This is part one of a two part piece on the story behind the Magnitsky Act
Everyone knows that on June 9th, 2016, Donald Trump Jr., Jared Kushner, and Paul Manafort met with lobbyist Rinat Akhmetshin and lawyer Natalya Veselnitskaya at Trump Tower in Manhattan. Although Junior was promised dirt on Hillary Clinton ("If it's what you say it is, I love it," he wrote), instead he received a lengthy treatise on "Russian Adoptions." They may as well have promised to show him the inside of Al Capone's vault.
There's still no evidence that Veselnitskaya and Akhmetshin ever intended to give Junior what they promised, but we know that they talked about a piece of legislation that has unnerved the Kremlin and created shockwaves in the oligarch community: the Magnitsky Act. Understanding this law goes a long way in unraveling just what makes Russia tick.
The story begins: Bill Browder and Sergie Magnitsky
The story begins in 2005 with American financier Bill Browder, who worked as the head of Hermitage Capital Investment in Moscow. After he went public with the revelation that several of the companies he'd invested in were corrupt, Russia kicked him out of the country and declared him a threat to national security. In June of 2007, the police raided his Moscow office, stole several documents, and used them to embezzle $230 million in tax reclamations. Browder, who could not set foot in Russia to settle the matter, hired a young lawyer, Sergei Magnitsky, to investigate.
Magnitsky's findings, which included a phony charge of tax evasion to justify the raid, implicated not only the Russian police but also government officials and mobsters. Once he went public with them, the Russian police arrested him in front of his family on false charges and threw him in prison. For almost a year he was tortured with the promise that it would all stop if he signed a statement recanting his accusations, which he refused. Just before his release date, he died in prison at the age of 37.
According to Russian officials, who denied his family an autopsy report, Magnitsky had died of pancreatitis. In reality, he was beaten to death when it became clear he would not capitulate to his torturers' demands. He documented his mistreatment in over 450 complaints, claiming he had been kept in a cell with rotting sewage and denied medication for illnesses he contracted while there, including kidney stones. Upon reading these, Browder couldn't imagine how his murderers would get off. But get off they did, with many of them receiving promotions and state honors.
Resolved to avenge his late attorney's terrible mistreatment, Browder stumbled upon an executive order called Proclamation 7750, which he describes in his 2015 memoir, Red Notice:
“I had discovered an executive order called Proclamation 7750, which allows the State Department to impose visa sanctions on corrupt foreign officials. I thought if I could convince the U.S. government to impose 7750 on the Russians who killed Sergei, it would hit them right where it counted. Corrupt Russians loved to travel and throw around their money, and if America were off-limits for them, it would be devastating.”
When Browder first proposed invoking 7750 to the State Department, they balked. He then took it to Kyle Parker, an expert on all things Russia and then-aide to Senator Ben Cardin. In an article for Ozy last month, Parker recalled that back then, "Russia has just acceded to the WTO [World Trade Organization], was a member of the G-8 and was seeking OECD [Organization for Economic Cooperation and Development] membership." Thanks to Obama's Russian "reset" policy, US-Russia relations were the strongest they'd been in years. With that in mind, we can better understand the White House's reluctance to take this on.
Taking on the super rich
After talking to Browder, Parker worked with his boss to draft the Magnitsky Act, which Cardin introduced to then-Secretary of State Hillary Clinton in an April 2010 letter. In addition, he named sixty Russian individuals who, if the act went through Congress, would have their visas revoked and their assets in the United States frozen as punishment for Magnitsky's death. After Obama signed the act into law in December 2012, Putin and the Kremlin retaliated by imposing sanctions on Browder, finding Magnitsky posthumously guilty, and barring Americans from adopting Russian children.
Although not as economically devastating as the 2014 sanctions punishing Russia for their invasion of Crimea, the Magnitsky Act took a far greater psychic toll on Putin and his oligarchs. Russia's oligarchs hold the majority of their money outside the United States, stockpiling it through real estate in places like New York and Miami. Cutting them off from their money hurt them right where Browder wanted them to feel it - their wallets. In an interview for Bloomberg, Browder explained exactly what makes them so afraid of the law:
“The primary objective of Putin…is to steal money. They are kleptocrats in the truest sense. But to do it, they have to commit grave human rights abuses. And once they have the money they have to move it to the west, where there are property rights. Because the Magnitsky Act freezes that money, it puts their business model at risk. That’s why it makes them so crazy.”
Since then, Browder has lobbied for other nations to pass their own versions of the act. So far, the UK, Canada, Estonia, Lithuania, and Latvia have followed suit. Other nations, including France, Germany, and the Netherlands, are next in line to debate their own proposed versions. All this explains why, at the Helsinki press conference last month, Putin said that he wants to interrogate Browder, accusing him of avoiding $1.5 billion in taxes and contributing $400 million to Hillary Clinton's campaign (neither of which are true).
Trump has made no promises to repeal the Magnitsky Act, but that has not stopped Russia from trying to undermine it here in the United States. And before Congress passed its Global Magnitsky Act in 2016, they even attempted to use a sitting Congressman to smear the late lawyer's reputation and torpedo Browder in front of the House of Representatives. But about that, you'll have to tune in tomorrow.