Micklethwaite Letter Jan 28 2010

8/7/2019 Micklethwaite Letter Jan 28 2010

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NEll MICKLETHWAtTEDirect dial: +44 (0) 207851 6086nmicklethl'[email protected]

8CliffordStreetLondonWIS 2LQtef +44.20.7851.6000fa x +44.20.7851.6100

OWN=\UDNICK

Our Ref: NPM/OB/028429.0002BY EMAIL, BY FAX AND BY COURIER28 January 2011

Dr. Erwin BeyelerThe Attorney General of SwitzerlandBundesanwaltschaftCH-3003 BernCopied to:Richard lsarln, Chief Executive OfficerMaya Kamm, Chief Compliance OfficerRomeo Cerutti, General CounselPrivate BankingCredit Suisse (Zurich)Paradeplatz 8ZurichDr. Eugen Haltiner, ChairmanDr. Urs Zulauf, Vice-Director, Legal DepartmentSwiss Federal Banking CommissionSchwanengasse 12P.O.BoxCH-3001 BerneMoney Laundering Reporting Office SwitzerlandFederal Office of PoliceNussbaumstrasse 29CH-3003 BernEva AignerSwiss Financial Market Supervisory AuthorityEinsteinstrasse 2CH - 3003 Berne

Dear Dr Beyeler,Re: Money Laundering Suspicion Report / Accounts at Credit Suisse (Zurich) heldin the names of:Aikate Properties Inc.Arivust Holdings limitedAnd any other accounts beneficially owned by Vladlen Stepanov and/or his wife,Olga Stepanova, Elena Anlsimova and her son Andrey Anlsimov, Olga Tsarevaand her daughter Elena Tsareva

We act for Hermitage Capital Management Limited ("Hermitage"), the investment advisor to theHermitage Fund.Brown Rudnl


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We hope that this letter, and the accompanying documentation, provides you with sufficientinformation necessary to conduct an urgent investigation and to take the steps that you considernecessary, such as freezing the accounts holding the illicit funds, investigating the account holdersand those doing business with them, as well as any other steps as you consider appropriate under thegiven circumstances, including bringing criminal charges and requesting extradition of those involved.Should you conclude that your investigation leads to the same results as that carried out by ourclients, we request that you freeze the accounts of those involved in the criminal activity immediately.In addition to the information provided with this letter, extensive information and documentationrelating to the underlying frauds is available online at hltp:!frussian-untouchables.com, a websitededicated to the late Mr Magnitsky established following Mr Magnitsky's tragic death in prison.

I, Suspected Money Laundering Activity through Various Accounts Held atCredit Suisse (Zurich) ("Credit Suisse")The purpose of this letter is to bring to your attention our clients' suspicion that the criminal proceedsgenerated by a large-scale criminal organisation, which involves high-level government officials,through complex frauds against our clients and other organizations that resulted in theft of someUS$230 million from the State Budget of the Russian Federation may be held in various accounts atCredit Suisse. The investigation carried out by our clients has shown that these accounts belong tocorrupt Russian tax officials and their immediate family members who have used and continue to usethese accounts to launder the proceeds of money stolen from the Russian state, the exposure ofwhich .ledto the death in prison of an anti corruption lawyer Sergei Magnitsky ("Mr Magnitsky"), whowas contracted as an external lawyer and adviser to Hermitage1. In addition, there are severalaccounts at Credit Suisse that our clients have identified as omnibus accounts that these individualsuse for no other purpose than laundering money for various unconnected parties.

You will notice that we have also copied this letter to Credit Suisse and the Swiss BankingCommission (UCommission") in an effort to assist both in meeting their respective obligations underSwiss Jaw and to counter a criminal conspiracy that appears to have used Credit Suisse to laundersubstantial sums. We note that the information we have uncovered has potential implications forCredit Suisse under its June 2008 Code of Conduct in connection with its commitment to maintain anexemplary control and compliance environment in relation to these and any related accounts. Theinformation may also trigger regulatory or other legal obligations. It is for this reason that we will besending this letter to Credit Suisse's principal compliance officer for Private Banking on this initialcommunication, as well as the CEO of the private banking department. In the event that the particularaccounts involved relate to the jurisdiction of others at Credit Suisse, such as compliance officers atother departments, we would be grateful if this letter could be forward to them on an urgent basis,

II. BackgroundAs Hermitage set out in numerous formal complaints made to the Russian authorities, which areavailable at http://russian-untouchables.com, following an extortion effort undertaken againstHermitage by a Russian police official, Lt. Colonel Artem Kuznetsov ("Mr Kuznetsov") of Russia'sMinistry of the Interior, Moscow Interior Ministry officers raided Hermitage's Moscow offices and theoffices of Firestone Duncan, Hermitage's legal and audit advisors. The officers, as our clients havesubsequently discovered, acting under cover of their official positions, and for the purpose of carryingout a criminal conspiracy to defraud the Russian government and Hermitage, illicitly seized certificatesof registration, company records, corporate seals and tax certificates of the three of the Fund'sRussian subsidiaries. The seized documents were then used to carry out a series of shamtransactions that led to the theft of 5.4 blllion roubles (US $230 million) from the Russian state budget,attributable to "refunds" of taxes previously paid by the Fund to the Russian government.2 In fact, theamounts were not refunded to the Fund, but stolen by the criminal group that used the corporatedocuments taken by the Moscow Interior Ministry officers from Hermitage ill icitly to secure the fundsfor themselves.

1Wall S tre et J ou rn al. M urde r by N atural C auses, N OV EM BE R 18 . 2 009~http ://on[ ine,wsj.com/art lcleISB10001424052748704204304574543422988504600.html)T he details of the the ft are se t forth In th e leite r of N ell M icll.lew alte of B row n R udn ick (Lon don ) to Y url C halka, P rose cutorG ene ra l of the R ussian Fe deration, from th e firm of B row n R udnick, N eif M lclI.le waite . 12 O ctobe r 2 009. an d attach ed he re asE xh ibit 1 P age s 1-2 9.2
http://russian-untouchables.com%2C/http://russian-untouchables.com%2C/


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III. Evidence That Mr Stepanov and Mrs Stepanova Have Not Obtained Their AssetsLegitimately

Our clients' investigation has shown that the members of the criminal group Included, inter alia,Vladlen Stepanov ("Mr Stepanov") and his wife, Olga Stepanova ("Mrs Stepanova"), who appear tobe the beneficiaries of the illicit wealth accumulated on these accounts specified in this letter. Ourclients have discovered that Mr and Mrs Stepanov played direct roles in securing the stolen funds.In the period from January 2007 to January 2008 Mr Stepanov incorporated various companies,which included Aikate Properties Inc ("Alkate"), a company registered in the British Virgin Islands, andArivust Holdings Limited ("Arivust"), a company registered in Cyprus. Mr Stepanov then openedvarious bank accounts at Credit Suisse on behalf of these companies, registering himself as thebeneficial owner. ' (Conflrmation that Mr Stepanov is the beneficial owner of Aikate is shown in a lettersigned by the sole director of the company in the British Virgin Islands, where the company isregistered.)4At the time, Mrs Stepanova was, and still is, the Head of the Bureau of the Moscow Tax Authoritythrough which $155 million of the $230 million of tax "refunds" were processed. She was responsiblefor authorizing these "refunds" requested by those that used them to carry out one of the largest taxfrauds in the history of the Russian Federation." Notably, the refund of an enormous amount by anystandards," was approved on the same day as the application for a refund was made, 24 December2007.

On 28 April 2009, Tverskoi District Court of City of Moscow of the Russian Federation, found that thetax refund requests and the related transactions were criminal, in a decision that addressed theculpability of only one member of the criminal organization, a saw mill employee VA Markelov, whowas involved in the illicit use of the Hermitage corporate documents to steal the $230 million. Theruling then merely stated that he was assisted by "unidentified members" of a criminal group.7

As the Russian government official, Mrs Stepanova is required to declare her income, as well as thatof her husband, Mr Stepanov, under anticorruption regulations approved by the President of RussianFederation". Together, their gross income over a ten year period amounts to less than US$500,OOOtotal, or an average of less than $50,000 per year. Although the year 2005 is missing from therecords that our clients have found, it is notable that neither Mr nor Mrs Stepanov had substantialincome for most of the ten year period and their average annual declared income between 2006 and2009 was $38,381.9 Mr and Mrs Stepanov have no legitimate source of Income that can support thetransactions that have moved through the accounts controlled by Mr Stepanov. To the contrary, aclose review of the accounts, provided below, led our clients to believe that these transactions canonly be explained by the existence of money laundering.

IV. Aikate's and Arlvust's AccountsThe limited information available to our clients regarding the activity on Aikate's and Arivust's CreditSuisse accounts indicates extensive money laundering and includes a number of "red flaqs" foractivity that is of high money laundering risk. The examples of these "red flags" are:1. Aikate was established as a shell company in the British Virgin Jslands on 29 January 2007. BVIis a jurisdiction that is considered to be of high-risk for money laundering due to its minimal duedil1gencerequirements in connection with corporate registration. Notably, under the BVI Business3 See Le tte r o f August 6 , 2009 f rom V ladl en S tepano v t o Koureon Management L im it ed reoA r iv us t Ho ld ings L im ited a ccoun ts ,a nd a tt ached he re a s Exhi bi t 1 Pages 30-33. .4 See L eIte r o f J un e 2 8, 2 00 8 from Hon . A ndr ew Mor ay S tu ar t, d ire cto r o f A ik ate P ro pe rtie s, In c, o n A ik ate P ro pe rtie s, In c.s ta tio ner y, a nd a tt ached he re a s ExhI bi t 1Pages 34 -35 .5 See Dec is io n fo r ta x r eb ate s o f P ar fe nlo n a nd Ma khao n s ig ne d b y O lg a S te pa no va , a nd a tta ch ed h er e a s E xh ib it 1 Pages 36-40 .6 See F inanc ia l T imes, Sept ember 12 , 20101 .RZB p robed f or p ossi bl e J in k s to Russ ia t ax f ra ud .http:/AwlI'I.fI.com/cms/s/O/8daee41abe98-11dfa755-0 0144feab49a.html#ixzz17 M911'1n6d7 A c op y o f t h e v er dIc t a ga In st Mar ke lo v, a nd a tta ch ed h er e a s E xh ib it 1 P ag es 4 1- 47 .8 Ant ico rrupt ion regu la tions rega rd ing the o ff ic ia ls o f Russlan tax au tho ri ti es~http://w..w/.r77.naI09.(uf index.php?topic=umns77 _2_1)A c op y o f th e S le pa no v/S te pa no va In come d ec la ra tio n fo r th e le n y ea r p er io d, 1 99 9- 20 09 , w ith 2 00 5 m is sin g, a nd a tta ch edh er e a s E xh ib it 1 P ag es 4 8- 57 .

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Step 1.

Companies Act, companies are not required to file information on directors and shareholders.(However, as stated above, our clients' investigation has shown that Mr Stepanov is the beneficialowner of Aikate and it also appears that Aikate opened an account 0835-1488763-52 with CreditSuisse.)2. Arivust was registered in Cyprus on 26 January 2008, a month after the illegal refund of the $230million took place. to Cyprus is another jurisdiction that is considered to be of high-risk for moneylaundering due to its minimal due diligence requirements in connection with corporate registration.Similarly to Aikate, Arivust opened accounts with Credit Suisse in USD 0835-1300256-72 andEuro 0835-1300256-72-1, IBAN CH38 0183 5130 02567200 O.3. A further indicator of money laundering is the movement of funds through multiple accounts,indicative of structuring activity. The funds In these accounts were not directly transferred to thefinal destination, but the chain was broken In between, which suggests that this was done in orderto hide the origin of the money. Transactions of this type appear to have taken place InvolvingAccount 980284-62-1 held in the name of Quartell Trading ("Quartan") and Account IBAN: CH680483 50 955976 12004 in the name of Baikonur Worldwide Limited ("Baikonur"), each of whichinvolve payments to or from what appear to be other shell companies in high-risk jurisdictions,but, our clients have discovered that both of these accounts are controlled by the same entities.4. The structuring activity appears to have been carried out through the following mechanisms,described in "Steps" below. Each of these steps themselves exhibit indicators that are of high riskof money laundering, as specified below.

The ill icit proceeds were first transferred to Quartell accounts: a payment of 2,OOO,000.00wasmade on January 23, 2008, from a company incorporated in New Zealand, Bristoll Export LimitedLevel 5 ("BristoW). Bristoll's registered address is Cf-GT Group Limited, Level 5, 369 QueenStreet, Auckland, New Zealand and it was incorporated by Michael Taylor, one of the partnersand executives of GT Group Limited, which became known for its involvement in establishing andmanaging the company SP Trading Ltd, whIch was found to have engaged In illegal armtrafficking of 35 tonnes of explosives and anti-aIrcraft missiles from North Korea to Iran when thelIyushin-76 plane was seized by Thai police on December 12, 2009.11 The involvement of thiscompany in other criminal activity Is yet another reason for one to suspect that the transactionmay involve a high risk of money laundering.Brlstoll is a company with 100 shares and its sole director is located in the high-risk jurisdiction ofVanuatu 12. There is no public evidence of legitimate commercial activity of any form involvingBristoll, which was listed as a company in New Zealand on July 11,2007, and is now defunct.This allows one to conclude that there are two reasons for suspecting money laundering: (I)Bristoll's location of Incorporation, and (ii) its defunct corporate status. Moreover, the suminvolved does not correspond to an explicable commercial transaction and notably, thetransaction took place just one month after the tax office headed by Mrs Slepanova approved themajority illicit tax "refund" of US$230 million.Subsequently, two similar payments, each of 1,999,900.00 were made on February 6,2008 andon February 12, 2008 to the same Quartell account from another company, Nomirex TradingLimited Cornwall ("Nomirex") 14 and also in this case, there are factors that indicate that thesetransactions have high money laundering risks, particularly as they took place one and a halfmonths after the illegal $230 million tax refund was approved by the tax authority headed by MrsStepanova.Nomirex was incorporated on 14 August 2006 as a shell company in the United Kingdom. It isowned by a Cypriot company, has a sole Cyriot director, and its authorized share capitalconsists of a total of two (2) ordinary shares. Again, there is no public evidence that the

to See t he S tr uc tu re r ep or t p ro vid ed b y In fo Cc re dlt, a nd a tta ch ed h e re a s E xh ib it 1 P ag es 5 8- 59ii http://online.barrons.comlart lclelSB126228981179512403.htmli2 Bank t ra nsf er r eco rd s o f p a ymen t f rom B r is to l! t o Quar te ll C red it Su is se a ccoun t, a tt ached he re a s Exhi bi t 1 Pages 7513 See c or po ra te r ec or ds , A uc kla nd , r ela tin g to B ris to l!, a tta ch ed h er e a s E xh ib it 1 P ag es 6 0 6714 Ban k tr an sfe r r ec or ds o f p ayment f rom Nomlr ex to Q ua rte n C re dit S uis se a cc ou nt, a tta ch e d h er e a s E xh ib it 1 P ag es 7 9 80is See c or po ra te r ec or ds o f Nom lr ex , a nd a tt ac he d h e re a s E xh ib it 1 P ag es 6 8 73

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http://online.barrons.comlartlclelsb126228981179512403.html/http://online.barrons.comlartlclelsb126228981179512403.html/


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company conducts any commercial activity, and it is obvious from the nature of the transactions(large amounts, unrelated to any visible commercial or business activity) that they may involvemoney laundering. Moreover, Companies House records show that for 2007-2009 Nomirex fileda dormant annual report with zero financial activity. This report of no activity appears to befraudulent on its face, particularly in light of the fact that substantial funds were transferredthrough Nomlrex accounts. This, yet again, caused our clients to suspect money laundering andcriminal activity.Both companies, Bristoll and Nomirex, have bank accounts at AS Trasta Komercbanka,Miesniekuiela 9, LV-1050 Riga, Latvia, (Bristoll - LV13KBRB1111213235001, Nomirex -LV16KBRB1111212787001). Latvia is another jurisdiction that the Financial Action Task Forcehas classified as being highly vulnerable for the laundering of criminal proceeds and it is seen asa high risk jurisdiction.Our clients suspect that, due to the circumstances and the individuals involved, the 6 millioninvolved in these transfers may be part of the criminal proceeds of the fraud against Hermitageand the Russian State Budget and this suspicion is also evidenced by the material produced inthe United States as a result of a successful subpoena filed by Hermitage in the District Court ofSouthern District of New York seeking information from various US banks on wire bank transfersrelating to the fraud.Wire transfer statistics obtained as a result of the court's ruling show that that the followingpayments were made to Bristoll and Nomirex immediately prior to the payments to Quartelldiscussed above: On 5 February 2008 the amount of US$ 498,955.00 was transferred to Bristol! fromRoland Management ltd, a company incorporated in the United Kingdom,16 a shellcompany which, according to the records available to our clients, as of June 30, 2008 ,had minus 102 total assets less current liabilities.On 5 February 2008 the amount of US$ 491,585.58 was transferred to Bristoll from SCBUNICON-IMPEX SRL, a company registered in Moldova 17, a shell companyincorporated on July 4, 2007 under the name of Vladimir Buntcovschl",

On 5 February 2008 the amount of US$7269000.00 was transferred to Nomirex from thesame company, SC BUNICON-IMPEX SRL1

It is these transactions that caused our clients to believe that the proceeds of the fraud movedfrom one shell company to another and finally to the bank accounts held by Mr and Mrs Stepanovat Credit Suisse.Step 2.

Four months after the funds were transferred to Quartell's account, similar amounts weretransferred from Baikonur's account, the account that our clients believe is controlled by the sameentit ies as Quartell's account, to Arivust, the company controlled by Mr Stepanov. Five paymentswith a total value of approximately 7.1 million were made to Arivust's account at Credit Suisse(lBAN: CH68 0483 50955976 12004) between 26 May 2008 and 17 June 20082 : On 26 May 2008 Baikonur paid 1,500,000 to Arivust; On 2 June 2008 Baikonur paid 1,600,000 to Arivust; On 6 June 2008 Baikonur paid 1,700,000 to Arivust; On 9 June 2008 Baikonur paid 1,OOO,000to Arivust; and On 17 June 2008 Baikonur paid 1,300,000 to Arivust.

15W ire transfer records of paym ent from R OlJ\N D M AN AG EM EN T LT O to Bristoll, attached here as Exhibit 1 Pages 8117 W Ire transfer records of paym ent from SC BU NIC ON-IM PE X to 8ristoll, attached here as E xhibit 1 Pages 8218 Extract from the M inistry of Jusllce of M oldova on S C B UNiC ON -IM PEX, attached here as Exhibit 1 Pages 8419W Ire transfer records of paym ent from SC BU NIC ON -IM PEX to N om lrex, attached here as Exhibit 1 Pages 8320 Bank transfer records of payment from Ace No CH 68 0483 5095 5976 12004 to Arivust, aUached here as Exhibit 1 Pages85-86

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a) 25 Apr 2007 $252,239Beneficiary: Sunny Beach PropertiesDetails of payment:Payment Inv. KPJR 07/082DO April 8, 2007. Unit No. 428 for Vladlen Stepanovb) 18 Oct 2007 $277,836.69Beneficiary: Sunny Beach PropertiesDetails of payment:Inv. KPJR 07/247For real estateNote: Most likely as a partial payment for Unit 428 for Vladlen Stepanovc) 16 Jan 2008, $629,030.00Details of Payment:Mr. Vladlen Stepanov for Unit 530(A2) In I(PJR, Dubai, UAE, accordingto inv, KP0237/01, dd. 07.01.08This is a partial payment for the purchase of a condominium at the Kempinski PalmJumeirah

During 2008 and 2009, large sums were transferred to Arivust's and Aikate's accounts held atCredit Suisse on behalf of Mr Stepanov and Mrs Stepanova and there is no suggestion that thesetransactions involved a known commercial activity or came from a visible source of legitimatefunds. Examples of these transactions are: Three payments of approximately 750,000 were made to Aikate's account at CreditSuisse, between June 16, 2009 and July 9,2009. Two payments, each in the amount of $300,000 (USD) totaling $600,000 (USD) weremade to Aikate's account at Credit Suisse on August 27, 200921 .

The Credit Suisse advisor for these accounts appears to be Mrs Svetlana Artho, whose telephonenumber is 044 3334084.

V. Further Money Laundering Activities Using the Same Accounts - Integration and Useof Funds to Purchase Real Estate;; The Purchase of Real Estate in DubaiIt appears that Baikonur's account (Credit Suisse USD Account 95597612; IBAN CH79 0483 50955976 1200 0) has repeatedly been used to make payments on behalf of the Stepanov family and thefamilies of other tax officials of Moscow tax office 28 for the purpose of laundering the stolen moneythrough the purchase of real-estate in DubaL22This activity includes the following payment orders that appear to have been made for the benefit ofMr Stepanov:

Notably, Mrs Stepanova approved the fraudulent tax refund just weeks before and our clients suspectthat it is likely that the money being sent originates with these refunds.

d) 26 Mar 2008, $426,072.70Beneflclary: Emerald Palace Group LimitedDetails of paymentPayment for real estate of Inv. Ep/KPJR 08/015 DTD 02.03.2008(For Vladlen Stepanov)This is a partial payment for the purchase of a condominium at the Kernplnsl PalmJumeirah (Most likely unit 530)

21 Ban k tr an sf er r ec or ds o f p aymen t t o A ik ate . a tt ac he d h e re a s E xh ib it 1 P ag es 8 7- 8922 Ban k t ra ns fe r r ec or ds o f p aymen t f or Du ba l b as ed p ro pe rtie s o f S te pa no v a nd Co. , a tta ch e d h e re a s E xh ib it 1 P ag es 9 0- 10 0

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j) 18 Jan 2008, $569,000Beneficiary: Emerald Palace Group LimitedDetails of paymentMr. Andrey and Elena Anislmova forunit G16 In KPJR, Dubai, UAD invoiceEP/KPJR 08/009 dd 09.01.2008

e) 16 Apr 2008, $265,779.20Beneficiary: Sunny Beach PropertiesDetails of Payment:Payment for Real estateVladlen Stepanov, unit 428 inv.SB/KPJR 08/049)f) 25 Jun 2008, $426,020.00Details of Payment:Inv. Ep/KPJR 08/043, Unit 530V. Stepanovg) 17, Sep 2008 $426,020.00Beneficiary: Emerald Palace Group LimitedDetails of Payment:Payment Inv. EP/KPJR08/076 DO02.09.2008, Vladlen Stepanov,Unit 530(Investment of Building)

Some of the payments appear to also have been made for the benefit Olga Tsareva, the deputy Headof Moscow Tax Office No. 28, the one who approved a major part of the illegal $230 million tax refundon 24 December 2007. The first payment was made approximately a month after the tax refund wasgranted:

h) 17 Jan 2008, $591,300Details of payment:Ms. Olga and Elena Tsareva for unit116 in KPJR, Dubai, UAE, InvoiceEP/KPJR 08/001 dd 09.01.2008i) 24 April 2008, $ 29,484Beneficiary: Emerald Palace Group LimitedDetails of payment:Transfer Administation charge,

Unit 116, KPJR, this transaction Is also seems to be done for the benefit of Ms.Olga and Elena Tsareva, because it is related to the same unit 116.Some payments appear to have also been made for the benefit Elena Anisimova, the First DeputyHead of Moscow Tax Office No. 28, the one who approved a major part of the illegal $230 million taxrefund on 24 December 2007. The first payment was made approximately a month after the taxrefund was granted.

k) 8 Jul 2008, $283,907.8Beneficiary: Emerald Palace Group LimitedDetails of paymentEP/A No. G16 Unit G16 (Investment for buldlnq), Which seems to be payment forthe same unit of Mr. Andrey and Elena Anisimova

ii) The De ve lopm ent o f a Re so rt P ro pe rt y ill MontenegroThe banking documents that our clients have in their possession, supplemented by other records,also suggest that Mr Stepanov and Mrs Stepanova chose to use the proceeds of their criminal activity

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to invest in the construction of another property in City Bar, the Republic of Montenegro, known for itsimpressive seaside.According to QuarteU's account statements, an omnibus account used in part to launder proceeds ofthe tax refund crime reported by Mr. Magnitsky23, from 01.01.2008 to 31.01.2008 and from01.02.2008 to 29.02.2008 the following transactions were made:a. Payment of 100,734.32 on 4 February 2008 to developer "Montenegro Projekt" 0.0.0.Podgoric;b. Payment of 106,413.88 on 17 January 2008 to Vladimir V.Abakumov Rusija Moskva;c. Payment of 204,114.32 on 4 February 2008 to Vladimir V.Abakumov Rusija Moskva;d. Payment of 5,293.88 on 24 January 2008 to Svetislav Predovic Bar Montenegro;e. Payment of 38,913.88 on 24 January 2008 to Svetislav Predovic Bar Montenegro;f. Payment of 6,214.32 on 1 February 2008 to Svetislav Predovlc Bar Montenegro;g. Payment of 27,514.32 on 4 February 2008 to Svetlslav Predovic Bar Montenegro;h. Payment of 59,O 14.32 on 4 February 2008 to Svetislav Predovic Bar Montenegro.Our clients suspect that the information relating to these transactions suggests that the majority ofthese payments were made for the purchase of construction materials for the resort property. All ofthe following payments were made from this account to Montenegro for the benefit of the Stepanovfamily who purchased a house. It appears that these payments are likely to have been made from theproceeds of the fraud used to purchase clean real-estate.

VI. Murder of Sergei MagnltskyAs explained above, our clients are of the view that Arivust's and Aikate's accounts held at CreditSuisse belong to a Russian tax official, her husband, and criminal associates, and that the activity onthose accounts Involves the laundering of the proceeds of money stolen from the Russian StateBudget.As we explained above, based on their own public filings with the government of Russia, neither Mrnor Mrs Stepanov have any source of income (other than the laundering of the proceeds of crime) tojustify the activity that has been taking place in these accounts. In the event that our clients' findingsare correct, the fraud proceeds used by the Russian tax officials and their families to purchase realestate in different countries have a connection to the murder of Mr Magnitsky, who was the firstperson to uncover and whistle blow the criminal conspiracy relating to these stolen funds placed atCredit Suisse by Mr Stepanov and Mrs Stepanova, two of the principal co-conspirators.In the autumn of 2007, in his capacity as Hermitage's lawyer, Mr Magnitsky discovered thatcompanies held by HSBC Guernsey, the Fund's custodian, had been stolen. The details of this thefthave been set out in detail in numerous complaints filed with the Russian government in thebeginning of December 2007 by the HSBC Guernsey Ltd., Trustee of the Fund and its lawyers. In thecourse of his investigation, Mr Magnitsky discovered that those that controlled the stolen companiesapplied for fraudulent tax refunds at Moscow tax offices 25 and 28, headed by Mrs Stepanova, thatthese refunds of 5.4 billion rubles ($230 million US) were approved in a single working day, that noaudits or questions were asked and that refunds were made to bank accounts of Universal SavingsBank Moscow, a bank owned by a convicted criminal, Dmitry Klyuev, whose legal advisor andbusiness partner is Andrei Pavlov, involved In the frauds against our clients.In a series of 12 formal filings made to the Russian government in 2008, Mr Magnitsky alleged thatthe fraud was carried out by a criminal group consisting of corrupt Russian police officers, corruptofficials from tax offices 25 and 28 and by other organized criminals. He also alleged that these two

nBank transfer records of payment from Ace No CH 68 0483 5095 5976 1200 4 to Arivust, attached here as Exhibit 1 Pages74-808


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the transactions themselves bear clear indicators of money laundering; and the actual sources of funds are likely to be the proceeds of organized crime involving serialthefts from the Russian State through fraudulent tax refunds including the theft of some $230million from the Russian state by corrupt officials, including Mrs Stepanova and other taxofficials.

1 ! 0 : .bromrudnid< tax offices were involved in granting systematic fraudulent refunds dating back to at least 2006.2 4Soon after making these allegations public, Mr Magnitsky was arrested by the same corrupt Russianpolice officers and held in prison without trial for a year. He was tortured in pre-trial detention anddied there one year following his arrest in the age of 37.25 The Russian government has sincerecognized the theft of $230 million of government money, but has so far failed to bring any chargesagainst any government officials against whom Mr Magnitsky gave evidence.The death of Mr Magnitsky while in custody received broad global attention and has been widelycondemned." The United States Congress has introduced an initiative to ban all the Russian officialsinvolved, Including Mr and Mrs Stepanov, from traveling to the US27 and to freeze all their assets andthose of family members as applicable. On 16 December 2010 the Parliament of the European Unionapproved a resolution requesting visa bans and financial sanctions against those Russian officialsinvolved in embezzlement of $230 million of government funds and the torture and murder of MrMagnitsky. World Check2 8 has also included the Stepanov family on its list of persons that theyadvise to avoid dealing with.

VII. Due Diligence and ComplianceAs we mentioned above, the bank accounts that we have discussed above appear to be managed bya Credit Suisse account officer named Svetlana Artho.Although our clients do not have access to the account opening information or to the overall booksand records maintained by Credit Suisse in connection with the relevant accounts, the limitedinformation that they managed to get hold of suggests that:

the immediate beneficial account holder, Mr Stepanov, is a Politically Exposed Person, as heismarried to a senior tax official; transactions on other accounts held at Credit Suisse appear to have been undertaken for theultimate benefit of of Mr Stepanov aswell; Mr Stepanov has no visible source of legitimate income to justify the amounts involved in thetransactions relating either to accounts in which he is the immediate beneficial accountholder, or relating to other accounts inwhich transactions have been made on his behalf; the businesses holding the accounts have no legitimate commercial activity to justify theamounts involved in the transactions; the structures involve companies incorporated in high-risk jurisdictions; some of the companies that maintain accounts at Credit Suisse are no longer in goodstanding and, as a result, have no legal status in the jurisdiction where they wereincorporated; some of those involved in the transactions appear to have been implicated in other seriouscriminal activity unrelated to the scheme outlined in this letter;

In light of this information, the Commission and Credit Suisse may wish to determine whether CreditSuisse:

24 T he s e a ll eg at io n s b y M r . M a gn lt sk y a re p ro vi de d h e re : h tl p: l/ ru ss la n, un to uc ha ble s ,c om /e n gf te s trm on ie s f25 N ew s article on S erge i M agn itsky death . http : //russlan-untouchables.comleng/category/magni tsky-deathI26 h tl p: fl ru ss la n. un to uc h a b le s . com le n gf ca te g o ry /in te rn at io na l re ac tl o nf .27 http://thomas.loc.gov/cgl.blnfguery/z?c111:S.3881:28 h tt p: // \'l\W /. wo rld -c he c k. com /a rt ic le s /2 01 0 I1 1/ 29 fa re -y ou -b an kl ng -a n y 6 0- russ ia ns -e u - wa nts-sanction/

9
http://russlan-untouchables.comleng/category/magnitsky-deathIhttp://thomas.loc.gov/cgl.blnfguery/z?c111:S.3881:http://thomas.loc.gov/cgl.blnfguery/z?c111:S.3881:http://russlan-untouchables.comleng/category/magnitsky-deathI


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undertook the required level of due diligence when opening the relevant accounts; filed suspicious transaction reports with the relevant Swiss regulators, as may be appropriate; checked whether the extensive and documented money laundering activity in these accountsextends to other accounts at the bank managed by Ms Artho, or by any unit ofwhich she may

be part of; consisdered whether the bank's compliance policies and procedure were properly followed inregard to these accounts and transactions; and looked into whether an independent review of other such accounts may be appropriate in lightof the many indicators of laundering activity here.

These possible failures to meet either due diligence obligations or suspicious activity reportingregarding these accounts would raise fundamental questions about the integrity, effectiveness, andimplementation of the effectiveness of the underlying anti-money laundering systems, policies andprocedures and the implementation of the Code of Conduct. These issues may also raise crucialissues for your consideration, which are beyond the scope of the immediate concerns that we haveraised in this letter.

VIII. ConclusionMr Magnitsky's death in custody provided tragic evidence of the corruption and of the extent of powerthat the officials that participated in the criminal conspiracy to steal the $230 million in taxes. While theunderlying scheme involved many stages, the financial elements of it boil down to three mechanisms.Firstly, the Illicit funds were generated by a corrupt theft of resources from the Russian state byRussian officials, including Mrs Stepanova.. The funds were then layered through a series oftransactions that involved a now-defunct bank in Russia, Universal Savings Bank, numerous shellcompanies, some of which held accounts at Credit Suisse to the accounts controlled by Mr Stepanov,the husband of the senor tax official who approved the illicit refund. The funds were finally placed in aseries of investments, including real estate properties in Dubal, made for the ultimate benefit of thecriminals that carried out the scheme, including Mr Stepanov, Mrs Slepanova, Ms Tsareva and MsAnisimova.Our clients have lost a dear friend and colleague and it is their goal at this point to place as muchpressure as possible on this criminal group, and to deny them the fruits of their criminal activity. Inpursuit of this goal, Hermitage intend to notify an the banks that they believe may have been involvedin the laundering activity beyond Credit Suisse as soon as possible, but we wanted to provide youwith this information, so as to ensure that our actions In Switzerland do not interfere with.investigations by the Commission or by Credit Suisse. With that in mind, it is our clients' intention toprovide the relevant information to the foreign correspondent banks of Credit Suisse that havehandled one or more of the Significant transactions involving apparently laundered illicit funds, as wellas to their regulators. Further, In an effort to further counter those responsible for Mr Magnitsky'sdeath, unless the relevant regulator asks them not to do it in an effort to ensure that nothing preventsthe ongoing investigations, Hermitage intend to make correspondence with relevant regulators andfinancial institutions public.We would be grateful if, once you have had a chance to consider this letter, you inform us what actionyou intend to take and would welcome any opportunity to discuss with you any aspects of this matter,should it be helpful to you. If you have any further questions,require any additional documents insupport of the factual matters raised in this letter, or require the translations of the documents that wehave provided, please direct communication in this regard to Neil Micklethwaite of this office.

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EXHIBIT TO THE LETTER FROMBROWN RUDNICK LLPTO DR ERWIN BEYELERDATED 28 JANUARY 2011


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1. T he signature at the foo t o f page 12 o f the attached letter w ritten English andpage 13 of the attached letter written in Russian is that o f Neil PMicIdetbwaite iden tified by m e

T o all to whom these presen ts shall c ome I M ICHAEL ROBERT LINDLEY o f 128W igm ore Street London W IU 3SA England No tary Public duly autho rised adm ittedand swo rn and prac tising w ithin the Un ited Kingdom of Great Britain and No rthernIre lan d d o h ere by c er tify:

2 . Neil P M icklethwaite is a member o f the law firm Brown Rudnick LLP an da so li c it o r of the Suprem e Court o f England and W ales

Sign ed an d sealed by me on 13 th October 2009 at 128 W igmore Street London W IU3SA

.......... ..~.:.'0..,,~~~.C~.~7)l'~ )M ICHAEL RO BERT LINDLEY NOTARY PUBLIC


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9. Stamp:timbre: [0. Signature; JM Casey

UNITED KINGDO M O F GREA Til R lT A lN A ND NORTHERN IRELAND

APOSTILLE(H ag ue C on ve nti on o f5 O c to be r 19611 Conve n ti on d e La Hay e d 1l 5 cctobre 1961)

I. C o un tr y: U n it ed K in gd om o f G re at B rit ai n a nd N o rt he rn I re la ndPays: Royaurne-Uni de Grande-Bretagne e t d 'Ir la nd e d u N or dT h is p ub l i c d o cum en t ILe present acre public

2. Has been signed by Mithael R Lindleya e te s ig n e pa rJ. A ctin g in the c apac ity o f N otary Publica gi ss an t e n q ua li te d e4 . Bears the seal/starnp of The Said Notary Publice st r ev etu d u s ce au /t i m br e d e

5 . at U :Jn do n/AL on dre s Certif ied! Atteste6. thelle J 3 O c to ber 2 0097. by Her M aje st y's P rin c ip al S ec re ta ry o f S ta te f or F o re ig n a nd C omm onw ea lt h A ffa ir s Ip ar I e S ec re ta ir e d 'E ta t P ri nc ip al d e S a M aj es te a ux A ffa ir es E tr an ge re s e t d u C omm onw ea lt h.& . Numb er /s on s No 1298887.

If this do cum ent is to be used in l< c oun try w hic h ls n ot p ar ty 10 the H ag ue C on ven tio n o f5 O cto ber1961, it s ho u ld b e p re se n te d 10 th e c on su la r s ec tio n ~rthe m is sio n r ep re se ntin g that c ou ntry . A napostille o r le ga li sa ti on c er ti fic at e o n ly c o nfl rm s t ha t t he s ig na tu re , s ea l o r s tamp o n t he d oc um en t isgenuine. II d oe s n ot m ea n tha t t he Con te n ts o f t he d oc um en t a re c o rr ec t o r t ha t t he F o re ig n &C omm onw ea lth O f fi ce a pp ro ve s o f th e c o nt en ts .


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-,

bownrudnIekcom

a

NE IL M ICKLETHWAITED ir ec t d ia l: + 4 4 ( 0) 2 0 7651 [email protected]

CliffordStreetLondonWIS 2LQlei +44.20.7851.6000fo~ +-44.20.7851.6100

Our Reference: NPM OK 028429/000213 October 2009BY POST

Mr Y uri C ha lk aProsecutor General of the Russian FederationThe Prosecutor General's Office of the Russian FederationBolshaya Dmitrovka, 15a GSP-3125993 MoscowDear Mr ChaikaBy means of this letter we request you to conduct a n investigation into the facts describedbelow, namely the theft of some 11.2 billion roubles by fraudulent means from the RussianState budget. These facts have been uncovered by Hermitage in the course of theirinvestigation into the large scale fraud perpetrated against them and the Hermitage Fund inRussia in the second half of 2007. As you may be aware, the complex fraud againstHermitage Involved the illegal misappropriation of 000 Rilend, 000 Parfenion and 000Makhaon (the "Hermitage Russian Subsidlariesb) by a Russian criminal enterprise, whichthen led to the theft of 5.4 billion roubles (US$230 million) from the Russian State budget. Inthe course of their investigation, and for the reasons describe! below, Hermitage hasdiscovered that those involved in the complex fraud against them may also be behind earlieraddiUonallarge scale frauds that resulted in a further 5.8 billion rouble (US$240 million) theftfrom the Russian Treasury.We act for Hermitage Capital Management Limited ("Hermitage"), the Investment advisor tothe Hermitage Fund. We also act for Glendora Holdings Limited ("Glendora Holdings") andKane Holdings Limited ("Kone Holdings"), two Cypriot companies, which are corporateshareholding vehicles owned by HSBC Private Bank (Guernsey) Limited ("HSBC"), thetrustees of the Hermitage Fund, and their three Russian subsidiary companies, 000 Rilend("Rilend"), 000 Parfenlon ("Parfenion~) and 000 Makhaon ("Makhaon"), in relation tovarious legal proceedings in all jurisdiction around the world:The information uncovered by Hermitage suggests that in RUSSia there Is an organisedcriminal group, comprised of private Individuals and government officials, which has beensystematically misappropriating dozens of billions of roubles from the Russian Treasury overthe last three years. This criminal group, through its fraudUlent activity! has stolensome 11.2 billion roubles since November 2006.The methods adopted by the criminal group have been consistent throughout. On eachoccasion the perpetrators filed fraudulent tax refund requests, which, following approval,have then been paid into a small commercial bank in Moscow, the Universal Savings Bank("Universal Savings 8ank")1. Pursuant to the documents obtained from the Russian court,this bank is owned by Mr Dmitry Klyuyev.2 In June 2008, shortly after the frauds occurred,I BIC c o de 0 44 5 85 4 68 w ith !h e C en tr al B an k o f R us siaz C rim in al v er dic t o n M ik ha ilo vs ky GOK c rim in al c as e # 1215106 dared 12 Jul y 2006


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784,824,104 roubles (US$32 m illion) in late March and April 2008.

- - r : ,, ; j l ~ ~ : : w ~c e l t : " ' ; t he Un ive rsal Sav ings Bank f il ed for vo lun ta ry liq u lda flon ''.

_ , J } ~ ~ f / - ' ! ' The facts uncovered by our client suggest that the frauds detailed below would not have.,-,'. been possible w ithout the direct involvement of officia ls from the Moscow Tax Services, inl).lt' p articu la r from Mosco w T ax A uth orities N um be r 25 a nd 28. T he se tw o tax authoritles p lay edT a centra l ro le in the 5.4 billion rouble fraud, which occurred in Decem ber 2007, againstH erm ita ge a nd th e S tate R ussia n b ud ge t. In fact, H erm ita ge 's in ve stiga tio n h as p ro du ce devidence of the involvem ent of M r Sergei Zhem tchuzhnikov, the Deputy H ead of M oscowTax Authority Number 25, and Ms O lga Tzyimai, the Head of the Audit in CameraD epartm ent Num ber 1 of M oscow Tax Au th or ity Number 28, in the fraud. In addition, asdes cr ib ed below , He rm ita ge 's in ve stig atio n has also show n that it is a lso like ly that otherem plo yee s o f M oscow T ax A uth orities N um be r 2~ an d 2 8 h av e a ssisted them in ste alin g 5Abillio n rou ble s from th e R ussia n b udg et, b ased o n the facts o f the ca se.

H en nita ge 's in ve stig atio n h as s hown th at 'addltlonal id en tica l fra ud s w ere co nd ucte d by th es ame c rim in al e nte rp ris e in clu din g Moscow Tax A uthorities N o 25 and N o 28, resulting in theth eft o f th e fo llo win g amoun ts from th e R us sia n T re as ury : 3,137,537,251 roubles (US$119 m illion) in November and December 2006;~ 2,072,921,322 roubles (US$82 m illion) in January, M arch, April, .Decem ber 2007;and

We fee l th at it is o ur o bliga tio n to b ring th e frau ds u nco ve red b y H erm ita ge to y our atte ntion .A s Gen era l P ro se cu to r y ou a nd y ou r o ffic e a re c on du ctin g th e s up erv is io n o ve r th e e xe cu tio nof th e R ussia n law , in clu ding crim in al p ro ce ed ing s a nd h av e th e a bility a nd re spo nsib ility tobring proceedings against the perpetrators of crimes comm itted w ithin the RussianFederation. T he fraud high lighted w ith in th is le tter represents a catalogue of reoccurringla rg e-scale crim es comm itte d a ga in st th e R ussia n sta te a nd p riv ate com pa nies o pera tin gle ga lly w ith in R ussia . W e a re o f th e o pin ion , th erefo re , th at it is yo ur d uty to in ve stiga te th esere oc cu rrin g c rim es a nd to b rin g th e p erp etra to rs to ju stic e.I. FRAUDULENTTAX REFUND:THE MECHANISMIn Ju ne 2 00 7, M osco w In te rio r M in istry o ffice rs ra id ed H erm ita ge 's M osco w o ffices a nd th eoffice s o f F ire sto ne D un ca n, H erm ita ge 's leg a! a nd a ud it a dv isors. T he o fficers seiz ed thec ertific ate s o f re gis tra tio n, c ompa ny re co rd s, c orp ora te s ea ls a nd ta x c ertifica te s o f th e th re eH ennitage R ussian Subsid iaries. The seized docum ents were then used to unlawfullycha ng e th e o wn ersh ip o f the H erm ita ge R ussia n S ub sid ia rie s from th eir ultim ate le gitim ateow ner, H SBC, to 000 P luton, an unknow n com pany registered in K azan, T atarstan. T heHSBC o ffic ers th at w ere th e le gitim ate d ire cto rs o f th e H en nita ge R us sia n Sub sid ia rie s w eresubsequently replaced by three convicted crim inals, M r M arke lov, M r K hlebnikov and M rKurochkin.T he p erp etra to rs the n fo rg ed a greeme nts b etw ee n th e H en nita ge R ussia n S ub sid iarie s a ndthree obscure and unknown Russian entities, 000 Instar ("In star") , Z AO Logos Plus("Logos P Ius") and 000 G rand A ctive ("G rand A ctive"). T hese three unknow n R ussianc ompa nie s th en file d laws uits a ga in st th e H erm ita ge R us sia n Sub sid ia rie s in S t P ete rs bu rg ,M oscow and Kazan, for alleged breach of those forged contracts, cla im ing 22.9 billion1CBR ref'of llquidatlon II OD 49 2 dat ed 2 5 .0 6 .2 0 08


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roub les in damages .N eith er H erm ita ge n or HSBC were n otifie d o f th e la wsu its o r th e le ga l p ro ce ed in gs a nd , a s aresult, neither had ever ap peared in court to d efe nd th e Hermitage Russ ian Subs id iar ies .Nonetheless, court documents show that unknown lawyers appeared in the courts,pur po rte d ly on beha lf of th e Herm ita ge Rus sia n S ub sid ia rie s. T he se lawyers a ck nowle dgedth e va lid ity o f th e co ntra cts, ra ise d n o d efe nce to th e fa ke c la im s, a nd c on ce de d fu ll lia bility .A ndrei Pav lov, Julia M ayorova and Ekaterina M aJtseva purported to act on behalf of theHerm itage Russian Subsidiaries in the claims brought against them by Logos Plus,In te re stin gly , A nd re j P av lo v la te r a pp ea re d a s c ouns el fo r G ra nd A ctiv e, t.e. in o ppos itio n toth e He rm ita ge Compan ie s, in th e K az an prooeedlnqs,Herm ita ge a nd HSBC h ad n o p rio r k nowle dg e o f, o r a cq ua in ta nce w ith , th ese la wy ers, h av enever hired or appointed them , and have n ev er a uth oriz ed o r ra tifie d th eir a ppoin tm e nts a sattorneys or agents of any kind. In short these were not Hermltaqe'sor HSBC's counse l.S im ila rly , th e H erm ita ge R us sia n S ub sid ia rie s h ad n ev er co nd uc te d a ny b usin ess with th en amed p la in tiffs , L og os P lu s, G ra nd A ctiv e a nd lnstar, T he fo rg ed co ntra cts th at fo rm ed th eb as is fo r th e cla im s w ere e sse ntia lly id en tica l a cro ss a ll th e ca se s, e xce pt th at th e p artie s tothe contracts and the figures had be en altered. The contracts w ere littered w ith m istakes(e .q ., re fe re nc in g ban k a cc ounts th at lia d n ot Yet bee n ope ne d) a nd in ac cu ra cie s (e .g ., u sin gaddresses that were incorrect as of the relevant date), Nevertheless, the judges in thep ro ce ed in gs sim ply awa rd ed In sta r, L og os Plus, and G rand A ctive 22.9 b illion roubles indamages.It w as th e lia bilitie s th at" r esu lte d from th ese ju dgme nts th at th e p erp etra to rs u se d to o ffs etthe profit m ade by the H erm itag e R ussia n S ubsidiaries fro m w hich they paid 5.4 b ill ions i nta xe s In 2 006.T he re w as a d ire ct co rre la tio n b etw ee n th e amo un ts awa rd ed a ga in st e ach o f th e H erm ita geR ussian' S ubsidiaries and the am ount of profit m ade by each subsidiary for the year e nded31 D ecem ber 200 6. C onsequently, on 2 4 D ecem ber 2007, the p erpetrators filed a re questfor a re fund of 5.4 b illio n ro ub le s In o ve rp aid ta xe s w ith M osc ow Ta x A uth oritie s N um be r 2 5and N um ber 28. The perpetrators sought repaym ent on the basis that, in light of the courtli ab ili tie s , t he p ro fit s for 2006 e qualle d z ero a nd , th ere fo re , th e e ntire amount o f c ap ita l g ain sla x th at h ad b ee n p aid b y th e H erm ita ge R ussia n S ub sid ia rie s to th e R uss ia n g ove rnme nt in2 006 s hould b e re fu nd ed from th e T re as ury .O n 24 D ecember 2007. tw o in de pe nd en t from e ach o th er M oscow T ax A uth oritie s N um be r2 5 a nd 2 8 sim ulta ne ou sly a pp ro ve d th ese co lo ssa l re fu nd a pp lic atio ns . F rom a re vie w o f th eavail ab le ev idence , it appears that a number of indiv iduals at M oscow Tax AuthoritiesNumber 25 and 28 were involved in the theft of sta te funds through these fraudulen t taxrefu nd applications. Tw o day s afte r the refunds w ere ap proved, on 26 D ecember 20 07, thesum o f 5 .4 b illio n ro ub le s w as p aid from th e R us sia n T re asu ry in to tw o a cco un ts a t U nive rsa lSavings Bank and one at Inte rcommerz Bank, another small bank in Moscow. Theseaccounts had been opened only two weeks earlier. As set out in more detail below ,H en nita ge h av e a ls o u nc ov ere d in fo rm a tio n th at s tro ng ly s ugge sts th at th is fra ud ule nt re fu ndis not the first in which individuals from M oscow Tax A uthoritIes N um ber 25 and 28 havebee n in vo lv ed in .The Invo lvem en t of the Ta x A uth ority O ffic ialsThe involvement of employees of Moscow Tax Authorities Number 25 and 28 becameapparent from the documents and w itness statements obta ined by the investigators In


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Confirmation from the banks of the Payment of the Fraudulent Court Awards toth e ClaimantsIt is claim ed Ms Tzyim ai that another key step in the audit w as to obtain bank statem entsfrom th e m is appro pria te d Herm ita ge Rus sia n S ub sid ia rie s, in o rd er to a sc erta in whe th er th efu nd s h ad a ctu a(ly b ee n tra nsfe rre d from the bank accounts of these companies to thec la imants fo llow Ing the cou rt o rder s. In h er w itn ess sta teme nt, M s Tzylmal claimed that herT ax A uth ority h ad re que ste d in fo rm atio n from the b an ks o f th e m isa pp ro pria te d H erm ita geRus sia n S ub sid ia rie s in re la tio n to th e mov emen t o f c as h from th eir b an k a cc ounts .However, 000 "H SB C Bank (R R)" M oscow , the only bank at w hich the H erm itage R ussianSubsidiaries held accounts. denies that it had ever received any such request from theM oscow Tax A uthorities in particular from M oscow Tax A uthority N o 28, ln its letter of 15Octo be r 2 008, 000 "H SBC Bank (RR)"Mos cow s ta te d: "W ithin state d in your re que stp erio d [from 1 N ove mbe r to 31 D ecemb er 2 00 7J th ere was no requests from Moscow TaxAu thor it ie s No 28 r e ce ived . ..n3) Confirmation that the Individuals had Valid Corporate AuthcmJj to " _ F i le " _-TaxRefund Requests on behalf 0"( the Hermitage Russian SubsidiariesB oth T ax A uth oritie s a pp are ntly also so ug ht co nfirm atio n th at th e in divid ua ls th at file d th eclaims for a tax refund were the proper representatives of the Herm itage RussianSubsidiaries. ln h er w itn ess sta tem en t. M s T zy im ai sa id th at Ih e "re que sts w ere se nt to theMoscow Branch of the Inte rior M inistry requesting (in accord ance w ith our enclosedq ue stio nn aire ) a n in qu iry in fo th e d ire cto rs o f 000 Parfe nio n a nd 000 M akhaon and also" into the count er pa rt ie s t o t he ir c on tr ac ts ." M s Tz yim ai then states that: "the re sults of theinqu iry in to p e rs ons of in te re st to us w ere re ce ive d from the M oscoW Branch of the (nteriorM in is try , w hic h c on firm e d th e e xis te nc e o f th e le ga l e ntitie s a nd th eir re la tio ns hip s."This response is surprising. because jus! three w eeks prior to the fraudulent tax refund,namely on the 3 and 10 December 2007, Herm itage and HSBC had filed six 255~pagecrim in al comp la in ts n otify in g th e In te rio r M in istry , th e G en era l P ro se cu to r. a nd th e R ussia nS ta te In ve stig ativ e Comm itte e to th e e xis te nc e o f th e fra ud , o utlin in g its d eta ils . T he Mos cowIn te rio r M in is try c on firm ed re ce ip t o f th es e c rim in al c ompla in ts o n 14 Dec embe r 2 007, n ea rlytw o w eek s p rio r 10 24 D ecem ber 2007 w hen the fraudulent tax refund w as approved. Sinceinfonnati_on regarding the m isappropriated H erm itage R ussian Subsidiaries and thefra udule nt c ou rt ju dg emen ts was , at that tim e. in the h an ds of th e M osc ow Inte rio r M in istry ,either the M oscow Interior M inistry m isled the M oscow Tax A uthorities or the M oscow TaxAuth oritie s m is le d th e in ve stig ato rs a s to th e le gitim ac y o f th e ta x re fu nd dec is io n.4) V~rifT~ation of the Authenticity of the Agreements UndeJIY.lrt~ the S h a mLawsuitsMr Zhemtchuzhnikov and Ms Tzyimai also claim to have checked the authenticity of thea gre emen ts b etw ee n th e m is appro pria te d Herm ita ge Rus sia n S ub sid ia rie s a nd ln sta r, L og osP lu s a nd G ra nd A ctive . In pa rticu la r, M s T zy im ai sta te s th at "a s part of in camera audit s, bothcom panie s [Parfe nion and M akhaonj w ere re que ste d to subm it all d ocum ents in original. ItShe then goes on to say that "all d ocum ents of 000 Parfe nio n a nd 000 Makh aon w erere ce iv ed in tim e v ia c ou rie r. n "Had th e p ro pe r pro ce du res a ctu ally b ee n p erfo rm ed. th e Ta x A uth oritie s w ou ld h ave e asilyas ce rta in ed th at th e re le va nt a gre em en ts co ntra dicte d th e S ta te S ta tistics C ommitte e a ndthe Russian Corporate Registry (EGRUL} records maintained by the Ta'S Authorities


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< ihem sl3Jv:es.For exam ple, the agreem ents w ith Logos P lus w ere signed by a person, :opera t ing . under a false identity using a stolen passport and the agreem ents w ith G rand. A ctiv e w ere sig ne d by a D irector w ho w as not appointed until tw o years after the contractdate.Expediting the Tax RefundIn h is w itness statem ent subm itted to the court in K azan, M r Z hem tchuzhnikov stated that"on the basis of the tax payer's application and the results of the com pleted audit, thed ec is io n V ia s made to re tu rn to 000 R lfe nd th e o ve rp aymen t o f in come ta x." A sto nis hin gly ,th e ta x re fu nd re qu es ts w ere a pp ro ve d by Mosc ow Tax A uth oritie s N umber 25 and 28 on thesame business day as they were received, 24 December 2007. The funds were thentransferred to new ly opened bank accounts at U niversal S avings B ank and IntercommerzBank only two days later, on 26 December 2007. If a ll the above steps were actuallyu nd erta ke n b y th e T ax A uth oritie s, it would mea n th at a ll th e re qu es ts w ere a nsw ere d w ith Inonly a fe w h ou rs o f th eir re ce ip t.B y e xp ed itin g th e re fu nd s, the M osco w T ax A uth oritie s pu rp ose ly ig no re d th e fa ct that courtju dgme nts in re la tio n to th e re le va nt lia bilitie s d id n ot come in to le ga l e ffe ct u ntil 11 January2008.F urth er In crim in atin g E vid en ceThe w itness statem ents by other indiv iduals, w hich w ere also discovered in the course ofH erm ita ge 's in ve stig atio n, s up po rt th e p oin ts ma de a bo ve . In p artic ula r, M r T re tia ko v, H e adof the Legal D epartm ent of M oscow T ax A uthority N um ber 28 and M s E lena K him ina, H eadof M oscow Tax A uthority N um ber 25, stated that on ly on 19 F ebruary 2009 and 24 February2009 respective ly (i.e , m ore than a year after the tax refund fraud had occurred) had theylearned from the Investigative Committee of the Interior M inistry that there had been nog en uin e ba sis fo r a re fu nd an d th at th e re fu nd h ad b ee n re qu este d fraudulently"This is d iffic ult to b elie ve , h ow ev er, b ec au se th e Mo sc ow Tax A uth oritie s h ad b ee n in fo rme dof the fraud on at least seven occasions in the period betw een 3 D ecem ber 2007 and 30 July2 008. In par tic ula r:1) In the period between 3 December 2007 to 11 December 2007 Herm itage and HSBCfile d s ix c rim in al c omp la in ts re po rtin g th e m is ap pro pria tio n o f th e H erm ita ge R us sia nSubsid iaries and the subsequent creation of fa lse liabilities w ith the GeneralP rosecutor's O ffice, the Internal A ffa irs O ffice of the Interior M in istry and theIn ve stig atin g C omm itte e u nd er th e G en era l P ro se cu to rs O ffice . T he se comp la in ts

Mr T re tiak ov state d! " O n F eb ru ar y 1 9,2 00 9 b as ed o n th e d oc um e nts su bm itte d to u s b y th e In ve stig ativ eC omm itte e o f th e In te rio r M in istr y, w e le ar ne d th at th e d ir ec to rs o f 000 Parfen io n an d 000 M akhao ne ar li er i n 2 00 7 s ubm itt ed t o T a x I ns pe c to ra te No 2 8, Mo sc ow, f ra ud ule n t d oc umen ts f or j us ti fi ca tio n o f t hetax rebates fo r 2 006 an d therefo re illegally received tax refun ds fro m the R ussian budget fo r R UB3,2 76 ,1 88,0 17 .4 8 an d RUB 37 2,82 5,989 re spe ctiv ely an d as suc h c ause d reputatio nal d am ag e to T axI ns pe ct or at e No . 2 8 a s w e ll a s ma te ria l d ama ge f or t he a bo v e s ta te d amou nt s."Ide ntic al (w ord fo r w ord) te stim on y (w ith o nly the date , H erm itag e R ussian Subsidiary an d tax refu ndam oun t c han ged) has be en g iv en by M s. E le na K him in a, H ead o f T ax In spe cto rate N o. 2 5, in w hic h shes ta te d, "O n F eb ru ar y 2 4 ,2 00 9, b as ed o n th e d oc umen ts s ubm itt ed t o u s b y t he I nv es tig at iv e C omm it te e o f t heIn te rio r M in is tr y, w e le ar ne d th at th e d ir ec to rs o f 0 00 R ile nd e ar lie r in 2 007 s ubmit ted t o Tax I n sp e ct o ra teN o 2 5, M o sc ow , fr au du le nt d oc um en ts fo r ju stific atio n o f th e ta x r eb ate s fo r 2 G 0 6 and t he r ef o re i ll eg a ll yr ec ei ve d a ta x re fun d fro m the R ussian budg et fo r RUB 1 ,7 51 ,4 89,000 an d as suc h c ause d re putatlo nald am ag e to T ax In sp ec to ra te N o . 2 5 a s w e ll a s m ate ria l d am ag e fo r t he a bo ve s la te d am o un t." .


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" .' =. . ..,."f.

we re fo rwa rded to th e Moscow In te rio r M in is tr y immedia te ly ;On 25 January 2008 Herm ita ge 's a nd HSBC 's lawy ers w ro te a lette r to M oscow T axAu tho rit y Number 25 notifying it of th e m isa pp rop riatio n o f the He rm ita ge Russ ia nSubsid ia rie s and the f raudu len t liab ilit ie s ;

3) On 31 January 2008 Herm itage 's and HSBC's, lawyers served Moscow TaxA utho rities N um be r 46 , 2 5 a nd 2 8 w ith p roce ed lnq s in a law su it see kin g to in va lid ateth e fra ud ule nt c ha ng es mad e to th e c orp ora te d ata ba se (EGRUL);4) On 5 June 2008 Herm itage 's and HSBC's lawyers filed another lawsuIt detailing 'them isappropriation of the Herm itage Russian Subsid iaries. The Moscow TaxA utho rities N um ber 2 5 w ere se rv ed as a th ir d par ty to th is lawsuit;5) On 23 July 2008 H SBC and H erm itage additionally reported the details of the tax

r efu nd fr aud aga in st He rm ita ge Rus sia n Subs id ia rie s to va rious au tho rit ie s , in clud ingth e Federa l Tax Se rv ic e;6) In July 2008 the Russian newspaper Vedomosf re que sted info rm ation ab ou t th efra ud from Mos cow Tax A uth oritie s N umbe r 25 and 28; and7) On 29 and 30 July 2008 the officia ls of Moscow Tax Authorities Number 25 and 28were q ue stio ne d b y In ve stig ato r U rz humts ev o f th e Kaz an In te rio r M in is try in re la tio nto the f raud.The statements by Mr Tretiakov. and Ms Khim ina that they were unaware of one of thela rg est ta x frau ds in R Ussian h isto ry , at the tim e th at the ir org an isa tion s h ad be en a le rte d tothe issue on seven separate occasions, suggests e ither com plic1ty in the fraud or grossnegl igence on t he ir pa rtSpaclflc Responsibility in the Fraud against the Hermitage Russian SubsidiariesT he detailed account of events culm inating in the m isappropriation of 5.4 billion roublesd escrib ed a bo ve , cle arly h ig hlfg hts M r Z hemtch uz hn iko v's a nd M s T zy im ai's in vo lv em ent inthe fraud, particularly because it is clear that both officia ls have given false statem entsregarding the procedures perform ed in the tax audits. A dditionally , it indicates that otherm em bers of M oscow Tax A uthorities N um ber 25 and 28 may have assisted w ith the taxfr aud aga in st th e Russ ia n T re asur y.O ther em ployees of the Tax A uthority N o 25 m ust have approved fraudulent tax rebates for476,799,045 roubles pursuant to the decision 77250000003118 on 24 D ecem ber 2007 and1,283,689,955 roubles pursuant to the decision 77250000003119 on 24 D ecem ber 2007.These indiv iduals are M s K him ina, the H ead of the M oscow Tax Authority Num ber 25, M sB urm istrova, the H ead of the B ankruptcy and Indebtedness Departm ent at M oscow TaxA uth ority N um be r 25 , M s K uz netz ov a, th e H ea d o f t he T ax R ep orting D ep artm en t a t M osco wTax A uthority N um ber 25 and M s K oltunova, the H ead of the A udit in C am era D epartm ent atMoscow Tax Authority Number 25. 'In addition, M s Stepanova, the H ead of M oscow Tax Authority Num ber 28, M s Davyidova,the H ea d o f th e B ankrup tcy a nd In de bte dne ss D ep artm en t a t M oscow T ax A utho rity N um ber2 8, M s P ro lov a, th e H ead o f th e T ax R epo rting D ep artm en t at M osco w T a x A uth ority N um ber2 8 a nd M s T zy im ai a ppro ved fra ud ulen t tax re ba te s fo r th e fo llow in g amo unts: .


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887,279,940 ro ub les pu rsu ant to the d ecision 77280000006602 on 24 December2007;

101,381,475 roubles pursuant to the declslon 77280000006603 on 24 December2007; 271,444,514 ro ub le s p ursua nt to the d ecisio n 77280000006604 on 24 December2007; 1,194,454,000 ro ub le s p urs ua nt to th e d ec is io n 77280000006605 on 24 Decem ber2007; an d 1,194,454,077 ro ub le s p ursu an t to th e d ec is io n 77280000006606 on 24 D ecem ber2007.T hese a pp ro vals fo rm ed an e ssen tial comp on en t O f th e o ve rall 5 .4 billio n ro ub le ta x re fun dfra ud aga in st th e Russ ia n T re asury and th e He rm ita ge Rus sia n Subsid ia rie s.T he s um o f 5 .4 b illio n ro ub le s fra ud ule ntly o bta in ed from th e R us sia n T re as ury w as re fu nd edinto accounts at U niversal S avings B ank and Intercommerz B ank. There, are a num ber offacts w hich strongly suggest that U niversal S avings B ank played a significant ro le in thefra ud s aga in st th e m is appropria te d He rm ita ge Rus sia n Subsid ia rie s. In par tic ula r: The fraudulent tax refunds were laundered through Universal Savings Bank prior tod is trib utio n to c on sp ira to rs ' a cc ounts a round th e wo rld ; Following numerous com plaints by Herm itage and HSBC to the Russian Authorities,in w hic h th e fra ud w as d eta ile d, U niv ers al S av in gs Ban k file d fo r v olu nta ry liq uid atio n

and, as a result, had its licence annulled by the C entra l B ank on 25 June 2008 (thusdes tr oy in g c ritic al e vid en ce o f its ro le in th e fr audu le nt a ctiv ity ); Gennady Plaksin , a shareholder, and chairman of the Board of Universal SavingsBank was also the 100% ow ner and G eneral Director of Instar, the com pany w hichfraudulently secured a judgem ent against R ilend (one of the H erm itage RussianSubs id ia rie s ) in Moscow ; A lexe i Zabolotl


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' 1III!1!i!!< ~Nearfy identical techniques appear to have been used to facilitate a tax refund fraud at theRengaz Subsidiaries in 2006, following their sale to offshore companies, As set out below,the tax refund fraud involving the former Rengaz Subsidiaries was almost a rnlrrorlrnaqe ofthe tax refund fraud perpetrated against the misappropriated Hennitage RussianSubsidiaries in 2007. It is Hermitage's firm belief that the similarltles between the two fraudsdemonstrate that the same criminal group orchestrated the tax frauds against both themisappropriated Hermitage RUssian Subsidiaries and the Rengaz Subsidiaries.In January 2006, the two Rengaz Subsidiaries were sold to off-shore companies, which arebelieved to be connected to Renaissance Capital. According to the Moscow and Kazanarbitration courts, the two former Rengaz subsldlartes were then sued In April 2006 by shellcompanies (000Megacel, 000 Poleta and 000 Optim-Service). The lawsuits alleged thenon-dellvery of OAO Sberbank and RAO Unified Energy System of Russia shares, whichhad risen in value.It appears that, as with the fraud against the Hermitage RUssian Subsidiaries, the lawsuitsagainst the Rengaz Subsidiaries were based on fake contracts. These contracts and furthercourts' awards created liabiUtiesagainst the Rengaz Subsidiaries which appear to have beenused to retrospectively reduce the Rengaz Subsidiaries' profits, allowing applications for taxrefunds to bemade. The processes through which the fraudulent tax refund was obtainedagainst both the Rengaz SUbsidiaries and the Hermitage Russian Subsidiaries wereidentical. In particular: The same' courts ~ The lawsuits against both the Rengaz Subsidiaries and theHermltaqe RUssian Subsidiaries were filed before the Moscow and Kazan ArbitrationCourts; The same contract structure - The lawsuits against the Rengaz Subsidiariesindicate that the stock sales giving rise to the alleged liabilities were structured toinclude three types of agreements: rrFramework Agreements," "Seles and PurchaseAgreementsn and "Cancellation Agreements," These agreements were in exactly thesame form as the agreements used to obtain the fraudulent judgments against themisappropriated Hermitage Russian Subsidiaries a year later; The same litigation tactics - Court documents show that lawyers purportedly actingon behalf of the Renqaz Subsidiaries acknowledged the validity of the contracts,raised no defence to the fake claims, and conceded full liability. This occurred inexactly the same way as the lawyers purportedly acting on behalf of the threeHermitage Russian Subsidiaries conceded the fraudulent claims being broughtagainst them; Sums to offset previously, earned profits - In both frauds the claimants wereawarded judgments that were sufficient to erase the prior profits of the companiesand to form the basis for a fraudulent tax refund. In the case of the RengazSubsidiaries, the Kazan and Moscow ArbitratIon Courts awarded the claimants $525million, Which reduced the Subsidiaries' profits for 2006 to zero.Aside from the similarities of the methods adopted by the perpetrators, it is also particularlynoteworthy that a number of individuals involved in the fraudulent lawsuits against theHermitage Russian Subsidiaries were also involved in the sham lawsuits against the RengazSubsidiaries. In particular:


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M r. A lexeLSheshenia - M r Sheshenla was the beneficia l owner of 000 P oleta, ihecom pany that won a US$425 m illion c la im against F inancia l Investm ents in theKaz an A rb itra tio n C ou rt in A pril 2006. Mr Shesheni a is a ls o th e s ame in div id ua l w hoserved as the owner and director of G rand Active, the com pany that obtained thefra ud ule nt ju dgme nt, m ore th an a y ea r la te r, in th e K az an A rb itra tio n "c ou rt a ga in stPa rfe nio n, o ne o f th e m is appropr ia te d He rm ita ge Russ ia n Subs id ia rie s.

Mr Andre i Pavlov - Mr Pavlov appeared as Counsel to the cla im ant in the shamlaw suit brought by 000 Poleta against F inancia l Investm ents, one of the form erRengaz S ubsid iaries. M r P avlov was also the lawyer w ho purported to representR lle nd , o ne o f th e H erm ita ge R ussia n S ub sid ia rie s, in th e la wsu it b ro ug ht b y L og osP lus, and who later purported to represent G rand Active in its c la im against theHe rm i tage Russ ian Subsid ia rie s . ' M r Gennady Plaksin ~ M r P laksin appeared as the 100% owner of 000 Optim -Service in the case against Selen Securities. The sam e M r Plaksln was also theowner and director of 000 Instar, the com pany which brought a f raudu len t lawsu ita ga in st R ile nd , o ne o f th e H erm ita ge R ussia n S ub sid ia rie s, in M osc ow . Mr P laks inwas also the Chairman of Unive rsal Savings Bank, the bank through which thefr audu le nt ta x re fu nd s r ec over ed in both fr auds we re la un de re d.Role of M oscow Tax Authorities Num bers 25 and 28 in the Rengaz Tax FraudShortly after the fraudulent lawsuits were concluded, the Rengaz Subsid iaries weretra nsfe rre d a nd re -re giste re d from th eir o rig in al T ax A uth oritie s In sm ole nsk to M os co w T axAuthorities Number 25 and 28. These were the same Tax Bureaux where them isappropriated H erm itage C om panies had been re-registered before those com paniesw ere fraudulently aw arded a 5.4 billion rouble tax refund. A s in the tax fraud perpetratedusing the H ennitage R ussian S ubsid iaries, fo llow ing re-registration w ith the new TaxA uth oritie s, th e p erp etra to rs c on tro llin g th e tw o R en ga z Sub sid ia rie s th en a pp lie d fo r c ap ita lgains tax refunds am ounting to nearly 2.9 bll1 ion roubles. T hese applications w ere filed,p ro ce ss ed a nd p aid b y Mo sc ow Tax A uth oritie s N umber 25 and 28.The m onies rece ived on behalf of the Rengaz S ubsid iaries, as a re su lt o f th e fra ud ule ntre fu nd s, w ere fin ally p aid in to n ew ly o pe ne d b an k a cco un ts a t U niv ersa l S av in gs B an k in th eR en ga z S ub sid ia rie s' n am es . A s se t o ut a bo ve , U niv ersa l S av in gs B an k w as th e same b an kat which the C rim ina! Enterprise opened accounts for the m isappropriated H erm itageRussian Subsid iaries and into which the resultant fraudulent tax refund m onies werereceived.It appears that there is a w ork ing connection betw een U niversal S aving B ank and certa inRenaissance C apita l indiv iduals. .C onnection betw een U niversal S avings B ank and Renaissance CapitalH erm itage 's investigation, conducted o n a basis of certa in court docum ents, has show n alo ng -te rm w orkin g re la tio nsh ip b etw ee n M r Dmitry K ly uy ev (th e o wn er o f U niv ersa l S av in gsBan k) a nd R en ais sa nc e C ap ita l, th e u ltim a te a dv is er to th e R en ga z Sub !J id ia rie s. U niv ers alSavings Bank is the prim ary conduit through which the proceeds of the fraudulent taxre fu nd s flow e n ro ute to o ffs ho re a cc ou nts o f th e c rim in als . In a dd itio n, M r K ly uy ev 's p ers on alexpertise in obtain ing tax refunds w as attested to in a R ussian court. S pecifically , M r Y urySagaydak, the form er Deputy CE O of Renaissance F inancia l P roducts, a subsld lary of


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,~ry:,:.;::~~-;;~'~;c:;-:'

. ,/~kenaissance Capita l, testified that RenaIssance Capital had engaged M r Klyuyev as a", consultant on matters o f tax legislation and the organization of claims for overpaid taxesthrough judicial otocedure."l i t . FURTHER SUSPECTED TAX REFUND FRAUDS INVOLVING UNIVERSALSAVINGS BANKIn addition to the tax' refund fraud that was perpetrated against the Hennitage RussianS ub sid iarie s an d th e R eng az sub sid ia rie s, H erm ita ge h av e a lso be come aware of at leaste ight other significant transfers from the Russian Treasury to Universal Savings Bank.H erm ita ge 's inv estiga tio n h as sho wn th at a n ad dition al tota l o f n ea rly 3 ~ illio n ro ub le s h asb ee n tran sfe rre d from the R ussia n T rea ~urv to e Igh t d iffe re nt acco unt h olde rs at U niv ersa lSa vin gs . Bank s in ce 2006. In particular:

T o th e a cc ou nt # 40702 810 7 000 000 00229 - RUR 156,854,023 for the period 1424 Novembe r 2 006;To the account # 40702 810 6 000 000 00088 - RUR 172,294,571 on 23 November2006;T o th e a cc ou nt # 40702 8106 000 000 00086 - RUR 418,718,051 for the period from 23N ov em be r to 2 2 D ecemb er 2 00 6;

1 .

2 .

3 .

4 .

5.

6 .

7.

8.

T o th e acco unt # 40702810500000000092 - RUR 55,053,837 for the period from 30N ov em be r to 2 1 D ecemb er 2 006 ;T o th e a cc ou nt # 407028104000000 00215 - RUR 411,040 ,741 for th e p erio d from 2 1December 2006 to 27 April 2007; T o th e a cco un t # 40702 8102000 000 00295 - RUR 1,021,950,170 for the period from10 D ecem ber 2007 to 24 A pril 2008;T o th e a cc ou nt # 407028102 000 000 00211 - RUR 178,761)52B for the period from 28M arch to 2 6 D ecemb er 20 07;To the account # 40702 810 0 000 000 00356- RUR 570,724,487 for the period 26D ecem ber 2007 to 24 April 2008.

(F or fu rth er d eta ils p le as e re fe r to A pp en dix 1 b elow)G iv en th e ce ntra l ro le pla ye d b y U niv ersa l S av ing s B ank in th e ta x re fun d fra uds a ga inst bo thth e H erm ita ge R us sia n Sub sid ia rie s a nd th e fo rmer R en ga z Sub sid ia rie s, th e q ue stio n a ris esas to w hether these large transfers from the R ussian T reasury to U niversal S avings B ankcould represent other fraudulent tax refunds. Bearing in m ind the size of the bank and thefact that it had no legitim ate banking business, the receipt of such large sum s from theR uss ia n T re as ury a t th e d ire ctio n o f Mo sc ow Tax A uth oritie s, ra is es th e s ub sta ntia l s usp ic lo nth at all such p aymen ts w ere th e re su lt o f sy stem ic tax fra uds. It a lso sug ge sts tha t U niv ersalSavings Bank was sim ply a conduit for the m oney laundering activ ities of the indiv idualsid en tifie d in th is lette r a nd m ust be come th e su bje ct of a fun investigation.

C rimi na l v er di ct o n M ik ha il ov sk y GOK c rimi na l c as e # 1215106 d ate d 1 2 July 2006


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R esp on se of the Inte rio r M in istry.. O n 7 M ay' 2009, General Major Anich in of the Russian Interior M in istry made a publics ta teme nt a nn ou nc in g th e co nv ic tio n o f a fo rmerly c on vic te d c rim in al, M r V ic to r Mark elo v, fo rste alin g 5.4 billio n ro ub les from the R ussian T re asu ry . T he v erd ict sta te s tha t M r M arkelo vo pe ra te d a lo ng sid e o th er u nid en tifie d p erso ns. G iv en th e c omple xity o f th e fra ud s, h ow ev er,it is d ifficu lt to Im agin e th at M r M arke lo v, a m ere sa wm ill e mp loy ee, h as b een resp on sible fo rthe entire 5.4 billion rouble fraudulent schem e, which involved sham lawsuits in threeR us sia n c ou rts , q ue stio na ble a ud its b y ta x o ffic ia ls , fa ls e in qu irie s b y p olice o fficia ls , a nd re ~reg is tr at ions o f the He rm it age Russ ian Subs id ia rie s. It a pp ea rs th at p uttin g th e b lame s ole lyon a form er convicted crim inal M r M arkelov is an act of convenience. In addition, there hasb ee n n o m en tion o f th e ob viou s qu estio n at'! t o h ow h e came to un la wfu lly m isap pro priate theH erm itag e R ussian S ub sid ia rie s from the ir la wfu l o wne r, H SBC a nd fu rth er tried to ille gallybankrupt them in order to cover the tracks. .P erh ap s m ore im po rta ntly , the re is no m en tion of a ny e ffo rts to re tu rn to the sta te b ud ge t a nyo f th e fu nd s th at h ad b een m isap pro priate d. T his is p articu la rly ab surd as, to da te, it rem ain sth e s in gle la rg es t fra ud to be u nc ov ere d a ga in st th e R uss ia n s ta te b ud ge t in R uss ia 's h is to ry .Ou r Ac tionsIn A ugust '2009 H erm itage filed a subpoena in a N ew Y ork court seeking to obtain evidencein re lation to the flow of m isappropriated funds from the Russian Treasury. A copy of thesub poe na a nd the de clara tio n of N eil M ickleth waite of th is firm file d in su ppo rt a re en close dw ith th is le tte r. T he d ec la ra tio n o f M r M ic kle th wa ite d es crib es th e e ve nts men tio ne d a bo ve indetail.W e request that you review our le tter and the subm issions made in the declaration andconduct a deta ile d in ve stig atio n in to th e c rime s and in div id ua ls deta ile d h ere in .W e w ill be happy to cooperate w ith you in your investigation and provide you w ith anyd oc umen ta tio n in s up po rt o f th e fa cts d esc rib ed a bo ve .W e are looking forw ard to your reply and kindly ask you to direct aU t he correspondence toM r Ne il M ic kle thwa ite o f th is o ffic e.gelYYt~9 I .MlcklethwaiteBROWN RUDNIC1( LL P


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Micklethwaite Letter Jan 28 2010