In November 17 story please correct Dudukina title in paragraph 5, and insert dropped word "not" in paragraph 12.
* Lawyer Magnitsky dies after 11 months in custody
* Browder accuses President Medvedev of ignoring calls
* Prosecutors say suspect had made no health complaints
By Dmitry Zhdannikov
MOSCOW, Nov 17 (Reuters) - A key witness in a legal battle over alleged tax fraud between Russia and Hermitage, once Russia's top investment fund, has died in custody, Russian prosecutors said on Tuesday.
Sergei Magnitsky, 37, who advised Hermitage while at law firm Firestone Duncan, died of heart failure on Monday, prosecutors said, adding he was a suspect in a tax evasion case against Hermitage's co-founder Bill Browder.
Browder was refused entry to Russia in 2005 on national security grounds and has accused officials of using Hermitage and other companies to fake tax refunds which defrauded Russian taxpayers of millions of dollars.
Hermitage said Magnitsky, who had complained of stomach ailments, died from a ruptured pancreas.
"He was a key witness and his evidence was very important," said Irina Dudukina, spokeswoman for the Interior Ministry's investigative committee. "The tragic news about his death came as an absolute surprise. He had complained about the conditions of his detention but never about his health," she said.
Magnitsky, also an important witness for Browder's case, was arrested in 2008 after tax police raided his offices as part of an investigation into Hermitage's alleged tax evasion.
He was charged with conspiracy but his case had not come to trial. Magnitsky's lawyers have repeatedly complained that he was denied medical treatment while his health deteriorated during 11 months in custody.
"A number of major international organisations like the International Bar Association and the U.K. Law Society called on the President of Russia (Dmitry Medvedev) to release Magnitsky but all those calls were ignored," Browder told Reuters.
Browder fell out with Russian authorities in 2005 after publicly berating large firms over their treatment of minority shareholders and accusing tax officers of faking tax refunds [ID:nLJ468432].
Russia later opened a tax evasion investigation against Browder and Hermitage subsequently disposed of all of its Russian holdings.
IN CUSTODY
The case has spooked many investors who questioned the rule of law in Russia but the Kremlin and the government have repeatedly played down concerns, saying tax and legal changes have improved the country's appeal. [ID:nLB115654].
Browder has denied accusations of tax fraud. Russian officials have convicted one man in connection with the budget fraud, alleged by Hermitage, but Browder said the misappropriated funds had not been returned.
In October, Browder posted a 10-minute video on YouTube outlining the fate of Hermitage and the tax fraud charges. The clip (www.youtube.com/watch?v=ok6ljV-WfRw) opens: "The following is a story so extraordinary you couldn't make it up."
Russia asked Interpol to put London-based Browder on an international wanted list [ID:nL9653637] and Browder said this was retaliation for posting the video.
Jamison Firestone, Magnitsky's former colleague and a managing partner at Firestone Duncan, said Magnitsky was due to be released last Friday following a key court hearing.
Prosecutors brought in new evidence against him and the judge decided to keep him in custody while denying the defence from studying new documents.
"A lawyer president of the Russian Federation allowed an innocent lawyer to die," said Firestone, referring to Medvedev, a former corporate lawyer.
"There is no law in Russia at the highest level. The higher you go the less there is law. Any lawyer who tells you he can protect you in Russia is a liar," said Firestone. (Additional reporting by Aidar Buribayev; writing by Dmitry Zhdannikov; editing by Dominic Evans)