* Browder calls fraud allegation an "absurdity"
* Lawyer Magnitsky faces posthumous prosecution
* Cases stoke friction between Russia and the West
By Douglas Busvine
MOSCOW, March 5 Russia said on Tuesday it would file criminal charges against William Browder, the head of a London-based investment fund, broadening a judicial offensive in a case that has already caused friction between Moscow and the United States.
The Interior Ministry said Browder, a co-founder of Hermitage Capital Management, would be charged with stealing shares in Gazprom in violation of a ban on foreign ownership of the state gas firm's shares that was lifted in 2005.
The case comes just as Browder is due to go on trial in absentia for tax fraud alongside Hermitage lawyer Sergei Magnitsky, who died in custody after accusing security and tax officials of obtaining a fraudulent $230 million tax rebate, only to have the tables turned by the officials he suspected.
The death of Magnitsky in 2009, after what his employer said was a severe beating, prompted the U.S. Congress to pass the Magnitsky Act last year, imposing visa bans and asset freezes on Russian officials suspected of violating human rights.
Browder, a British citizen with U.S. roots whom President Vladimir Putin accused of "economic crimes" at a news conference in December, denies tax fraud and dismissed the latest accusations as baseless.
"This is clearly part of the desperate retaliation of the Russian government after my involvement in the passage of the Magnitsky Act in the United States," he told Reuters.
"Putin singled us out and defamed us at his annual press conference in December. That was a signal to all law enforcement agencies to open up as many cases as possible against me in absentia and Sergei Magnitsky posthumously."
The new case against Browder dates back to the early 2000s, when investors speculated over whether Russia would lower a so-called 'ring fence' that barred foreigners from owning stock in Gazprom, the successor to the Soviet Union's gas ministry.
Hermitage and other funds created offshore 'grey schemes' enabling investors to place bets that Gazprom's cheap Russian shares would catch up with its pricier London shares when the ring fence was scrapped.
Mikhail Alexandrov, head of the Interior Ministry's organised crime and corruption section, told reporters that firms controlled by Browder had bought 131 million Gazprom shares between 1994 and 2004.
But Browder said the grey market schemes had been legal.
"The ownership of Gazprom shares through these structures was blessed by the Russian Federal Securities Commission in 2004 and by Gazprom itself on an ongoing basis," he said.
"Thirty-five percent of Gazprom stock was owned by foreign investors through derivative structures. To retroactively illegalise this for political purposes is an absurdity.
Alexandrov said Hermitage had also sought access to Gazprom's accounts, "which had strategic significance for the Russian Federation".
"The losses arising to the state from the illegal appropriation of shares in Gazprom were at least 3 billion roubles ($100 million) - that is just a preliminary estimate," he said.
He did not detail how he had reached the estimate of losses, but said the figure related to only one legal entity controlled by Browder, and that it could rise. The ministry did not say why it had not filed the charges yet.
Meanwhile the pro-Kremlin television channel NTV was due to air an investigative documentary on Tuesday night that, according to a trailer, was set to report that Browder had exploited Magnitsky's death for his own ends.
Critics say such documentaries are often aired to influence public opinion before charges are filed against opponents of the government.
Hermitage managed $4 billion in investor cash at its peak.
It has produced documentation that, it says, shows that Russian security and tax officials were involved in seizing control over Hermitage affiliates in Russia and securing the tax rebate.
Magnitsky, who had investigated that case, died aged 37 after just under a year in custody. Putin has said he died of heart failure but the presidential human rights council has said he was probably beaten to death.
Browder lobbied for the Magnitsky Act's passage and the European Parliament has passed a resolution calling for European Union member states to adopt similar legislation.
No one has been convicted over Magnitsky's death, but lawyers say he will next week become the first dead person to be put on trial in Russia.