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From Russia with Blood: A grim struggle against Russian corruption

Posted by Red Notice
on 31 Jan 2015 | 0 comments
Tagged in: Red Notice, Sergei Magnitsky

by Olivia Ward, Toronto Star, 31 January 2015

Bill Browder was a Red Diaper baby whose grandfather was a leader of the American Communist Party. But when he rebelled by investing in Russia's capitalist revolution, he found himself in the black - both financially and personally.

A Chicago-born hedge fund manager whose investments made more than $3 billion in chaotic post-Soviet Russian markets, Browder was a poster boy for the legion of Western wannabes who headed east to cash in. But it all went catastrophically wrong when he locked horns with Vladimir Putin's regime over the economic skullduggery that was undermining Russia.

Browder's book Red Notice tells a chilling story of "high finance, murder and one man's fight for justice," a tale that makes the dirty dealings of House of Cards look like Snow White. There's already a Hollywood film in the works.

In 2005, when Browder's struggle with Russia's oligarchs reached the top, he was expelled from the country. It was part of a scheme to steal $230 million in tax money that he had already paid. Browder's savvy young tax lawyer Sergei Magnitsky had found evidence of a massive tax fraud that funneled millions into the pockets of Russian officials.

After Magnitsky denounced them to the authorities, he was arrested in 2008. He kept detailed records of torture and abusive conditions as he was pressured to withdraw his testimony.

Seriously ill with pancreatitis and often in agonizing pain, Magnitsky was denied treatment. After 358 days behind bars, the 37-year-old lawyer died on Nov. 16, 2009, in Matrosskaya Tishina prison, his body bearing marks of severe beating.

Putin maintained that Magnitsky had died of natural causes, and none of those linked to his death were punished. Outraged, Browder began a worldwide campaign against those responsible - winning a landmark set of sanctions from the U.S. Congress, including visa bans and asset freezes against accused offenders.

Russia retaliated with its own sanctions against American adoptions of Russian children. It also sentenced Browder to nine years for tax fraud in absentia, convicted Magnitsky in a widely derided posthumous "trial" and attempted to put Browder on an Interpol "red notice" that could lead to his arrest and extradition to Moscow - the red notice of the title.

The book, he says, is a grim insurance policy: "There is a very real chance that Putin or members of his regime will have me killed one day," he tells his readers. "If I'm killed, you will know who did it. When my enemies read this book, they will know what you know."

When you came to Russia and founded Hermitage Capital Management in 1996, did you have any idea of how dark that bright future would become?

I always thought the worst thing that could happen was to lose the money I'd invested. If I'd even imagined the eventual outcome, that things could go so horribly wrong, I would never have done it in the first place.

At first things went so well. You made huge gains for your fund in the privatization rush. Even when you started your "stealing analysis" that pointed fingers at leading oligarchs you had no problem with Putin or the
Kremlin.

At the beginning of the Putin era he supported us when we did these analyses. The reason was he was fighting with the same guys we were fighting. They were stealing power from him and money from us. The enemy's enemy is your friend.

Then they became harder to tell apart?

It changed after (Mikhail) Khodorkovsky's arrest. (The oil billionaire who backed the Russian opposition and served 10 years on fraud and corruption charges.) Putin arrests the richest man in Russia, puts him on trial and allows the TV cameras to film him sitting in a cage. The message to others was that if you don't want to end up in a cage better come and make arrangements with Putin. After that, in 2004, everybody changed their behaviour. What Putin's cut was, I don't know.

What was the turning point for you?

It started with the Sidanko story (a big Siberian oil company headed by billionaire and deputy prime minister Vladimir Potanin). I was just a financial analyst, doing simple division. I looked at the market value of the company, how many barrels of oil do they have, etc. and I saw that the company was cheap. I was buying stocks.

Share prices were going up, nothing to do with me. Then suddenly they tried to take two-thirds of our shares away from us. That was Potanin. I thought, "this isn't right. I've not done anything to him. He shouldn't be allowed to do this."

You won that battle for shareholder rights, but it started a war. What did you learn from that?

One thing was clear to me: in Russia, the absolute worst thing that can happen to you in any powerful position is to lose face. The moment you do, everyone jumps on top of you. It's a prison culture.

Does that apply to Putin himself? And if so, what does that say about the outcome in Ukraine?

Putin is invested in the invasion of Ukraine. He can't back down now. There's no possibility. Anything he does that looks like compromise is purely short-term and tactical. He's in a terrible position. The worse the economic consequences are in Russia the more he has to escalate to distract from the awful economics.

As the conflict in Ukraine rages on, what can the West do?

The only hope is to contain him. With Putin, the best possible outcome is a cold war. Now we have a hot war, which could go in all sorts of terrible and unpredictable circumstances.

What's the status of your campaign to widen the Magnitsky sanctions?

The European Parliament called on governments (to adopt them). But it can't prescribe for individual countries, it can only recommend. So we're still trying to get the sanctions implemented in Europe. We're also in detailed discussions with the Canadian government, and there seems to be an appetite there. Irwin Cotler (MP) put together a private member's bill which may be converted to a government bill.

What kind of toll has the last five years taken on your life?

I've given up being a businessman. This mission is my only priority. Personally, there are two ways to react to this bad stuff. You can let it break you, or think of ways of adjusting to it. I don't go around moaning when I'm out to dinner, and my friends think I'm just a regular guy.

I'm heartbroken by what they did to Sergei. It haunts me every day. He died in my service. But I can't go through life with a big weight on my shoulders. I go through life smiling because I'm trying to do something meaningful now. I see the progress we're making and hopefully I can stop them from doing horrible things to other people.

You're looking after Magnitsky's family. How are they faring?

I wouldn't say the wounds have healed but the scar tissue has hardened. They're here in London. Most importantly, Sergei's young son is going to school. He's getting a good education, and he's a serious and self-confident young man. He looks more like his father every day.

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