Author’s note: In early January, 2019, Veselnitskaya was charged by SDNY for obstruction of justice in the Prevezon case.
(Russian/Русский перевод) A major U.S. federal money laundering trial—one related to the Magnitsky murder and the largest ever tax fraud in Russian history—of a Russian firm with ties to both Putin and a major Russian Trump supporter was bizarrely settled without admission of guilt by the Acting U.S. Attorney. The trial could have been a major embarrassment and caused many problems for Russia at this delicate time, and none other than Preet Bharara had been running this case for three-and-a-half years before he was fired by Trump just two months ago. Naturally, questions arise and this looks pretty bad.
Originally published on LinkedIn Pulse May 15, 2017
By Brian E. Frydenborg (LinkedIn, Facebook, Twitter @bfry1981) May 15th, 2017; this article was censored when it was posted on a Russian government think tank (see below); see how this story and other Russian money laundering threads tie to Trump’s and Putin’s associates in my Twitter thread here. See related July 27th article with additional information on the Prevezon case, including Kushner’s ties to it: Think You Know How Deep Trump-Russia Goes? Think Again: This Chart/Info Will Blow Your Mind
NOTE: July 12th, The Russian International Affairs Council editorial staff censored my below post that I had posted July 11th on its site (I am a regular contributor and was invited to be so some time ago), sending me the following message:
We regret to inform you that based on the decision of RIAC’s editorial office, it will not be possible to further consider your latest blog post for publication.
We reaffirm your right as blogger to publish material in your blog without negotiating the approval of its content in advance or any censorship. However, we have to make sure all texts are in line with the norms of the Russian law for RIAC information resource acts within Russian legal framework and we are held responsible for any publications on our website.
As an information resource, we are obliged to prevent the spread of extremist information, unreliable data as well as exposure of personal data to the public.
Moreover, serving as a platform for scientific discussion on important, complicated and sometimes highly sensitive issues in the field of world politics, we maximize our effort to prevent the spread of fake news and propaganda, irrespective of who is their source and what motives they harbor disseminating them.
We are thankful for your understanding.
RIAC’s editorial office
I wrote the following responses:
Could you please identify yourself and kindly identify in detail the sources used and statements made in my latest piece that “extremist,” have “unreliable data,” and that exposed any “personal data?” Let’s be honest here: you’re censoring analysis that the Putin government doesn’t like that goes against the Kremlin narrative, plain and simple. Every single source I referenced is credible and reliable, and I challenge you to prove otherwise. Conversely, there are many blogs up there with poor research that remain simply because they are critical of American policy and give Putin a free pass or praise. If you do choose to go down this path after being one of the only sites Russia that truly allowed diverse opinion, I will publicize this and draw attention to your hypocrisy.
How does this violate Russian law? What statute specifically?
Was it because of the link to the original article being a LinkedIn article [Russia had banned LinkedIn]?
Here was the next response:
This decision was made collectively by the RIAC’s editorial team. your text contradicts RIAC’s internal regulations. We do our best to provide the platform for discussion for all experts regardless of their ideological and political views. The main criterion for us is the academic style of texts and substantial argumentation.
The main problem with the content of your latest piece is the use of data which can not be confirmed by other reliable and internationally recognized sources. The information which was published in your latest piece can put RIAC and you, as blogger, in danger of being accused of defamation.
You are writing a blog at RIAC since 2015 and it is the first time we encounter such a problem.
We hope for your understanding and hope that this incident will not stop you from writing for RIAC’s website.
RIAC’s editorial office
Clearly, the reasons my post was censored were content-specific. My next message generated no response whatsoever, despite my request for RIAC to identify SPECIFIC information with which RIAC had a problem:
Please be specific and tell me what data cannot be confirmed by reliable and internationally recognized sources. That is false and you must be mistaken and I linked to sources that are only internationally recognized as credible so I await your specific citations and I will be happy to respond to your specific issues with specifics.
There are two possible explanations: something here (most likely the discussion of anything related to Magnitsky) is a red line, even for a blogger on this Russian government-sponsored think tank, or, things are so sensitive now that any post like this would be censored even in such a forum. This is very disappointing.
On July 24th, I reposted this with this chain and I CALLED AGAIN ON THE EDITORIAL STAFF OF THE RUSSIAN INTERNATIONAL AFFAIRS COUNCIL TO SPECIFICALLY IDENTIFY WHAT INFORMATION AND SOURCES ARE INAPPROPRIATE AND NOT BACKED BY CREDIBLE REPORTING. It is sad that even a think tank must be co-opted by Putin’s agenda and cannot allow a free expression of a well-sourced, meticulously researched view that differs from that of Putin, the Kremlin, and the Russian Foreign Ministry.
On July 25th, my post was again censored and my login credentials revoked.
UPDATE July 24th: Bill Browder has filed a complaint with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) against Rep. Dana Rohrbacher (R-CA) and his staff director for violating the Magnitsky Act.
UPDATE July 8th: The New York Times is reporting that on June 9th, 2016, Paul Manafort, Jared Kushner, and Donald Trump Jr. met a lawyer for Prevezon-head Denis Katsyv named Natalia Veselnitskaya, an anti-Magnitsky Act crusader and the wife of a close colleague of her client’s father, in Trump Tower, a meeting arranged by Donald Jr.
AMMAN — THE TRIAL was set to begin in three days, a mammoth trial a decade in the making, one of international intrigue, massive money laundering, the biggest tax fraud in Russian history, posh Manhattan real estate, powerful Russians with connections to Russian President Vladimir Putin, and the murder two people and attempted murder a third, each victim gathering evidence against the Russians. But, instead, the Acting U.S. Attorney for the Southern District of New York submitted a letter on May 12th, 2017, to the presiding judge, William H. Pauley, III, stating that the government had reached a settlement with the defendants, after his predecessor, Preet Bharara, had spent three-and-a-half years building his case.
In case you forgot—with all the Comey firing drama and the new Trump revealing classified information to the Russians brouhaha and dozens of other developing scandals that are unfolding with blistering speed—a newly-installed President Trump back in March fired U.S. Attorney for the Southern District of New York Preet Bharara from his prestigious position, a position from which Bharara played roles in past and current cases involved with and related to Trump (including busting a Russian mafia money laundering ring that was partly run from Trump tower and a current case investigating stock trades of Trump’s Secretary of Health and Human Services, Tom Price) and a role in which he would have been involved in possible future cases had he not been fired. Bharara also had a strong record of taking on Russian criminals, even those closely tied to Putin and the Russian government: he busted two major Russian arms dealers, including the notorious “Merchant of Death” Viktor Bout; he successfully prosecuted multiple Russians involved in hacking, cybertheft, and other cybercrimes; he was involved in cases against Russian spies, including the biggest post-Cold War Russian espionage situation (at least before the hacking) in which 10 undercover Russian agents were arrested and later traded with Russia; and he exposed a plot by dozens of Russian diplomats to defraud Medicaid in order to make extravagant purchases and/or go vacations.
Had he not been fired by Trump, Bharara would now be leading this case, too, and almost exactly two months from the day he was fired, the U.S. government, with his acting replacement acting in his stead, settled with a whimper a case stretching back a decade. It was a case U.S. had been building for close to four years and one in which one key lawyer working against Russian interests, Sergei Magnitsky, was murdered, and in which another lawyer working against the Kremlin on behalf of Magnitsky’s family, Nikolai Gorokhov, was thrown out of his fourth-story Moscow apartment window on March 21st of this year, just one day before a major Russian court appearance concerning the same crimes (such “accidents” are not uncommon with Putin critics); Gorokhov suffered severe head injuries and is apparently still hospitalized; he had provided key evidence for Bharara’s prosecution team and was set to be a star witness in the trial that was to start today, May 15th. Unsurprisingly, Bharara and his team were actually very concerned that something exactly like this would happen to Gorokhov and submitted a formal letter expressing that concern to the presiding judge back in October 2015.
The roots of the case go back over a decade to Russia, and for a thrilling read on its origins, you can pick up Bill Browder’s Red Notice: A True Story of High Finance, Murder and One Man’s Fight for Justice. Browder was running the wildly successful Hermitage Capital Management in Russia throughout the late 1990s and the 2000s. But when he fell out of favor with the Russian Government for trying to take on the corrupt system of doing business in Putin’s Russia, Putin started playing hardball, having Browder deported in late 2005 through the hands of the F.S.B., the K.G.B.’s main successor, labeling Browder, essentially, an enemy of the Russian state. In 2007, Hermitage’s Russian office was raided, one of its employees roughed-up; soon after, Browder’s intrepid lawyer, the previously mentioned Magnitsky, eventually helped to uncover a massive $230 million tax refund fraud scheme in Russia, the largest tax scam in Russian history and one carried out through collusion between (likely senior) Russian government officials and members of the Russian mafia. Together, they conspired to use profitable companies like Browder’s by seizing control of them on false legal pretexts, throwing a bunch of fake lawsuits at them, and then erasing the companies’ profits from the books and claiming the taxes those companies had paid as a refund since the profits generating those taxes had magically disappeared; Magnitsky was arrested for his efforts on trumped-up charges, and, once in custody, was beaten by guards and denied medical care in Russian prison, dying from his wounds and deliberate lack of medical attention in 2009.
Magnitsky’s death turned Browder into a crusader to expose Putin and honor Magnitsky’s memory; in 2012, when a Russian named Alexander Perepilichnyy began working with Browder to help and moved to the UK to do so, he mysteriously died while jogging near his new home, almost certainly the victim of a Kremlin operation, with an investigation into his death still underway; Browder bravely continued his efforts by pushing the U.S. Government to pass the Magnitsky Act in 2012, allowing for harsher punishments and sanctions of Russian officials involved in these crimes and pushing the EU to pass a similar law in 2014. This infuriated Putin, and when the U.S. applied sanctions to dozens of Russians under the authority of the new law in 2013, he responded by banning Americans from adopting Russian children and barring 18 U.S. current and former officials, including—and this is key—Preet Bharara for his earlier moves against Russian criminals.
Enter Russian Denis Katsyv, the essential head of a Cyprus-based apparent real estate company Prevezon Holdings, which was one of the beneficiaries of the $230 million Russian tax scheme. In charges filed by Preet Bharara in a lengthy complaint submitted in September, 2013 (and in the complaints’ two amendments in November, 2014, and October of 2015), the U.S. affirmed Magnitsky’s findings and accused Prevezon of receiving through a convoluted series of transactions involving shell companies at least (roughly) $2 million (possibly more) of the $230 million of Russian scam money, some of which Prevezon then laundered through the purchase of luxury Manhattan real estate properties, partly because, as I’ve described before, America has famously lax regulations on money laundering through real estate. Among those who would end up helping Bharara with his case against money laundering was Bill Browder.
Office of the U.S. Attorney for the Southern District of New York
Here is where the world of coincidence gets to be a bit astounding: Katsyv is the son of Petr (Pyotr) Katsyv, a former Russian government minister who currently helps to run Russia’s state-owned Russian Railways, which until recently was led by Vladimir Yakunin, a close Putin ally with a history of corruption who began publicly backing Donald Trump’s presidential candidacy since at least June 2016; Yakunin and Petr Katsyv ran Russian Railways together for about a year. Yakunin had also partnered with Denis Katsyv and Republican Congressman Dana Rohrbacher in 2016 to lobby against a stronger version of the Magnitsky Act under consideration that would expand to cover any government officials around the world involved in human rights abuses, with this version known as Global Magnitsky; the efforts to fight it included promoting a controversial “documentary” trashing Magnitsky and Browder and accusing them of the tax fraud, which is Russia’s official version of who is responsible for the $230 million fleecing of Russian taxpayer money. Rohrbacher also met earlier this very month with an old Soviet spy-turned Putin lobbyist named Rinat Akhmetshin and specifically discussed the Prevezon case with him; the two had also worked with Katsyv on opposing Global Magnitsky.
There is also the fact that a prominent Russian activist and lawyer, Andrei Stolbunov, was targeted with very likely false extortion charges by the Russian government in 2014; the Russian government accused him of trying to extort money from Petr and Denis Katsyv and also accused him of working with Bharara’s office and Browder; fearful, Stolbunov applied for asylum in the U.S. even before Russia filed charges against him, seeing the writing on the wall.
At this same time the above Russian laundering scheme at the center of the Prevezon case was underway, at least three other major Russian money laundering schemes were underway, about which I have gone into great detail in my previous writing (any new details I’ve received will have fresh links in this section, but for my other information for the following schemes, please do take a look at my detailed research in my other work):
1.) One scheme was Russian organized crime—led by the Russian “boss of bosses” Semion Mogilevich (who was linked to the money laundering ring partly run from Trump Tower that Bharara shut down)—working on behalf of the Russian government and close associates of Vladimir Putin—including Ukrainian oligarch Dmitry Firtash and the now disgraced former Ukrainian President Viktor Yanukovych—to launder money into the U.S. in Manhattan as part of a major laundering operation worth billions involving the Eurasian gas industry, especially Gazprom. The whole Eurasian gas/money laundering scheme was itself designed to help Russia dominate Ukraine politically by taking profits from crooked deals to bribe Ukrainians politicians and fund the campaigns of Yanukovych and his political party; the political side of these efforts was led then by future Trump presidential Campaign Chairman Paul Manafort, aided by his associate and future Trump campaign employee Rick Gates and with another Trump campaign advisor, Carter Page, advising two key entities on different ends of the scheme at the time; Manafort was key in setting up a series of laundering scams involving real estate in Manhattan, for which he was sued—along with Firtash, Mogilevich, and Yanukovuch—by an imprisoned former Prime Minister of Ukraine who had energetically fought Putin and the gas scheme: Yulia Tymoshenko. Tymoshenko was imprisoned on false charges after Manafort had orchestrated Yanukovych’s 2010 presidential comeback-win, in which the proceeds from that gas/laundering scheme were used to weaken her political power and empower her enemies; this would all help lead to the current war in Ukraine. Manafort apparently was paid some of his Russian money—from this illicit Russian scheme or possibly other illicit Russian schemes to handle the corrupt Yanukovych’s ill-gotten funds or promote abroad the general interests of the Russian Government—through the Bank of Cyprus, then run in-part by Wilbur Ross, Trump’s future Secretary of Commerce (who would also help Russians make deals using the bank to avoid sanctions imposed by the West after Russia’s annexation of Crimea; Ross remained with the Bank until he was confirmed to Trump’s cabinet in 2017). Also of note here is that Firtash is being held by Austrian authorities as the U.S. and Spain compete to extradite him for various criminal charges; a critical question is how vigorously the new Trump Administration officials are pursuing his extradition.
2.) At the same time as this was going on, the son of an alleged Mogilevich capo and convicted large-scale money-launderer Felix Sater (possibly also an associate of Mogilevich himself) set up a real estate office for his company, Bayrock, in Trump Tower in Manhattan, befriended Trump, and, along with a number of Russian/former-Soviet Republic characters, brokered and financed a series of disastrous and scandalous real estate deals with Trump that, viewed together, almost certainly were laundering schemes for dirty Russian money; even after all that scandal, Trump hired Sater to work directly for the Trump Organization and, once president, used him as back channel to push a peace deal very favorable to Russia for the Ukraine/Russia conflict.
3.) A third concurrent scheme involved Russian laundering to the tune of billions through Deutsche Bank, which just happened to be the only major bank operating on Wall Street willing to loan to Donald Trump for most of the 2000s after a terrible series of high-profile bankruptcies, disputes, and shady, unethical business practices on the part of Trump made him a persona non grata among all other major Wall Street lenders. An internal Deutsche audit apparently found that the money loaned to Trump was not tainted by the dirty Russian money, but there is pressure to have an outside group conduct an open, transparent investigation to verify this. In what may be Trump’s largest conflict of interest as president (Trump owes the bank some $300 million), it is now his Department of Justice, run by his less-than-trusted Attorney General Jeff Sessions—who had to at least stated he would recuse himself on all things Russian and campaign 2016 because of his lies under oath about meetings with the Russian ambassador during Trump’s campaign—carrying on the U.S. investigation into Deutsche, and it remains to be seen how vigorously Sessions’ Department of Justice will pursue its part of the major international ongoing investigations into Deutsche for over $10 billion in Russian laundering and for which it has already been fined over $800 million.
Taken together, all this is very worrying and very incriminating.
And yet, members of the media and the public not in the tank for Trump must be careful not to mistake their justified outrage and terror at the Trump Administration’s conduct any kind truly national feelings existing along the same lines: in a poll taken just after the Comey firing, not even half (only 46%) of Americans disapproved of Comey’s firing, while 39% actually approved of it; a more recent poll, after the firing scandal had had a few more days of exposure, shows 38% disapproving, and only 29% approving, and even with just two data points, there is clearly hardly a groundswell of support for something like impeachment or even being able to claim any kind of a national consensus that Trump’s conduct is outrageous (even though it clearly is). In the first poll, only 13% of Republicans disapproved of the Comey firing and only 8% in the second; in both polls, more independents disapproved than approved, but in neither did the independents’ disapproval figure surpass 45%, a very telling figure indeed. Meanwhile, the Republican numbers line up with two earlier polls from mid-March and mid-April showing that only about 3.5% and 2% of Trump voters, respectively, regret voting for him. It will be interesting to see how much, if any, his base of support drops after the Comey firing or the breaking classified information scandal, and I suspect there will be little to no change, with plenty of time before the 2018 midterms and 2020 presidential election for any wavering supporters to be distracted by new (faux) outrages directed at both the left and the media, whom Trump’s supporters despise.
One very disturbing similarity the circus of events surrounding the arrest and death of Magntisky, who was leading the investigation on behalf of Browder and his firm against the Russian government and their associates (including Russian mafia figures), shares with the current situation with Trump and the firing of the FBI Director James Comey, who was leading the investigation of candidate and then President Trump and his associates (possibly including Russian mafia figures), is the blatant lying the Russian government and Trump Administration engage(d) in regarding their respective situations, with astounding shifts in the rationales presented to the public as if they knew enough of the public would just shrug their shoulders and move on as if nothing important was happening, that they would not even take care to make sure their lies were not obvious to the public because did not respect the intelligence or the integrity of their own people would hold them accountable for their lies.
And those thinking the FBI investigation is some sort of political issue are, to a large extent, being myopic and petty; the issue of Russian interference is clearly one of national security, the only reason it’s become so political is because Republicans are treating this like any other sort of right-left issue, where this would benefit Democrats and hurt their Republican president, so they must start from the premise it’s just Democrats being sore losers—despite the incredible breathtaking breadth and depth of evidence it is not—and work from there, retreating using scorched-earth tactics only when forced to; THAT is where the politics lie, not in standing up to Russia, something which used to be an American thing but is now solidly a Democratic thing, not in any significant way a Republican thing in the era of Trump.
In the context of all of this and especially the many serious scandals and questions involving Russia, and after a key witness was nearly murdered not even two months ago and understanding that this case took nearly four years to prepare, it is very strange, even suspicious, that Bharara’s replacement went with a settlement for less than $6 million (given the long preparation, it is likely the U.S. government spent more than that pursuing the case) when the government initially sought to seize over $20 million in assets, and all with no admission of wrongdoing on the part of Prevezon in the settlement. A federal appeals court had even disqualified previous lawyers for the case last October, and in the final days before the trial, the judge had even ruled to admit important Russian case file as evidence provided by Gorokhov for the prosecution (the day the U.S. asked to have the evidence admitted was the same day Gorokhov was pushed out his window, and its admission be and was challenged by Prevezon, since the evidence was obtained in such an unusual way as Russia was refusing to cooperate and provide the evidence under its treaty obligations) and had also ruled against a defense motion to dismiss the case, so the prosecution even had some steam going into the trial. But then, there was no trial… Thus ended U.S. v. Prevezon Holdings, and though the Acting U.S. Attorney, Joon Kim, declared the settlement a victory, so did Prevezon, and it’s not hard to see why it did.
I have faith that Kim wasn’t corrupted or anything like that, and he seems to be a professional public servant; maybe so new into his position, he was more inclined to think of this settlement as a victory, but I will give him the benefit of the doubt and will not pretend to have any serious sense of his precise thinking. Bharara tweeted support for the settlement, though it’s hard to imagine him publicly criticizing his former subordinate, just as it’s hard to imagine him settling, as Kim did.
So there are some very important questions here:
1.) Did Trump or any of his people suggest—especially Kim’s direct boss, Attorney General Jeff Sessions—recommend, encourage, or pressure Kim in any way to accept a settlement?
2.) Why did Kim decide to settle?
3.) Why won’t the U.S. Attorney’s office comment or respond to media inquiries on the settlement?
These questions should be the subject of at least a Congressional investigation, as the decision to not to take this case to trial is confounding given all the context presented here and is just one more example of Russia being able to feel that, relatively, they have a friend in the Trump Administration.
Correction appended: changes made to reflect the alleged nature of Sater’s father’s ties to Mogilevich
See how this story and other Russian money laundering threads tie to Trump’s and Putin’s associates in my Twitter thread here!
© 2017 Brian E. Frydenborg all rights reserved, no republication without permission, attributed quotations welcome
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