Why Does the Kremlin Care So Much About the Magnitsky Act?

What Russian officials mean when they talk about “adoptions”

Maxim Shemetov / Reuters

Let’s get something straight: The Magnitsky Act is not, nor has it ever been, about adoptions.

The Magnitsky Act, rather, is about money. It freezes certain Russian officials’ access to the stashes they were keeping in Western banks and real estate and bans their entry to the United States. The reason Russian (and now, American) officials keep talking about adoption in the same breath is because of how the Russian side retaliated to the Magnitsky Act in 2012, namely by banning American adoptions of Russian children. The Russians vowed they were punishing Americans who violated the human rights of Russians, after an adopted Russian toddler died of heat stroke in a Virginia family’s car. But the only Americans the bill directly targeted were the ones involved in putting the Magnitsky Act together.

At the time the adoption ban was passed, the Russian Federation had more orphaned and abandoned children than it did after the end of World War II, which claimed the lives of 27 million Soviets. Prime Minister Dmitry Medvedev bemoaned the 95 Russian orphans whose American adoptions fell through just as the law was signed in 2012, 95 Russian orphans whom Russians didn’t want to adopt. There was a massive outcry in Russia and thousands protested in Moscow against a bill that made no sense: If the Kremlin is so angry about the Magnitsky Act, why was it punishing … Russians? And the most vulnerable Russians at that?

It was such an angry and nonsensical response that it’s worth looking at why the Magnitsky Act made Putin and the Russian elite so upset in the first place.

The Magnitsky Act—or the “Majinsky” Act, as the president’s lawyer and his recently departed press secretary tended to pronounce it—is named for Sergei Magnitsky, a lawyer and auditor. One of his clients, William Browder, was once the largest foreign investor in Russia, until the Russian authorities kicked him out of the country and allegedly began pilfering his investment fund, Hermitage Capital. Magnitsky uncovered what he alleged to be a complicated scheme by which officials from the Russian Interior Ministry and the courts used forged Hermitage documents to claim ownership of Browder’s fund, and then sued the Russian government, saying that they, the new pseudo-owners of Hermitage, had overpaid their taxes by $230 million. The courts and the Russian tax system, by Magnitsky’s account, speedily obliged, shelling out $230 million to the new owners, who then invested in luxury apartments in Moscow and abroad.

When Magnitsky sued the Russian state for this alleged fraud, he was arrested at home in front of his kids, and kept in prison, in filthy conditions, for nearly a year until he developed pancreatitis and gall stones. In November 2009, Magnitsky, 37, was found dead, chained to his bed and lying in a pool of his own urine. Apparently, when he was  dying and screaming in pain, the prison guards summoned not emergency medical help, but psychiatrists.

Before the Russian government began persecuting political dissent more overtly after the protests of 2011-2012, Russian journalists knew that there was really only one thing that could get you killed: exposing a powerful person’s corruption and thereby taking away his ill-gotten money. The first decade of Putin’s rule was a bonanza for state security structures. Using tactics similar to those used in the Browder-Magnitsky case, government officials, especially those in Putin’s native FSB, enriched themselves. The economic elite became those tied in some way to the government, which provided the easiest route to wealth. They became, in the words of the Russian journalist Andrei Soldatov, “the new nobility.” They pillaged and nearly wiped out small and medium-sized businesses in Russia, jailing many of their owners in the process. Government programs and projects were dreamt up not to be built or actualized, but to allow their proponents to pocket parts of the state budget. Opposition leader Alexey Navalny made a name for himself exposing how civil servants rigged state tenders to buy themselves fur coats and gold watches and expensive cars. In 2008, then-president Medvedev lamented the fact that one-third of the Russian federal budget disappeared down the drain of corruption—which only means it was a far higher proportion.

Back then, a Russian businessman told me it felt like “the day before Pompeii,” with everyone stealing as much as they could as quickly as possible—and then whisking it out of the country. “The Chinese feel that time is on their side, probably because of their long history,” former CIA director John Brennan told me on the sidelines of last week’s Aspen Security Forum. “The Russians don’t feel that time is on their side.” Indeed, the generation of officials around Putin are known as the vremenshchiki, “the temporary ones,” the ones whose meager salaries couldn’t have possibly paid for that house or that car or that watch, who steal as much as they can and squirrel it away in some tropical offshore account. The families of the Russian elite often don’t live in Russia. They live in Paris, in London, Geneva, New York, Los Angeles. That’s where their money lives, too, and where their children go to school and where their families seek medical treatment—which is one of the reasons the Russian education and medical systems are falling apart, robbed by corruption of what little resources they had.

And even after 2014, when Russia got hit with American and European sanctions and Putin commanded prominent Russians to bring their wealth and families back. Foreign Minister Sergey Lavrov did (his daughter had lived in New York), but many didn’t. One high-ranking member of Putin’s United Russia party recently complained to me how hard life was in Paris, where his wife and youngest son lived. His older son was studying in the U.K.

What made Russian officialdom so mad about the Magnitsky Act is that it was the first time that there was some kind of roadblock to getting stolen money to safety. In Russia, after all, officers and bureaucrats could steal it again, the same way they had stolen it in the first place: a raid, an extortion racket, a crooked court case with forged documents—the possibilities are endless. Protecting the money meant getting it out of Russia. But what happens if you get it out of Russia and it’s frozen by Western authorities? What’s the point of stealing all that money if you can’t enjoy the Miami condo it bought you? What’s the point if you can’t use it to travel to the Côte d’Azur in luxury?

Worse, it looked for a while like the Europeans were going to pass a similar law—because Russians stash far more money in Europe than in the United States. And then 2014 hit. Putin invaded Ukraine and annexed Crimea, and the United States and European Union teamed up to slap sanctions of some of Putin’s closest lieutenants, freezing their assets and keeping them away from their beloved seaside villas and city condos. In a rare public interview, the banker and close Putin friend Gennady Timchenko, complained of his life under Western sanctions. “Now, I basically can’t leave the country,” he told the TASS state news agency. “My family is spending the summer in the south of France, where we traditionally spend every summer, and I am cut off from all of it. From my family, from my beloved dog, a labrador.” (The labrador, Romy, is the daughter of Connie, Putin’s dog whom he has used to scare German Chancellor Angela Merkel.) Now, with the sanctions, Timchenko, a French and Russian citizen, can’t visit Romy, who lives in Switzerland with his son.

Last June, Natalia Veselnitskaya, a Russian lawyer, met with Donald Trump Jr., Paul Manafort, and Jared Kushner to discuss restarting adoptions (in her telling). In reality, she was there to talk about undoing the Magnitsky Act. Speaking on a Russian political talk show in 2014, she railed against the sanctions being imposed on Russian elites for the Kremlin’s actions in Ukraine. The sanctions, she said, “are just pretext to continue what they started in 2010, when legislation was first developed to impose sanctions in relation to the death of Magnitsky,” to whom she referred as “that poor boy.” The Magnitsky Act was the blueprint, in other words, for the big sanctions that came in 2014.

In all of the drama over the Russian interference in America’s 2016 election, it’s easy to forget just how corrupt Russia is, and how much corruption and money flows still determine the official course of action. The Magnitsky Act so angered the Russians because it targeted what really mattered to them; it went after Russian elites’ raison d’être. It’s why Senator John McCain called it a “pro-Russia” law, and many in the Russian opposition agreed: it went after not the Russian people, but the elites who stole from them with brazen impunity. The law hit the mark so precisely and painfully that the elite lashed out fiercely enough to do what neither the Magnitsky Act nor the 2014 sanctions did: They targeted their own, most vulnerable citizens—as if they haven’t stolen from them enough.