 9HR.

Our
address in London.

Of course, it hadn’t actually been sent from our office. The waybill, though, showed it
had
been sent from a DHL depot in south London, so we immediately contacted London’s Metropolitan Police and explained the story. Later that day, Detective Sergeant Richard Norten, a young officer in a leather jacket and aviator sunglasses, strutted into our offices.

I introduced myself and asked whether he had had any luck figuring out who’d sent the parcel.

He shrugged and slid a DVD out of his jacket. “No, but I’ve got
the CCTV from the Lambeth DHL,” he said. “Maybe you can identify them.”

I indicated my desk. Vadim, Ivan, and I gathered in front of it as Norten loaded the disc into my computer. He grabbed the mouse, opened the file, and fast-forwarded through low-resolution video footage of people coming and going at DHL’s shipping desk. Then he let it play. “Here it is.”