Russian Fraudster Sues Hermitage Founder

Feb 10 2010 | 11:00am ET

A Russian fraudster is suing the man who claims to be his victim, alleging that hedge fund manager William Browder defamed him.

Victor Markelov’s case against the Hermitage Capital Management chief goes to trial today. He is seeking US$3,000 in damages from Browder and two Russian media outlets “for the protection of honor, dignity and compensation of moral harm caused,” The Telegraph reports.

Markelov, who pleaded guilty to a US$230 million tax fraud that involved companies allegedly stolen from Hermitage, is the latest bizarre turn in a case involving a firm that was once Russia’s largest foreign investor. The case took a tragic turn last year, when Hermitage lawyer Sergei Magnitsky died in jail awaiting tax evasion charges. Russian officials later acknowledged that Magnitsky, who charged Russian officials with participating in the fraud, had been mistreated in prison.

Despite his guilty plea, Markelov claims he is innocent of the more serious charges leveled against him by Browder, who called Markelov a “murderer” and “swindler” and accused him of being a mobster with connections to Russian officials.

“I am not a member of any criminal group,” Markelov, who is serving five years for fraud, claims. “I am not familiar with and never communicated with any officers of the law enforcement agencies who could be related to” a raid of Hermitage’s Moscow offices. Browder claims that information stolen during that raid led to the theft of the hedge fund’s companies, but Markelov says he acquired the companies legally.

“I understood I acted carelessly when I signed” documents used to win the fraudulent tax return at the heart of Russia’s case against him, Browder, Magnitsky and Hermitage, Markelov said. But he denied any further wrongdoing, saying he “was not engaged in theft, larceny or any criminal seizure.”

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