Russian prosecutors charged anticorruption lawyer and blogger Alexei Navalny, one of President Vladimir Putin’s harshest critics, with embezzlement Tuesday in connection with a 2009 timber deal in which he participated as an unpaid adviser. 
 
The criminal charges, which carry a five-to-10 year prison term, are the latest to be lodged against a vocal Kremlin critic and have some U.S. lawyers with Russian expertise skeptical about the country’s commitment to the rule of law.
 
“Russia is falling into a dictatorship and [Navalny's] arrest is entirely political,” says Jamison Firestone, the cofounder and managing partner of Moscow-based law and accounting firm Firestone Duncan, who fled Moscow for London in 2010 after he discovered that someone was trying to obtain a $21.5 million fraudulent tax refund by forging his signature on client documents. “At its best, the indictment says to Navalny that if you continue to open your mouth, you’re going to prison. At its worst, he’s already going to prison.”
 
The Investigative Committee of the Russian Federation—a body akin to the Federal Bureau of Investigation—filed the charges against Navalny under Article 160 of Russia’s criminal code, according to a press release outlining the allegations. Prosecutors claim Navalny embezzled roughly $500,000 from the regional government of Kirov, a province just west of the Ural Mountains, by participating in a scheme to steal timber from a state-owned company.
 
Navalny, who has publicly described the charges as “ strange and absurd,” has been released by Russian authorities and agreed not to leave Moscow while his case is pending. Regional prosecutors in Russia previously investigated similar charges against Navalny before dropping the matter, according to news reports. But as a leading Putin and anticorruption crusader— Time once called Navalny “ Russia’s Erin Brockovich” for taking on corporate greed—Navalny continued to draw the interest of those loyal to the government.
 
Navalny is not the first lawyer to wind up in difficult straits after running afoul of Russia’s powerful political interests. Vasily Aleksanyan, a onetime Cleary Gottlieb Steen & Hamilton lawyer and former head of the legal department of embattled Russian oil giant Yukos, died at age 39 from AIDS-related complications last October. His death came some five years after he was arrested and imprisoned in connection with the Russian government’s 2004 seizure of more than $100 billion in Yukos assets. Government critics claim Aleksanyan’s detention was directly responsible for his death.
 
Sergei Magnitsky, a former head of Firestone Duncan’s tax practice, died three years ago at age 37 in a Moscow pretrial detention facility after being arrested by Russian police as part of their investigation into London-based hedge fund Hermitage Capital. Hermitage drew the Kremlin’s ire in 2005 for campaigning against corruption at Russian companies. (The Russian Interior Ministry also targeted another lawyer, Alexander Antipov, in the Hermitage case, according to our previous reports.)
 
Firestone himself has been busy in recent months supporting a bill before Congress named after Magnitsky, which he hopes to see passed before legislators take their summer recess in August. The bill would revoke visas and place sanctions on Russian officials found to be responsible for Magnitsky’s death and other human rights abuses. The bill, whose fate is currently tangled up in the outcome of pending trade legislation with Russia, has drawn the wrath of the country’s foreign ministry.
 
Firestone, who played a key role in putting together a mini-documentary telling Magnitsky’s story, says one would be “hard pressed to find four or five people that command more respect” in Russia than the 36-year-old Navalny, who exposed an alleged $4 billion fraud two years ago at Russia’s state-owned oil pipeline company Transneft. The London-based Firestone, who advised U.S. clients in Russia for 18 years, has witnessed from afar the growing protest movement led by Navalny and others against the regime led by Putin, who was sworn in earlier this year for a third term as president.
 
In July the Russian parliament adopted a controversial bill that labels nongovernmental organizations “foreign agents” and mandates increased fines for libel and slander, which Kremlin critics such as Firestone say are merely tools to crush dissent and stave off the protest movement. (The new laws come the  same week that a Moscow court began hearing arguments in a case against three members of Pussy Riot, a female punk rock band that staged an anti-Putin performance at a protest earlier this year.)
 
Despite the crackdown on protesters, some say that rather than the product of a formal directive from Putin, the charges against Navalny are more likely the result of the activist lawyer’s personal feud with Alexander Bastrykin, a former university classmate of Putin’s and the chairman of the State Investigative Committee. In a series of blog posts this week, Navalny accused Bastrykin of being a longtime resident of the Czech Republic and having business interests in the country despite a law in Russia banning government officials from engaging in commercial activities.
 
“All politics in Russia are intensely personal,” says Robert Amsterdam, a name partner at Amsterdam & Peroff, whose unique “political litigation” practice was profiled earlier this year by The American Lawyer. Amsterdam once represented imprisoned Yukos CEO Mikhail Khodorkovsky, and has remained a vocal critic of the current Kremlin regime since being kicked out of the country several years ago.
 
Amsterdam claims the “personal piques and interests of the various players involved” often determine who receives justice in Russia and notes that the case against Navalny “demonstrates the institutional breakdown” among the warring clans vying for influence within the Kremlin.
 
Amsterdam, who runs his own blog espousing his perspectives on global politics and business, says Putin is obsessed with the reversal of Russia’s geopolitical position. A faltering economy, a troublesome opposition movement, the United States’s growing status as a gas exporter, and the crisis in Syria are all contributing to Putin’s “fear of the falling dominoes of the Arab Spring,” he says.
 
As Amsterdam sees it—and he has enjoyed many conversations over the years with nervous partners at Am Law 100 firms—one implication of Navalny’s arrest for U.S. lawyers operating in Russia is the advent of a so-called dual state, with the rule of law applying to most of society and the “ prerogative state” catering solely to the interests of the ruling regime.
 
U.S. lawyers must navigate such a bifurcated system carefully. As Pavel Ivlev, a former Yukos lawyer who has fled to the U.S., wrote in an email to participants in the 2010 St. Petersburg International Economic Forum: “As you listen to Russian officials and businessmen discuss potential gold mines in investing in Russia, be mindful that there are numerous land mines as well.”
 
Firestone knows the perils well. His time in Russia began with the tragic killing of his firm’s cofounder, U.S. lawyer Terry Duncan, at the hands of a special forces sniper during a 1993 street battle between democratic protesters and Communist hardliners. It ended when Bastrykin refused to investigate the forgeries of Firestone’s signature, despite the personal plea of John Beyrle, the former U.S. ambassador to Russia. Firestone says that those working for U.S. firms in Moscow need to come to grips with why they’re really there.
 
“International law firms aren’t in Moscow to take political positions,” says Firestone, a former board member for the American Chamber of Commerce in Russia. “They want to make money, so they’re happy taking the gas and government contracts from a dictatorship.”
 
Federal lobbying records show that Akin Gump Strauss Hauer & Feld, Alston & Bird, Greenberg Traurig, Hogan Lovells, Patton Boggs, and Venable have all handled work for the Russian government or entities affiliated with the Russian state. Baker & McKenzie, Baker Botts, Cleary, and Squire Sanders have all represented the Russian Federation in litigation in the U.S.
 
 
Of course, U.S. firms are hardly alone in opening Russian offices to seek riches from the country’s business and political elite. Magic Circle firms Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, and Linklaters all have offices in Moscow, as do such other top London-based firms as Clyde & Co, Herbert Smith, and Norton Rose.
 
Russia’s largest domestic firms include Vegas Lex, the Pepeliaev Group, Egorov, Puginsky, Afanasiev & Partners, Alrud, and Goltsblat, the Russian practice of London-based Berwin Leighton Paisner following a 2009 joint venture agreement.
 
The American Lawyer wrote at length about Egorov Puginsky’s rise to prominence in 2007. Last year the firm, a longtime adviser to the Putin camp, merged with Kiev-based Magisters to form a 300-lawyer legal giant with offices throughout several former Soviet republics, as well as London and Washington, D.C.