Role of Tax Autorities

PRIVATE BRIEFING
DOCUMENT, NOT FOR

DISTRIBUTION OR
QUOTATION
The Russian Tax Authorities Cover Up of the

Theft of $230 Million of Funds from the Russian
Budget
September 2009
PRIVATE BRIEFING
DOCUMENT, NOT FOR
I. Fabricated criminal case

DISTRIBUTION OR
QUOTATION
On 28 May 2007 criminal case was opened against company Kameya advised by Hermitage
Capital. On 4 June 2007 Moscow Interior Ministry raided offices of Hermitage and its lawyers
Led by
Lieutenant Colonel
Artem Kuznetsov
Hermitage Moscow Office Firestone Duncan, Hermitage’s Lawyers
Seized documents
Original Certificates of Original Certificates of

Original
OriginalCertificates
Certificatesof Original
OriginalCertificates of
Registration with the of Certificates
Registration with Tax of Original Charters
Corporate Seals Registration
Registration with the
with the Registration
Registration with Tax
with Tax Original
OriginalCharters
Charters
State Registrar Authorities
State
StateRegistrar
Registrar Authorities
Authorities
2
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
II. Theft of the companies QUOTATION
Seized documents were used for the illegal re-registration of three Hermitage Fund
companies (Rilend, Makhaon and Parfenion) for the benefit of convicted felons
Documents seized by Interior Ministry
Original Certificates of
Original
Certificatesof
Registration with the of Original Charters
Registration with the Original
Registration with the
State Registrar Corporate Seals OriginalCharters
Charters
State
StateRegistrar
Registrar
Original Certificates of
Original
Certificates of
Registration with Tax of
Registration
Registration with Tax
with Tax
Authorities
Authorities
Authorities
HSBC PRIVATE BANK

(Guernsey) LIMITED
Victor Markelov
Trustee to Hermitage Fund
100% 100%
OOO Pluton,
(Kazan, Tatarstan)
Corporate HSBC MANAGEMENT Corporate

Director (Guernsey) LIMIT ED Director
GLENDORA KONE
HOLDINGS Corporate Director HOLDINGS
LTD LTD
Cyprus Cyprus
100% 100% 100%
100% 100% 100%
V.Kurochkin V.Markelov V.Khlebnikov

General Director General Director General Director
OOO RILEND, OOO PARFENION, OOO MAKHAON, OOO RILEND, OOO PARFENION, OOO MAKHAON,
Moscow Moscow Moscow Moscow Moscow Moscow
3
Who was the new owner of the
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
Hermitage’s stolen companies? QUOTATION
A convicted murderer named Viktor Markelov
V. Markelov
100%
OOO Pluton,
(Kazan, Tatarstan)
100% 100% 100%
V.Kurochkin V.Markelov V.Khlebnikov
OOO RILEND, OOO PARFENION, OOO MAKHAON,

Moscow Moscow Moscow
Source: St. Petersburg, Moscow and Kazan Arbitration Courts and EGRUL database
PRIVATE BRIEFING
DOCUMENT, NOT FOR
III. Fabricated liabilities

DISTRIBUTION OR
QUOTATION
The same documents were used to forge backdated contracts, file lawsuits against three
Hermitage companies and obtain illegal judgments totaling to $974 million*
Fake agreements
General Director
19 Sep Power of Grand Active
OOO Parfenion, Attorney
2005 Moscow
Regional General
representative $$$ Director
Kozlov M.V. Sheshenia
14 Aug General Director

Power of
2006 OOO Parfenion, Attorney Foregone profit Grand Active
Moscow
Regional General
representative $$$ Director
Kozlov M.V. Sheshenia
Fake liabilities for $ 575 m
Source: St. Petersburg, Moscow and Kazan Arbitration Courts database , * Moscow Arbitration court award US$ 312 mln; St Petersburg Arbitration court award US$ 376 mln; and 5
Kazan Arbitration court award US$ 575 mln;
PRIVATE BRIEFING
DOCUMENT, NOT FOR
IV. Unknown Lawyers pleaded guilty

DISTRIBUTION OR
QUOTATION
Even though HSBC and Hermitage were unaware of these lawsuits, the three Hermitage
stolen companies were represented by lawyers who had never been appointed by the
Hermitage Fund using fake powers of attorney
HSBC PRIVATE BANK

(Guernsey) LIMITED Moscow Arbitration Court
Trustee to Hermitage Fund Not Advocate

A.A.Pavlov
100% 100%
aware Rilend’s Lawyer
Kazan Arbitration Court

Corporate HSBC MANAGEMENT Corporate
Director (Guernsey) LIMIT ED Director
GLENDORA KONE
HOLDINGS Corporate Director HOLDINGS
LTD LTD
Cyprus Cyprus E.A.Maltzeva
Parfenion’s Lawyer
100% 100% 100%

OOO RILEND, OOO PARFENION, OOO MAKHAON,
Advocate
Y.M Mayorova
Makhaon’s Lawyer 6
PRIVATE BRIEFING
DOCUMENT, NOT FOR
IV. Lawyers pleaded guilty

DISTRIBUTION OR
QUOTATION
… and pleaded guilty
“Defense” Lawyers
“Hereby, the defendant confirms that he
understands the charges, doesn’t have any
Fake POAs to lawyers objections and fully accepts the claims.”
from Rilend, Parfenion
and Mahaon
Advocate
A.A.Pavlov
Rilend Lawyer
“According to p.3 art. 70 of APC the acceptance

of the claim by the defendant releases the
plaintiff from the requirement to prove the case.”
E.A.Maltzeva Judge Orlova
Parfenion Lawyer
Advocate
Y.M Mayorova
Makhaon Lawyer Judge Orlova
7
Source: St. Petersburg, Moscow and Kazan Arbitration Courts database
V. Judges issued $974m award to three
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
shell companies QUOTATION
The courts issued illegal judgments of $974 million against the three stolen companies
General Director St-Petersburg, Moscow and Kazan Arbitration Courts'

Awards against Hermitage Fund's stolen companies
OOO Makhaon,
Logus Plus
700
Moscow $581
600
500
General Director
OOO RILEND,
mln
US$
400
$322 Instar
300
Moscow
200
$71
General Director 100
OOOParfenion,
0 Grant Active
Award against Makhaon Award against Rilend Award against Parfenion
Moscow
US$ 974 million (23.3 bln RUB)

8
Source: St. Petersburg, Moscow and Kazan Arbitration Courts database
PRIVATE BRIEFING
DOCUMENT, NOT FOR
VI. $230 mln tax refund in two days

DISTRIBUTION OR
QUOTATION
Fake liabilities backed by illegal judgments were used by criminals to offset previous
profit of three Hermitage Fund companies and illegally refund $230 million
Profit “Adjustment” via Fake Losses Taxes Paid vs. Tax Refund
Source: St. Petersburg, Moscow and Kazan Arbitration Courts database and hermitage Fund financials
PRIVATE BRIEFING
DOCUMENT, NOT FOR

DISTRIBUTION OR
QUOTATION
Then the stolen Hermitage Fund companies were re-registered to Moscow Tax
inspections № 25 (Rilend) and № 28 (Makhaon & Parfenion)
Rilend
Makhaon
Parfenion
Tax Inspections
Tax Inspection № 10 and № 15
Source: EGRUL statements
№ 25 and № 28
PRIVATE BRIEFING
DOCUMENT, NOT FOR

DISTRIBUTION OR
QUOTATION
“Amended” tax declarations were submitted to Tax Inspections № 25 and № 28 and

their decision to rebate US$ 230 million was made in one day with the following
payments in two days
DECISION MADE IN 1 DAY TO REPAY $230 MILLION
Universal
Savings Bank
$230 million
Amended Tax Return Tax Inspections
for year 2006 #25 and 28 Intercommerz
Bank
11
PRIVATE BRIEFING
DOCUMENT, NOT FOR
Neglecting of Hermitage Complaints

DISTRIBUTION OR
QUOTATION
After the discovery of the crime, Hermitage filed complaints with eight Russian
government authorities
Russian General
Prosecutor’s Office
Russian Interior
Affairs Minister
FSB
Russian Finance
Minister No
Hermitage
Complaint re
$230 Million
Theft
response
Federal Tax Service
Russian State Central

Investigative Bank
Russian State Audit Committee
Chamber 12
What did the authorities do about PRIVATE BRIEFING
DOCUMENT, NOT FOR
the theft of $230 Million?

DISTRIBUTION OR
QUOTATION
On 16 April 2009, the Russian General Prosecutor Office convicted Victor Markelov
for the fraud
Tverskoi Court $230 million

16 April 2009 28 April 2009
Person Victor Markelov
convicted: FRAUD (p.4, Article 159 of Criminal Code)
Offense:
Case: Trial for the theft of $230 million stolen from the Russian budget
[originally paid by Russian companies of the Hermitage Fund]
Date: 28 April 2009
Sentence: 5 years imprisonment

Fine: Zero
Other suspects: Unknown co-conspirators 13
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
Who was responsible and who was not? QUOTATION
The trial documents portrayed Markelov as the main perpetrator and the Moscow Tax
Authorities № 25 and № 28 as victims of the $230 million fraud
Theft of $230 Million

“Responsible” “Victims”
April 2009 Trial

Tverskoi District Court
Moscow
#25 #28
Victor Markelov
Moscow Tax Authorities
“General Director of Parfenion” No 25 & No 28
“Shareholder of Parfenion, Mahaon and Rilend”
14
Source: April 2009 Trial in Tverskoi District Court of Moscow

PRIVATE BRIEFING
Do we believe that a sawmill employee was DOCUMENT, NOT FOR

DISTRIBUTION OR
the mastermind of this sophisticated fraud? QUOTATION
No.
Victor Markelov
Sawmill Employee, Saratov Victor Markelov
region
Stages of 2007 Theft of Hermitage Fund Companies and $230 Million
HSBC PRIVATE BANK

(Guernsey ) LIMITED OOO Pluton,
Intercommerz Univ ersa l ( Kazan
, Tatarstan
)
Ba nk
Sa ving s Ba nk
?
Tru stee to Hermitage Fun d
Courts Banks Tax Authorities

100% 100%
Interior Ministry Tax Office St Pet. Opened Approved
Co rp o rate
Directo r
HS BC MANAGEMENT
(Gu ern sey ) LIMITED
Co rp o rate
Directo r Court: new bank revised tax
GL ENDORA
HOLDI NGS
L TD
Co rp o rate Director
KONE
HOLDI NGS
L TD
Seized Erased names Kazan
100% 100% 100%
Cyprus C yprus
documents of lawful accounts declarations and
Court:
100% 100% 100%
during raids owners and tax refund

Moscow
directors in applications V.Kurochkin V.Markelov V.Khlebnikov

OOO RI LEND,
M os cow
OOO PARFENI ON,
M os cow
OOO MAKHAON
M os cow
,
Court: OOO RI LEND,
Novocherkas s k
OOO PARFENI ON,
Novocherkas s k
OOO MAKHAON ,
Novocherkass k
state database Approved $1 bln. false Intercommerz

Univ ersal Bank Universa l
claims in 3 regional courts Sa vings Bank Sav ing s Bank
Hermitage Companies paid Perpetrators stole
$230 million $230 million

February 2006 through fraudulent December 2007
in taxes to
tax refunds from
the Russian budget Budget
the Russian budget
of
Russian Federation
Source: EGRUL, Courts of Moscow, St. Petersburg and Kazan

PRIVATE BRIEFING
What role did the Tax Authorities play in the DOCUMENT, NOT FOR
DISTRIBUTION OR
theft of $230m? QUOTATION
Tax officials of Moscow Tax Authorities 25 and 28 claimed they knew nothing about the
$230m theft:
“See no Evil” “Hear no Evil” “Speak no Evil”
#25 #25 #25
#28 #28 #28
“During in camera audits V.A.

Markelov and unidentified
persons by deceipt mislead the
“Authorised officials of authorised officials of Moscow
“Heads of Moscow Tax Authorities Moscow Tax Authorities Tax Authorities No 25 and 28 by
No 25 and No 28, being No 25 and No 28, who submitting to the inspections fake
unaware of the criminal actions were not aware of the contracts for delivery of Gazprom
criminal actions and intent shares…dated 2005-2006”
and intent of the group, having of the group, in accordance
been mislead in respect of the with p.1 of Article 176 of “Heads of Moscow Tax
genuineness and the authenticity of the Tax Code of the Authorities No 25 and No 28
fake documents made decisions to Russian Federation being unaware of the
return the tax amounts allegedly checked the justification criminal actions and intent of the
subject for a refund.” for the amount of tax group, issued decisions to refund
submitted for refund.” OOO Parfenion, OOO Mahaon
and OOO Rilend with requested
amounts of taxes.” 16
Source: April 2009 Trial in Tverskoi District Court of Moscow
PRIVATE BRIEFING
What did Moscow Tax Authorities do with DOCUMENT, NOT FOR

DISTRIBUTION OR
Markelov’s tax declarations? QUOTATION
Officials from the Moscow Tax Authorities No 25 and 28 claimed they checked
whether the claims of losses by Markelov were genuine and legitimate
“Due to the large amount submitted What did Tax Authorities have to check
for reduction, a tax audit in camera during the audits?
was conducted in respect of the
submitted revised declaration” Real Profit Reported
by Hermitage in 2006
$1,200
$958m
$900 Rilend,
Rilend
$321m
$312m
$600 Parfenion
Parfenion,
$575m
$581m
$300
Makhaon
Makhaon, $0
US$ $71m
$71m
$0
mln Makhaon
Makhaon,
-$71m
-$71m
-$300
Parfenion
Parfenion,
-$575m
-$581m
-$600
Rilend
Rilend,
-$900 -$312m
-$321m
Moscow Tax Authorities -$958m

-$1,200 Fake Losses for 2006 reported by Markelov and two
2006
(No. 25, No. 28) other fake directorsFake
(Khlebnikov and Kurochkin) at the
Real Profit Losses New Adjusted "Profit"
end of 2007
Source: Kazan Court, Witness Statements of Sergei Zhemchuzhnikov, Deputy Head of Moscow Tax Inspection No 25 from 30 July 2008 and of Olga Tsymai, Head of In Camera Audits
Division No 1 of Moscow Tax Inspection No 28 from 29 July 2008
17
PRIVATE BRIEFING
How did the Moscow Tax Authorities check if the DOCUMENT, NOT FOR
DISTRIBUTION OR
claims of losses were legitimate? QUOTATION
The Moscow Tax Authorities claimed to have performed a tax audit:

Verification of “Losses” What Tax Authorities said to
have done:
Checks of “Made a request to the tax authorities at
Tax Audits 1 Counterparties

the place of registration of counterparties
to the contracts, the relationships with
which had lead to the increase of
expenditures and the reduction of taxable
income”
“Requested from the banks data about

2 Banks the movement of cash on bank accounts”
Moscow Tax
Authorities (#25, #28)
“Requests were sent to the Moscow
Branch of the Interior Ministry
3 Interior Ministry requesting to conduct (using our
attached questionnaire) an inquiry of
directors of OOO Parfenion and OOO
Mahaon and also of their counterparties”
“Requested documents confirming the

4 “Contracts” reduction of taxable income”
“Organisations were requested to submit
original documents”
18
Source: Kazan court, Witness Statements from the Moscow Tax Authorities #25 and #28
PRIVATE BRIEFING
DOCUMENT, NOT FOR
1 Checks of counterparties DISTRIBUTION OR

QUOTATION
The Tax authorities first needed to check if the counterparties to the contracts had
reflected the large receivables on their balance sheets
Hermitage Companies “Liabilities” “Counterparties’ Receivables”
Parfenion Grand Aktive “Made a request to the

- $575 Million +
$575 Million Tax Authorities at the
place of registration of
counterparties to the
contracts”
Rilend Instar
- $312 Million + $312 Million
Makhaon Logos Plus

- $71 Million + $71 Million
(No. 25, No. 28)
19
PRIVATE BRIEFING
DOCUMENT, NOT FOR

QUOTATION
What did the Moscow Tax Authorities claim they had learned about the counterparties’
contracts?
What did Moscow Tax Authorities No 25 and

Moscow Tax No 28 claimed to find from counterparties’
Authorities (#25, #28) tax reporting?
Counterparty Receivables Claimed

$575 M
$312 M
“The replies we received confirmed
the existence of the organisations,
submission by them of reporting
that was different from zero.” $71 M
Grand Logos
Aktive Instar Plus
20
PRIVATE BRIEFING
DOCUMENT, NOT FOR

QUOTATION
Did the tax authorities really check with counterparties? No. The counterparties
never reported any claims on their balance sheets
Real Reporting by Counterparties
Submitted to Tax Authorities and Reported to
the State Statistics Committee
Receivables Reported by the
Counterparties
0 0 0
Any Receivables? = Zero Grand

Aktive
Instar Logos
Plus
Source: State Statistics Committee

PRIVATE BRIEFING
DOCUMENT, NOT FOR
2 Checks with the banks DISTRIBUTION OR

QUOTATION
The Moscow Tax Authorities claimed they had checked with the banks where Rilend,
Parfenion and Makhaon held cash and securities from 2005 to 2007
“Requested data on the movement of

cash on bank accounts of OOO Rilend
with the banks, data on movement of
securities on depo accounts”
Bank Accounts of:

• Rilend
• Parfenion
Moscow Tax
• Makhaon
Authorities
(No. 25, No. 28)
Source: Kazan court, Witness Statements from the Moscow Tax Authorities # 25 and # 28
22
Could have the checks with the
PRIVATE BRIEFING
DOCUMENT, NOT FOR
2 DISTRIBUTION OR
banks been genuine? QUOTATION
No. HSBC, the bank where Rilend, Parfenion and Makhaon held accounts confirmed it
never received any requests from the Moscow tax authorities
“HSBC Bank confirms that

no requests from the Moscow
Tax Authorities No. 25 or No.
28 were received during the
period from 16 November to
31 December 2007.”
Source: HSBC Confirmation Letters dated 15 October 2008 regarding Rilend, Makhaon and Parfenion
23
Checks with the Moscow Interior
PRIVATE BRIEFING
DOCUMENT, NOT FOR
3 DISTRIBUTION OR
Ministry QUOTATION
The Moscow Tax Authorities claimed they have checked with the Moscow Interior
Ministry prior to approving the $230 million tax refund
Moscow Tax Moscow Interior Moscow Tax

Authorities (#25, #28) Ministry Authorities (#25, #28)
Request with a
Answer
questionnaire
“Requests were sent to the Moscow

Branch of the Interior Ministry “The results of inquiry of
requesting to conduct (using the persons of interest to us were
received from the Moscow
questionnaire we attached) an inquiry
Branch of the Interior
of directors of OOO Parfenion and Ministry which confirmed the
OOO Mahaon and also of the existence of the legal entities
counterparties to their contracts.” and their relationships.”
Source: Kazan court, Witness Statements of the Moscow tax authorities # 25 and # 28
24
Were the Moscow Interior
PRIVATE BRIEFING
DOCUMENT, NOT FOR
3 DISTRIBUTION OR
Ministry’s answers true? QUOTATION
No. Three weeks prior to the fraudulent tax refund, on 3 and 10 December 2007,
Hermitage and HSBC had filed six 255-page criminal complaints notifying the Interior
Ministry, the General Prosecutor and the Russian State Investigative Committee of the
existence of the fraud and outlining its details
“All is fine.”
Six 255-page
Criminal Complaints

(#25, #28)
Confirmed transfer of
criminal complaints to
the Moscow Interior
Ministry for review
3, 10 December 14 December 24 December

2007 2007 2007
Source: HSBC and Hermitage complaints filed 3, 10 December 2007; correspondence from Interior Ministry to HSBC and Hermitage lawyer dated 14 December 2007
25
PRIVATE BRIEFING
DOCUMENT, NOT FOR
4 Checks of contracts
DISTRIBUTION OR
QUOTATION
The Moscow Tax Authorities claimed to have checked the authenticity of contracts
“As part of in camera audits,

organisations [Parfenion and
Mahaon] were requested to
submit original documents.”
“Requested and received
Moscow Tax Authorities documents of OOO Rilend.”
(#25, #28)
“Contracts” with OOO Grand Aktive, OOO

Instar and ZAO Logos Plus
26
Source: Moscow, St Petersburg and Kazan courts, Witness Statements from the Moscow Tax Authorities #25 and #28
PRIVATE BRIEFING
DOCUMENT, NOT FOR
4 Checks of contracts DISTRIBUTION OR

QUOTATION
Were the contracts authentic? No, anyone would immediately recognize from any
simple reading of the Company Files and Corporate Registry (EGRUL) maintained by
the tax authorities that these contracts were forgeries
Indications of Contracts Being Forgeries
• Data for bank accounts, addresses of

Hermitage companies were invalid
Company Files Kept by
Tax Authorities • Contracts with Logos Plus were signed by
a non-existent person operating on a
stolen passport
• Contracts with Grand Aktive were signed
Russian Corporate Registry
by a director, two years prior to his
(EGRUL) Maintained by appointment as director
Tax Authorities
27
PRIVATE BRIEFING
DOCUMENT, NOT FOR
Timing of the Refund of $230 Million

DISTRIBUTION OR
QUOTATION
Astonishingly, the refund was approved within one day and paid out
two days later
$230 Million Tax
Refund Requested
December 24, 2007

Victor Markelov
(#25, #28)
$230 Million Tax Refund

Granted to Markelov
Refund Requested.
Refund Approved Refund Paid
24 December 26 December
2007 2007
Source: Kazan and Moscow Courts, Witness Statements from Tax Authorities #25 ad #28
28
PRIVATE BRIEFING
The refund was approved before the court judgments DOCUMENT, NOT FOR
DISTRIBUTION OR
validating the fake liabilities came into effect QUOTATION
Tax authorities were in such a hurry to refund $230 million that they ignored the fact
that the court judgments in respect of the fake liabilities did not come into effect until
24 days later
“On the basis of the tax payer’s “This award comes

application and results of the into force on
carried-out audit, the decision was
made to return to OOO Rilend the 11 January 2008.”
overpayment of income tax”
Moscow Court
Moscow Tax Authorities (Instar Award against
(No. 25, No. 28) Rilend for $312 Million)
17 January 2008
Instar Award Comes
24 December 2007 into Force
Source: Kazan and Moscow Courts, Witness Statement of Sergei Yurievich Zchemchuznnikov, Deputy Head of Moscow Tax Inspection No 25
29
Another very similar tax refund took
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
place in 2006 QUOTATION
In the mid 2006, the Moscow Tax Authorities #25 and #28 re-registered 2 former
Rengaz companies, Selen Securities and Financial Investments, and then refunded them
$107 million previously paid in taxes Selen Securities
Financial Investments
Re-registered
Moscow Tax
Inspections
# 25 and #28
Smolensk Tax Authority # 6
30
PRIVATE BRIEFING
DOCUMENT, NOT FOR
How did those companies get a tax refund?

DISTRIBUTION OR
QUOTATION
By creating losses equal to the profits of the Rengaz companies
Profit “Adjustment” via Fake Losses

Selen Securities
US$
million
2006
Source: Fake lawsuits, Rengaz’s companies financials 2006 31
PRIVATE BRIEFING
DOCUMENT, NOT FOR
Why eliminate the profits?

DISTRIBUTION OR
QUOTATION
… in order to file an amended tax return restating earlier profits to zero

and justifying a $107 million refund of previously paid taxes
Taxes Paid vs. Tax Refund
Selen Securities
Source: Fake lawsuits, Rengaz’s companies financials 2006

32
PRIVATE BRIEFING
DOCUMENT, NOT FOR
How did the companies get a tax refund? DISTRIBUTION OR

QUOTATION
First, fake losses were created by filing fake lawsuits against the former Rengaz
companies of in different Russian jurisdictions
The Rengaz Lawsuits
Rengaz Holdings
Limited
(Cayman Fund)
(listings in Bermuda, London)
100% 100%
Ravett Holdings Limited Gillow Enterprises Limited

(Cyprus) (Cyprus)
49%
Funding
Arrangements
Persey Securities Limited
100%
(Russia) Lawsuit
Lawsuit
Lawsuit
Lawsuit 51% 100% Lawsuit
Financial Investments Ltd Selen Securities Ltd
(Russia) (Russia)
Kazan Moscow
5 lawsuits were filed in March and April 2006 in the
Moscow and Kazan Arbitration Courts
Total Claims: US$ 980 million, awarded US$ 525 million 33
Source: Moscow and Kazan Arbitration courts filings 2006
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
What did these lawsuits allege? QUOTATION
In Kazan, the lawsuit alleged that on 1 November 2005 Financial Investments sold to
Poleta 10,250,500 Sberbank Preferred shares and did not deliver, which caused a
cancellation of this agreement on 30 November 2005, resulting in forgone profit due to
Poleta (The same was done with UES shares in February 2006)
1 November OOO
OOORILEND,
Financial
Moscow
Investments,
Poleta
2005
General Director $$$
Anisimova L.V.
30 November OOO
OOORILEND,
Financial
Forgone Profit Poleta
Moscow
Investments,
2005
General Director $$$
Anisimova L.V.
Claim for $ 421 million (RUB 10.1 bln)

Source: Kazan case # A 65-6851/2006-СГ1-17, Exchange rate 24 RUB : US$1
34
How did the Rengaz companies
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
defend against claims? QUOTATION
The General Director of Financial Investments and Selen Securities acknowledged the
claims and accepted liability in full
“Hereby, Financial
Investments accepts the
claims in full and doesn’t
have any objections”
General Director General Director

Akhmedshin G.G.
Akhmedshin G.G.
“According to p.3 art. 70 of

APC the acceptance of the
claim by the defendant
releases the plaintiff from
the requirement to prove
the case”
Judge Valiakhmetov
Judge Valiakhmetov
Source: Moscow and Kazan Arbitration Court cases 35
PRIVATE BRIEFING
DOCUMENT, NOT FOR
Fraudulent Court Judgments

DISTRIBUTION OR
QUOTATION
The Moscow and Kazan Arbitration Courts awarded US$525 million against Financial
Investments and Selen Securities
Moscow and Kazan Arbitration Courts' Awards

against two RenGaz companies
450 $421 Megacel
OOO Financial 400 (former Prior)
Investments, 350
Moscow
300
250
mln
US$ 200
150
$104
100
50
OOO Selen Securities, 0
Poleta
Moscow
Award against Selen Securities Award against Financial Investments
US$ 525 million (12.6 bln RUB)

36
Source: Moscow and Kazan Arbitration Courts database
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
New Bank Accounts QUOTATION
In December 2006, Financial Investments opened a new bank account

with Universal Savings Bank and Selen Securities opened its bank
account with the same bank in March 2007
OOO Financial
New account
Investments, December 2006 Bank formed: 28.02.2002
Moscow Region: Moscow
Equity: $1.5 mln
Total Assets: $25.6m*
Ranked No. 920 **
OOO Selen New account

Securities
Moscow
March 2007 Universal
Savings Bank

* Central Bank of Russia (www.cbr.ru)
** 2006 Total Assets Ranking, RBC.Rating (http://rating.rbc.ru/articles/2007/03/01/31383191_tbl.shtml?2007/02/28/31382412)
37
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
Tax Refund Execution QUOTATION
Central Bank records showed that the Russian tax authorities refunded the capital gains
taxes to the two Rengaz companies, Financial Investments and Selen Securities, in the
period from December 2006 to March 2007
RUR 2.97 bln ($ 108 mln)
Universal Savings Development Capital Bank

Bank
RUR 597 mln RUR 1.1 bln RUR 1.3 bln
($21 mln) ($39 mln) ($48 mln)
OOO Selen OOO Financial

RUR 1.3 Bln OOO Financial
Securities Investments Investments,
38
Source: Central Bank database,
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
Summary QUOTATION
The perpetrators in the Rengaz fraud are the same people involved in the fraud with the
companies stolen from Hermitage
Similarity Rengaz fraud Fraud vs Hermitage
Tax Inspection №25

Tax Inspection №28
Universal Savings Bank
Andrei Pavlov
Alexei Sheshenya
Gennady Plaksin
Kazan Arbitration Court
Moscow Arbitration Court

39
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
Summary QUOTATION
The perpetrators also used the same exact techniques

Similarity Rengaz fraud Fraud vs Hermitage
Claims
Agreements
Lawsuits
Courts
Accepting claims
Courts’ Judgments
Eliminating Profit
Tax Authorities
Bank
Plaintiffs
Criminals
Lawyers
40
After discovery of two similar tax
PRIVATE BRIEFING
DOCUMENT, NOT FOR
DISTRIBUTION OR
frauds ….. QUOTATION
Rengaz Fraud Fraud against Hermitage

Dec 2006 - April 2007 December 2007
Tax Inspection №25 Tax Inspection №25

Tax Inspection №28 Tax Inspection №28
Fraudulent Fraudulent
Tax Rebate Tax Rebate
Russian Budget Russian Budget

RUR 2.9 bln (US$ 108 mln) RUR 5.4 bln (US$ 230 mln)
Universal Universal
Savings Bank Savings Bank
41
Source: Central Bank database,
… and looking at the USB’s data other PRIVATE BRIEFING
DOCUMENT, NOT FOR
8 similar tax refunds were found

DISTRIBUTION OR
QUOTATION
Eight other similar tax refunds

$45 $43 mln
$40
$35
Tax Inspections
Millions US$
$30
$25
$24 mln
$20
$16 mln $16 mln Total: RUR 2.98 Bln
$15
$10
$6 mln $6 mln $7 mln
+
$5 $2 mln Rengaz fraud: RUR 2.9 Bln
$-
USB acc USB acc USB acc USB acc USB acc USB acc USB acc USB acc
+
40702 810
7…229
40702 810
6…088
40702 810
6…086
40702 810
5…092
40702 810
4…215
40702 810
2…295
40702 810
2…211
40702 810
0…356 Fraud vs Hermitage: RUR 5.4 Bln
Total : RUR 11.2 Bln

(US$ 470 mln)42
Source: Central Bank database see Apnx 1
Universal Savings Bank
Appendix 1 PRIVATE BRIEFING
DOCUMENT, NOT FOR
Eight other similar tax refunds’ details

DISTRIBUTION OR
QUOTATION
Date Of Payment BIC BIC

Transfer Order # Payer Bank Payer Bank Payer Account Payer Name Beneficiary Bank Beneficiary Bank Beneficiary Account Amount (RUR) FX rate US$ eqv
14-Nov-06 30 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 7 000 000 00229 116,805,441.00 26.0229 $ 4,488,563.57
22-Dec-06 24 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 6 000 000 00086 91,345,544.00 26.3120 $ 3,471,630.59
30-Nov-06 35 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 5 000 000 00092 14,456,687.00 26.2597 $ 550,527.50
30-Jan-07 2 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 4 000 000 00215 87,855,780.40 26.5330 $ 3,311,189.10
27-Feb-07 56 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 4 000 000 00215 94,072,544.00 26.1074 $ 3,603,290.41
26-Mar-07 31 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 4 000 000 00215 80,751,587.00 26.0229 $ 3,103,097.16
27-Apr-07 43 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 4 000 000 00215 33,075,306.38 25.6854 $ 1,287,708.44
28-Mar-07 696 044583001 CBR 40101810800000010041 Treasury RF 044585468 Universal Savings Bank 40702 810 2 000 000 00211 18,912,583.00 26.0240 $ 726,736.21
Total: 2,985,397,407.78 $ 119,525,957.97
43
PRIVATE BRIEFING
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Questions for Tax Authorities DISTRIBUTION OR

QUOTATION
1) Why did you approve the tax refund for such a large amount (US$230 million, or 5.4
billion roubles) in one day?
2) How many similar tax refunds did you make during last 5 years?
3) Why did you approve the refund in the absence of any records of receivables in tax
filings of counterparties? In the absence of any bank transfers to confirm liabilities?
Before the court judgments came into force?
4) How could it be that two independent Tax Inspectorates approved and paid large
amounts from the Russian budget simultaneously – exactly on the same day?
5) Why didn’t you conduct a full audit to make decision on such a large tax refund?
6) What information did you receive from the Moscow Interior Ministry regarding the
refund (given that they were in possession of the Hermitage complaints about false
liabilities and theft of their companies on 14 December 2007? And given that all the
persons making refund applications (Markelov, Kurochkin and Khlebnikov) had prior
criminal records?
44
PRIVATE BRIEFING
DOCUMENT, NOT FOR
Questions for Tax Authorities DISTRIBUTION OR

QUOTATION
7) Why did not the Federal tax Department make additional checks when the tax rebate
request came from the lower level Tax inspectorates for such large payments? Taking
into account that the tax rebate is related to 2006 year not 2007 when the rebate was
paid.
8) How did it happen that besides US$ 230 million (RUR 5.4 billion) related to tax fraud
against Hermitage, you apparently refunded another $108 million the year before the
fraud against Hermitage? and then another US$ 112 million (RUR 2.98 billion) during in
the same period – so in total more than US$ 470 million or RUR 11.2 billion?
9) Are you investigating at least these two tax refund frauds now?
10) How you could explain the fact that two different officials from two different tax
inspectorates on different dates provided identical (word by word) witness’ statements
about the tax frauds?
45

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PRIVATE BRIEFING

DOCUMENT, NOT FOR

The Russian Tax Authorities Cover Up of the

I. Fabricated criminal case

Hermitage Moscow Office Firestone Duncan, Hermitage’s Lawyers

Original Certificates of Original Certificates of

II. Theft of the companies QUOTATION

Documents seized by Interior Ministry

HSBC PRIVATE BANK

Corporate HSBC MANAGEMENT Corporate

100% 100% 100%

V.Kurochkin V.Markelov V.Khlebnikov

Hermitage’s stolen companies? QUOTATION

A convicted murderer named Viktor Markelov

100% 100% 100%

V.Kurochkin V.Markelov V.Khlebnikov

OOO RILEND, OOO PARFENION, OOO MAKHAON,

III. Fabricated liabilities

14 Aug General Director

Fake liabilities for $ 575 m

IV. Unknown Lawyers pleaded guilty

HSBC PRIVATE BANK

Trustee to Hermitage Fund Not Advocate

Kazan Arbitration Court

100% 100% 100%

General Director General Director General Director

IV. Lawyers pleaded guilty

… and pleaded guilty

“According to p.3 art. 70 of APC the acceptance

shell companies QUOTATION

General Director St-Petersburg, Moscow and Kazan Arbitration Courts'

US$ 974 million (23.3 bln RUB)

VI. $230 mln tax refund in two days

VI. $230 mln tax refund in two days

VI. $230 mln tax refund in two days

“Amended” tax declarations were submitted to Tax Inspections № 25 and № 28 and

DECISION MADE IN 1 DAY TO REPAY $230 MILLION

Neglecting of Hermitage Complaints

Russian State Central

the theft of $230 Million?

Tverskoi Court $230 million

Sentence: 5 years imprisonment

Who was responsible and who was not? QUOTATION

Theft of $230 Million

April 2009 Trial

Source: April 2009 Trial in Tverskoi District Court of Moscow

Do we believe that a sawmill employee was DOCUMENT, NOT FOR

the mastermind of this sophisticated fraud? QUOTATION

HSBC PRIVATE BANK

Courts Banks Tax Authorities

during raids owners and tax refund

directors in applications V.Kurochkin V.Markelov V.Khlebnikov

state database Approved $1 bln. false Intercommerz

claims in 3 regional courts Sa vings Bank Sav ing s Bank

Hermitage Companies paid Perpetrators stole

$230 million $230 million

Source: EGRUL, Courts of Moscow, St. Petersburg and Kazan

theft of $230m? QUOTATION

#25 #25 #25

#28 #28 #28

“During in camera audits V.A.

What did Moscow Tax Authorities do with DOCUMENT, NOT FOR

Markelov’s tax declarations? QUOTATION