It’s not easy to hear of how Russian lawyer Sergei Magnitsky was killed.

“You need to be sitting down for this story” said chair, Edward Lucas, foreign correspondent with the Economist. “Could those people at the back find a space?”

William Browder was once the largest foreign portfolio investor in Russia with the Hermitage fund before he was thrown out of the country in 2005.

Sergei Magnitsky

“Twenty-five police officers raided my office in Moscow” Browder said, “and 25 more police officers raided the office of my American law firm. . . . One of the lawyers protested at the seizure of these documents and he was beaten so badly he was hospitalised for three weeks.”

Browder hired seven lawyers to find out more about the mess, one of them was a 36-year-old Sergei Magnitsky. They started an investigation that unearthed a high-level attempt to siphon a high-volume of funds. It was a complicated scheme that lead to a false tax refund of $230m that came – not from Browder‘s company but from the Russian taxpayer.

Six out of seven of Browder’s lawyers left  Russia for safety. Sergei Magnitsky decided to stay.

“He testified against the police officers who did the raid used to get the documents . . . and one month later the same police officers came to his home . . . and arrested him and put him in pre-trial detention and then began to torture him.”

He was later sent to the infamous Butyrka prison and got very sick after months of serious mistreatment.

“They did move him to a facility that had an emergency room but instead of treating him in an emergency room they put him in an isolation cell and chained him to a bed and allowed eight riot guards with rubber batons to beat him until he died.”

Browder is now trying to push the Sergei Magnitsky Rule of Law Accountability Act through US congress. If approved, this would allow assets of those responsible for his detention, abuse or death to be seized.

Corruption

Brutal truths about the Russian state unravel through the Magnitsky story. From a citizen’s point of view, bribery is a part of what Masha Gessen, author of a recent book on Putin, says is the “daily humiliation of living in Russia”.

But she said corruption in the country should be concerning from a strategic point of view, too.

“Russia happens to have one of the two largest arsenals of nuclear arms that’s reason enough to pay attention to the fact that . . . it’s extremely corrupt and on the brink of collapse.”

According to Browder the rot runs deep. He cites the beginnings of the investigation that ultimately led to Sergei Magnitsky’s murder.

“I discovered . . . that all the Russian companies I was investing in were basically losing all the money they should have been sharing with the shareholders with a bunch of corrupt officials and corrupt management.”

Putin

Gessen said the Russian president models government on the Russian spy agency – his former employer.

“I think Putin seriously believes that the KGB is the best thing ever invented. And he’s done everything in his power – and that’s a lot –  to re-shape Russia in the image of the KGB.

“The KGB’s a closed system, it’s best on personal connections and paranoia, where information comes in and doesn’t go out.”

This is the system that allowed Magnitsky’s death. As Browder said when asked by the audience what happened to his Russian investments, “I didn’t lose any money, I lost something far more precious; the life of a young man.”

Against a backdrop of growing discontent, and widespread allegations of fraud, Russia’s recent elections heralded Vladimir Putin’s re-election to the presidency. The man who many still saw as Russia’s de facto leader will now resume his tenure, four years after ostensibly ceding power to Dmitry Medvedev. 

In light of these developments a panel of experienced commentators gathered at the Frontline Club to assess the past, present and future of Putin’s Russia. The evening was chaired by Edward Lucas, The Economist’s Deputy International Editor, in discussion with Masha Gessen, a Russian-American journalist and author, and Bill Browder, an outspoken shareholder activist who was the largest foreign investor in Russia until 2005, when he was banned from the country.

Gessen, author of The Man Without a Face: The Unlikely Rise of Vladimir Putin, described Putin’s Russia as a mafia state in which large-scale corruption at the top relies on small-scale corruption at the bottom. She claimed that Putin “thinks the KGB is the best thing that was ever invented”, adding that she saw him as pleonexic – in that he suffers from the insatiable desire to have what rightfully belongs to others.

Browder agreed, describing his own experience as “the story of how bad things have got in Russia, and emblematic of the bare face of Russia from the beginning to the end.” He began to withdraw his money when he realised that all of his companies were hemorrhaging money to corrupt officials. A saga ensued in which Russian police seized his assets, took control of his companies and – amongst other things – conspired to reclaim $230m that Browder’s companies had paid in tax.

What followed has now become an infamous tale of state corruption and brutality. Sergei Magnitsky, the lawyer investigating matters on Browder’s behalf, was imprisoned and eventually murdered in custody. 

His is not the only case of this kind, as Browder and Gessen observed, but the unfailing bureaucracy of all involved led to the publication of an exact account of the events, written by Magnitsky, and a list of those responsible. Lucas described the Magnitsky list as “one of the most effective fires lit under the regime”, and Browder summarised the reasons behind its impact: 

“The people who committed these crimes didn’t do it because of religious intolerance, or ideological intolerance. They did this for money.”

Browder suggested that the regime was unsustainable, given the prevalence of events like this, but the panel recognised the inherent difficulty in ensuring a genuine transition of power. Gessen offered her own analysis of the regime’s ability to adapt and protect itself:

“With the whole reset campaign of the last 3 years, there were a lot of people who fell into Medvedev’s trap. The best way to think of Putin and Medvedev is of a president and a first lady: the first lady gets to reach out to people, and perform humanitarian gestures. That humanitarian gesture deceived a lot of people.”

Despite this, Gessen noted that the West is an important influence, even to the most corrupt Russian officials:

“More important than anything else, it’s the place where they keep their money. You can’t keep your money in Russia, there is always somebody better connected than you are.”

And, as the question and answer period drew to a close, Lucas suggested that Putin’s hold on power might begin to loosen if another disaster on the scale of the Kursk or Beslan were to strike:

“He handles these situations very badly. The people who’ve got a huge stake in the survival of the regime may wonder if they can keep it going for a few more years by pushing him downwards or sideways.”

Watch the event here: