September, 2009

Jamison F: My name is Jamison Firestone. I’ve been practicing law, and I’m a member of the New York bar. I’ve been practicing law in Moscow since 1993. The story I’m about to tell you is a pretty wild ride through the lack of law. I wanted to make an interesting point. I don’t think we’ve ever met before, but people often ask me, how do I practice law in a land with no law. That’s a question that I ask myself more and more. All those skills that I learned, and all these things that I trained for, have increasingly less relevance in Russia, as time goes on.

The other comment I wanted to make, just before starting, is I read, “Come learn more about the Russian regime’s strategy to enrich itself, at the expense of honest companies.” Actually, I would say there’s often not a strategy. It’s a free-for-all, so I’m going to take you through a free-for-all right now, and a little wild ride. In Russia, we had this mix that Ethan talked about where criminals become politicians, and government servants, and government servant become criminals. The reason for this, is that the number one reason for getting into public service in Russia, is to make money, to make money out of your office. Your office is an enabler to make money.

Why was Hermitage Capital targeted? They were the largest investment fund in Russia. They were seen as the hero, the defender of minority shareholders. They were a great client to have. They were winning victory, after victory on nontransparent management and companies. They were getting management thrown out of companies that they held shares in. They were winning battles that nobody thought that could be won. Well that’s why they were targeted, because when you want to dilute minority shareholders, and you want to put a lot of money in your pocket by doing so, and some guy stops you from doing it, you got to get rid of him. That’s why Hermitage was targeted.

The first thing they did, was they canceled the visa of Mr. Bill Browder, who ran the fund, on the grounds of national security. A lot of time went by. Now what happens is, a bunch of, let’s say opportunistic government employees, decide to make crime pay. You form a little criminal group here. We’ve got some businessmen who got an idea. You’ve got some corrupt government officials in the Minister of Internal Affairs, call the the police. They’re basically the muscle. You’ve got some guy sitting in the Tax Inspector, who has got the needed signature.

What’s the plan? The plan is basically to rip off the budget for $230 million. It’s a very simple plan. Here’s how it worked. My law offices are raided in 2007. 20 armed officers from the \[foreign language 00:02:36] came into my office with a bogus search warrant, beat up one of our lawyers, put him in the hospital for three months, and took the Hermitage documents. Every single original document that we had for the Hermitage companies, the seals, the original documents. They gave us a receipt. Once they take these things, they give your receipt for exactly what was taken. So I have a receipt saying, we have the seals of such and such company. We have the corporate documents, and whatever. They carried all this stuff off.

Now what did they do with these documents? While, our documents, compliance documents, were safely in the offices of the police, they let a 42-year-old killer out of prison. They made him owner and general director of a new company. The used the seal and the documents of the Hermitage companies, to transfer the ownership of the Hermitage companies, which were previously held in the custody of HSBC, they now became owned by \[OOO Pluton 00:03:30], a company that is owned by a 42-year-old murderer. Who had recently been let out, who had no college education, and was a very unlikely person to be managing a $4 billion fund.

Now what’s interesting here, is that there was no money in these companies, because when Mr. Browder’s visa was canceled, you can imagine that his investors got concerned, so they redeemed, and they sold all the shares. They paid a lot of taxes, and they sent the money out, back to the investors. So what were stolen, were empty companies. Here’s our killer with his rap sheet. In any case, all of these documents were in the custody of the Interior Ministry when this happened. Now is very interesting, I want to roll back one here, is that once the ownership had been changed, we didn’t know this had happened. We’re thinking, “Well gee, our documents have been seized. We’re finally in compliance. Give us our documents back. Give us our data files back. But we generally think they’re safe.”

Meanwhile, while those documents are there, we don’t know it, but the Hermitage companies are being sued. They’re being sued in Kazan. They’re being sued in St. Petersburg, and we don’t know that this is going on. We don’t know it’s going on, because we don’t own the companies anymore. The first thing that the new owner of the Hermitage companies did, was remove the old management, without telling the old management. The second thing they did, was appoint their own lawyers. So bogus lawsuits are filed against empty companies in two different places, and judgments are won.

We had declared $973 million is profits, and we had paid $230 million in taxes on the basis of that. These bogus lawsuits were for exactly $973 million, exactly the amount of the profit. The lawyers representing the companies, basically didn’t contest the claim. They explained to the judge, “We agree with the plaintiff’s claim. We fully accept damages.” Essentially what was happening, was an award was given to a paper company, headed by a killer, for $973 million, the exact amount of money that we had declared profit, which wiped out all of the corporate profits to zero. Interesting.

Now we’ve got zero profit. What do you do at that point? Well, what the killer general director did, was he filed an amended tax return, to report that we had zero taxes, way back when we paid all those taxes, “And why don’t you give us our money back?” So on a Friday, they asked for a refund of $230 million from the Russian treasury. On Monday, we got a fast-track refund of $230 million. No audit, no question, no nothing. All of which was immediately converted to dollars, and moved out of the country, through the US banking system. We’re chasing the money at the moment.

What do we do? We file a bunch of complaints. We filed complaints everywhere and possibly file a complaint. Now what happens to these complaints? Essentially, what happens to these complaints is, every complaint is given to further investigation for the very same officers that we were complaining about, who had seized the documents, and who we had implicated in the crimes. What immediately happened, was these officers said, “Hmm, this is really bad, because they’ve reported in the press that we’re involved in the theft of $230 million. We’ve got to find some bad guys.”

What they then do, is they implicate the Hermitage people, and its lawyers. They put Mr. Browder on a Russian Federation Federal search list. They did the same to Mr. \[Cherkaza 00:07:17] from Hermitage. Then they started going after the lawyers. They indicted two lawyers, \[Mr. Hardinoven and Mr. Pastakwauv 00:07:24], essentially, for filing complaints against this. They said, “Well, you know, in order to have filed complaints on behalf of these stolen companies, you would have needed a power of attorney from the stolen companies, and your power of attorney is from HSBC, the former custodian. You really need a power of attorney from the criminals who stole the company. By using a power of attorney that wasn’t issued by the criminals, which are the management that we recognize now, you’ve committed a crime.” So they indicted the attorneys, who fled the country.

What do they do to the head of my Tax and Audit Commission? They searched his home at seven o’clock in the morning. It took all day, and when they were finished searching, they said, “Come down to the station for some questions.” This is back in November of last year. He’s been in detention ever since. He’s had no trial. He’s currently in a cell that’s 80 square feet, four people. No water, and the sanitary conditions are atrocious, no hot water.

Now I want to show you just how ridiculous this is, because Sergei Magnitsky, from my office, was called in to give testimony against the police. He gave testimony against a particular Lieutenant colonel, Mr. Kuznetsov. When he did that, within two weeks, Mr. Kuznetsov was added to the very investigation that Mr. Magnitsky was complaining about. One month after that, Mr. Kuznetsov was part of the group of people who arrested Mr. Magnitsky. Hold on a moment, let’s see where we with this. Hold on. Okay.

You always think, “Well gee, how much of a chance does one have in Russian court?” The answer is zero, when the guys running it, are running it for private gain. Nothing matters anymore. It’s really like people going, “Oh, if Stalin, only knew, everything would be fine.” Well, the authorities know. They don’t care. Okay, everybody has got their private game in Russia. That’s what you have to kind of understand, that it’s not a case of there’s this thing called the Russian government, and it’s got a plan. What’s really going on is a free for all right now. These officers have this game going on. These people have that game going on, and to step on somebody else’s toes and get involved in busting up their game, is something that you don’t want to do, because it costs you time, and effort. It takes you away from your own pursuit of making money, and it makes you enemies, so why do it?

In any case, all of the charges against Sergei didn’t make sense. They claimed that he was doing things with these companies in 2001. We had clean audits for the companies. We proved that he didn’t even start working for them for 2002. Facts don’t matter.

I just take you through this briefly – but, it doesn’t matter what you say. They claim he was trying to leave the country so that they had to arrest him and detain him because he applied for a British visa. The British Embassy said he’s never applied for a visa. Doesn’t matter. They continue the detentions.

As you can see, they keep moving him around to worse and worse conditions. They do offer him occasionally to write bad things about his clients and then he’ll get out, and he doesn’t do that. They haven’t allowed him visitation rights, and the conditions are pretty inhumane.

Now, I’d also like to tell you what they do to the people in our office. The police actually interrogate the people in our office and say, “Please give us what we want against Mr Magnitsky. Otherwise, you will no longer be a witness in this case. You will be a suspect.” They send the local police cops on the beat, which are called the \[foreign language 00:01:02] to talk to the parents of my employees and say, you know, “Your daughter, accountant, or your son, lawyer, nice kid but just working for a bad company. You don’t want your kids to go to prison, so you should talk to them and get them to give us what we want.” They call in my former employees and they do the same thing.

In addition to this, I’ll tell you a funny story. In all of this time that I’ve been living on and off in Russia, never once has anybody questioned me, never once has anybody bothered me, officially. On August 1st, I had a very funny story happen to me. I am General Director of other companies in Russia. One of the companies that I’m General Director of, which is owned by a client, paid 21.5 million dollars in Russian profits tax in 2006. I signed that. I transferred the money, everything fine.

On August 1st, I came home and I found an envelope in my post box in Russia, and it said, “Dear Mr. Firestone,” it was a letter from the tax inspector, “We are rejecting your modified filings for 2006 because the signatures don’t match.” Well, first of all, I didn’t file any modified files. Second of all, there were 100 pages of my forged signature, and forged seals. What did those documents say? Remember that what our company has been doing for the last 11 months or so is running around saying, “There’s a group of corrupt police officers who’ve got a scam. They take companies, they restate their profits, they refund the tax, and they steal it.” What did those documents that I found in my post office box say?

They said, “Dear Tax Inspector. I’d like to restate the corporate profits tax due for 2006, that I already paid, from 21.5 million to half a million, signed Jamison” – i.e. they set me up to make it look like I was just about to steal 20 million dollars from the Russian government.

Why did they do that? Do you want to put me in prison? I don’t know. I assume I’ll be finding out rather shortly when I return to Moscow. Is it a warning shot across my bow? I don’t really know. I don’t know the game that’s being played, but this is the kind of stuff that lawyers have to deal with, working in Russia today. These are the kinds of games that are played. That’s the example. That’s what I wanted to share with you. Overall, I think what we have is a complete free-for-all in Russia right now. I think it was started with Yukos and now corporate raiding, the government does it, private individuals do it, it’s a public-private venture to make some money. You just \[foreign language 00:03:33] somebody whenever you need to steal something.

Anyway, thank you for your time.