Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

U.S. Holds Russian On Tax Fraud Charges

SEATTLE — A Russian millionaire living in the United States is being held without bail on charges of income tax fraud.

Valery Shegnagayev, 59, principal owner of a fishing company in Vladivostok, pleaded innocent Thursday to charges that he failed to report about $12.8 million in business funds that were used to buy real estate, luxury vehicles, jewelry and art for his personal use from 1994 to 1997. That enabled him to avoid paying about $3.5 million in taxes, according to a four-count indictment that was issued Oct. 5 and unsealed Thursday.

If convicted, he could face 12 years in prison and $1 million in fines.

U.S. Magistrate Monica Benton ordered that Shegnagayev be held as a flight risk pending a detention hearing Monday. Trial was set for January.

Defense lawyer Angelo Calfo said Shegnagayev had lived in the area for years and was willing to surrender his Russian passport, put a $3 million home up as collateral, post a $1 million cash bond and wear an electronic monitoring bracelet.

"To make him wait in jail for three days after a four-year investigation is too much for me to take," Calfo said. "It’s just not fair."

Assistant U.S. Attorney Jim Lord said Shegnagayev had organized-crime affiliations and indicated he might try to flee by liquidating some assets, including a $6 million house that he sold and replaced with a $3 million home. Lord said that Shegnagayev’s business is worth $30 million and his personal wealth is estimated at $15 million.

Shegnagayev is the founder and principal shareholder in Fisheries Kolkhoz Vostok-1 of Russia and of North Pacific Corp., which manages Vostok-1’s business in the United States.

He is also the subject of a Russian tax investigation that was cited in a precedent-setting ruling by the 9th U.S. Circuit Court of Appeals last week. That ruling upheld the ability of foreign governments to conduct criminal investigations on U.S. soil with the aid of American authorities regardless of whether court action in the foreign country is imminent.