Perched on a crescent of artificial islands known as Palm Jumeirah in Dubai, the Kempinski Hotel & Residences resembles a sprawling seaside palace.
Many of the 244-unit development’s luxurious apartments and villas have reportedly sold for millions of dollars, some even before the complex officially opened in 2011.
OCCRP reporters found that among the early investors was a company owned by Dmitry Klyuev, the alleged mastermind of a massive Russian tax scandal known as the Magnitsky Affair.
The Magnitsky Affair was named after whistleblower Sergei Magnitsky, a lawyer who died in prison after giving evidence to Russian prosecutors about the fraud, only to be arrested himself on tax evasion charges. The fraud scheme he exposed involved $230 million being stolen from the Russian state and siphoned out of the country through a maze of shell companies.
OCCRP reporters’ new findings show that an offshore company owned by Klyuev paid for luxury property at two Kempinski resorts around the same time the fraud came to light and Magnitsky was arrested and jailed.
Dmity Klyuev, the alleged mastermind behind the tax fraud revealed by Sergei Magnitsky.
Although financial records obtained by the reporters don’t provide a complete picture of where the money used by Klyuev’s company to purchase properties came from, they found that around the time of several of the real estate deals, the offshore firm received millions of dollars from two companies involved in processing funds from the Magnitsky Affair. The timing of the events raises questions over whether the property investments may have been funded with money connected to the fraud scheme.
Klyuev did not respond to questions. Kempinski Hotels did not respond to an invitation to comment. Nver Mkhitaryan, a former MP for the pro-Russian Ukrainian Party of the Regions who developed the resorts and whose companies were paid by Klyuev’s firm when it purchased the properties, also did not respond to a request for comment.
OCCRP has reported extensively on how Dubai has become an appealing option for those looking to launder or hide cash, due to its reputation for financial secrecy, low taxes, and valuable real estate.
Leaked corporate filings show that Klyuev was the sole owner of a British Virgin Islands (BVI) company called Virginia Invest & Finance S.A. from 2006 to 2011. Reporters found evidence that during that time, the company spent some $15 million dollars on a villa and four luxury apartments in Dubai.
Excerpt from the purchase agreement for a villa bought by Virginia Invest & Finance S.A.
The villa and apartments were purchased in May and June 2009, according to the Dubai transaction data, just as Magnitsky’s case was increasingly gaining international attention. Two apartments and the villa were bought on the same day, June 11, 2009, which is also when Magnitsky filed a complaint at the European Court of Human Rights about his conditions in prison in Russia.
The lawyer had been jailed in Moscow the previous year after testifying to Russian prosecutors. He had implicated Russian Interior Ministry officials and Klyuev in the complex tax fraud scheme.
Magnitsky was beaten in prison and died in November 2009 at the age of 37 after being denied medical treatment for pancreatitis.
Whistleblower Sergei Magnitsky’s tombstone at Preobrazhenskoye Cemetery, in northeastern Moscow.
Klyuev went on to hand ownership of Virginia Invest & Finance in 2011 to a former Russian official. The company bought two more properties at the Kempinski Hotel & Residences in 2012, according to the Dubai transaction data, for just over $4 million.
By 2016, the company had sold its properties for at least $13.7 million, taking losses on some of them – before being liquidated that December.
Tax officials implicated in the fraud also spent millions on property at Kempinski Hotel & Residences between 2008 and 2010, as OCCRP has previously reported. None of the officials has been convicted for their involvement in the scheme.
The Kempinski Hotel & Residences in Dubai.
A criminal investigation by Russian authorities fixed legal blame for the massive tax fraud scheme exposed by Magnitsky on two low-level ex-convicts. Both pled guilty and got minimum sentences of five years in a correctional colony in 2009 and 2011.
However, the U.S. announced sanctions against those who it alleged were the real perpetrators in 2014. The Treasury Department alleged Klyuev had “masterminded” the scheme and had owned a bank that laundered around $97 million from fraudulent tax returns.
The sanctions were brought under the so-called Magnitsky Act, legislation that resulted from a campaign spearheaded by the investor Bill Browder, whose companies had been targeted by the fraud and who employed Magnitsky as a lawyer.
Klyuev has never been charged over the tax fraud.
A 10-year investigation by the Swiss Attorney General into funds linked to the Magnitsky Affair fraud ordered the seizure of assets worth about $19 million linked to Klyuev and others implicated in the case. But the case was closed in 2021 because there was not enough evidence to bring charges in Switzerland, according to an announcement by the Office of the Attorney General of Switzerland. Most of the frozen funds were released.
Tracing Klyuev’s Company
OCCRP reporters traced Virginia Invest & Finance’s Dubai real estate purchases by scouring leaked records from Dubai and Cyprus, along with property transaction records and bank statements.
Reporters found that the company was registered in 2005 in the BVI, a jurisdiction that offers corporate secrecy, keeping Klyuev’s involvement hidden behind corporate services providers.
However, leaked corporate filings from Cyprus-based services provider ConnectedSky Legal & Corporate Consultants Ltd revealed that Klyuev was the sole shareholder of Virginia Invest & Finance from 2006 until 2011, when he transferred ownership to Sergey Smorodin, a former regional minister in Russia.
Management of the company was handed over to ConnectedSky under a January 2013 letter replacing its previous BVI services provider Trident Trust (BVI) Ltd.
