Opportunity and Corruption

Stanford MBA Bill Browder started his career as an investment banker in London just before the fall of the Berlin Wall. Despite his family's political expectations, Browder chose to pursue profit as a capitalist. He landed a consulting job with the Murmansk Trawler Fleet, a Russian Arctic fishing company. Browder discovered that the Russian government was selling a majority stake in the company, worth $2 billion, for a mere $2.5 million. This sparked his curiosity about the broader landscape of privatization in Russia and how he could seize opportunities there.

When he learned that Russia was practically handing out money, he convinced the Salomon Brothers to invest $25 million there. But investing in Russia wasn't straightforward. Instead of a stock market, people traded paper vouchers for stakes in companies. However, Russia's reputation for deceit proved true. Insiders used sneaky tactics to snatch up valuable assets for cheap. For instance, an airport in Siberia mysteriously shut down just before an oil company auction. Another company even blocked an auction with burning tires.

Browder's Bold Investment in Russia

Salomon's Browder invested $25 million in Russian companies like Lukoil, Unified Energy System, and Rostelecom. Russia's stock market surged, turning Browder's $25 million into $125 million. He went from being criticized to praised at Salomon. They even asked him to advise George Soros and John Templeton on Russian opportunities.

Bill Browder, once part of Salomon Brothers, later felt frustrated with the company's bureaucracy. In the 1990s, he decided to create his own hedge fund in Moscow, despite not speaking the language. Setting up Hermitage Capital with $4.5 billion under management, Browder's unlikely move paid off. His first investor, billionaire Edmond Safra, took a $25 million leap of faith, betting on Russia's emerging market.
ChallengRussian oligarchs is a risky game.

When confronting the corrupt oligarchs of Russia, Bill Browder willingly assumed a perilous undertaking. Throughout his efforts, he encountered numerous obstacles and garnered some substantial adversaries who wished to do him harm. His travels from Moscow to London were especially treacherous as illustrated by his habit of routinely carrying $7,500 in cash with him at all times for protection against those who opposed his cause.

Browder was concerned about the impact of a potential communist victory on his investments as the 1996 Russian presidential election loomed. To safeguard against losses, he chose to put money into an oil company that provided substantial dividends. When Boris Yeltsin emerged victorious and defeated pro-oligarch candidates in the competition, Browder's Hermitage Fund profits climbed dramatically by approximately 125% within several months.

Deal with Opaque Investments and Betrayals

Browder spotted an opportunity with Sidanco, an oil company with limited public trading and little available data. Despite the risks, he invested $11 million in the company, seeing it as a cheaper option compared to giants like BP or Lukoil. His move paid off when BP followed suit, buying into Sidanco the next year at a whopping 600% markup. But the victory turned sour fast. Sidanco's owner, Vladimir Potanin, diluted the shares, wiping out Browder's profits. Browder didn't take it lying down. He publicly called out Potanin's double-dealing, reported the issue to Russian authorities, and emerged victorious. Knowing he was taking on a powerful oligarch, Browder enlisted the help of bodyguards provided by Safra to protect himself.

In 1997, Hermitage emerged as the world's top-performing hedge fund, boasting remarkable returns. However, the fund's value plummeted by 90% during the Asian financial crisis in Russia, triggering a seismic shift in the behavior of oligarchs. With Wall Street's withdrawal from the Russian markets, oligarchs abandoned restraint, leading to widespread corruption and what was described as "an orgy of stealing," resulting in an astonishing wealth gap, where the richest Russians became worth 250,000 times more than the poorest.
Reveal the Controversy Surrounding Gazprom

During the late 1990s, Gazprom - a prominent participant in the gas industry - was involved in a major scandal when they sold their gas fields at incredibly cheap rates of up to 99.5% discount. Researcher Bill Browder brought these unethical sales into light via respected publications such as The Wall Street Journal and Financial Times. As a direct result of this exposure, Vladimir œPutin dismissed Gazprom's CEO with the intention to get hold of all misappropriated assets again.

Browder's discoveries were instrumental in Hermitage Fund making a standout investment as Gazprom's stocks rose by 100 times. Despite sensing misconduct within other firms, Browder carried on with his investigations. Shockingly, Putin supported Browder despite usually being aligned with Russian business interests. He likely viewed this chance to check the powerful oligarchs who he felt had gone beyond their briefs.

Alliance Shift

Browder's return to Moscow from London in 2005 ended abruptly when officials detained and expelled him without explanation, citing him as a national security threat. Fearing for his staff and assets, Browder swiftly moved out of Russia and liquidated his $4.5 billion fund. This exit led to investors withdrawing from Hermitage, prompting Browder to launch the Hermitage Global Fund in 2006 with a focus on other markets, raising $625 million. Meanwhile, Russian authorities launched a criminal investigation into Hermitage, conducting raids on its former banks and offices.
Understand Russia's Plot

Browder was taken aback when he discovered that someone in Russia had seized control of one of his companies, facing a $71 million judgment, along with two others, which ended up owned by a convicted killer. What puzzled him further were the phony claims totaling $1 billion against these companies, despite Hermitage having sold off its Russian assets already. It dawned on him that these stolen companies might be used to orchestrate a tax refund scam, considering Hermitage's substantial $230 million tax payment in Russia back in 2006.

Browder, based in London, requested more public records, which made the wrongdoers uneasy. They moved the stolen companies from Novocherkassk to Khimki near Moscow, pocketing a hefty $230 million in tax refunds, the largest in Russian history. Browder traced the money's path through wire transfers to small banks where the stolen companies held accounts. He shared his findings with The New York Times and discussed them on a radio show in Russia, but unlike before, this didn't lead to the arrest of corrupt officials. Browder's enemies demanded his Russian lawyer report to the police for questioning. When the lawyer refused, the police threatened to force him, prompting Browder to go into hiding for weeks before fleeing the country, warned by friends that his life was in danger.

The Confrontation of Browder

Browder, a businessman, faced a nasty plot by his Russian adversaries who accused him of tax fraud, alleging he stole $230 million from the country. Some of his former colleagues fled Russia to escape trouble, but Browder's lawyer, Sergei Magnitsky, wasn't so fortunate.  Magnitsky, only 36, uncovered the tax fraud scheme and bravely pointed fingers at two high-ranking officials involved. Despite believing in the fairness of Russia's justice system, Magnitsky found himself behind bars, enduring horrific conditions in filthy cells infested with rats and sewage. He turned to global human rights organizations and the media for help, hoping to shed light on the injustice he faced.

The Washington Post covered Magnitsky's suffering, but Russian reporters feared touching the story. This wasn't new to Browder, who once saved an epileptic lying in a Moscow street. Nobody helped because they risked arrest by harsh Moscow police. In prison, Magnitsky developed gallstones. Officials refused treatment for four months, despite his agonizing pain. He could have been released if he withdrew his accusations against Artem Kuznetsov and Pavel Karpov, the two officials behind the scam. But Magnitsky didn't back down.

Justice for Magnitsky

In 2009, Russia accused Magnitsky and Browder of crimes. Browder feared Russia would label him a wanted criminal with a "Red Notice," seeking his arrest and extradition. Tragically, Magnitsky never reached trial; he was fatally beaten by his guards. Browder, determined to hold those responsible accountable, promised Magnitsky's daughter that justice would prevail.

Browder's efforts led to tangible outcomes. Senator Ben Cardin, alongside others, urged the US State Department to revoke visas for 60 Russians involved in Magnitsky's death. Browder's testimony in Congress spurred action, resulting in a bill co-sponsored by Senator John McCain. Through his advocacy, Browder shed light on the corruption of individuals like Kuznetsov and Karpov, who had amassed wealth beyond their official incomes.

œThe Magnitsky Act: 

The Magnitsky Act became law in the US, aiming to punish 60 Russians connected to Sergei Magnitsky's story and later expanding to include all human rights violators. Despite opposition from President Obama and Senator Kerry, families of other victims supported the bill's wider scope. As Russia sought to join the World Trade Organization and US businesses sought to trade with it, Senator Lieberman blocked the repeal of Cold War sanctions until the Magnitsky Act was passed. This law marks a significant step in addressing global human rights abuses, despite initial challenges.

Russian officials didn't like the Magnitsky Act, a law targeting those involved in Sergei Magnitsky's death. When asked about photos of Magnitsky's badly beaten body, a Russian official downplayed the injuries, saying, œMaybe he was kicked one time, maybe two, but this is not the reason for his death. Another official, Karpov, sued Browder for saying bad things about him, claiming it caused him "moral suffering." Even though Karpov didn't earn much, he hired an expensive London law firm. The Magnitsky Act passed, but Russia kept fighting it. On the anniversary of Magnitsky's death, another Russian, Perepilichnyy, died while jogging in Britain. Browder thought Russian people were behind it.

In retaliation to the Magnitsky Act, Putin stopped Americans from adopting Russian kids and tried to arrest Bill Browder, but Interpol refused. Then, Russia accused Browder of things like tax fraud, stealing money, and devaluing the ruble in 1998, even blaming him for a murder. Although Russia sentenced him to nine years in jail, Browder is safe in London because British officials won't send him back. So, despite Russia's efforts, Browder remains out of their reach.