How Bill Browder Became Russia’s Most Wanted Man
The hedge-fund manager has offered a fable for why the West should confront Putin.
20 Aug 2018 – Shortly after Presidents Donald Trump and Vladimir Putin wrapped up their recent summit at the Finnish Presidential Palace, in Helsinki, around two hundred journalists gathered in the building’s neoclassical ballroom. It was July 16th, three days after the special counsel Robert Mueller published an indictment charging twelve members of the G.R.U., Russia’s military-intelligence service, with hacking into Democratic Party servers and disseminating e-mails during the 2016 election. As Trump started answering questions about the interference, and it became clear that he would not accept the assessment of U.S. intelligence agencies over the denials offered by Putin, the frenetic sense of anticipation in the room turned to silent confusion.
Trump claimed that Putin had made “an incredible offer” during their meeting: investigators working with Mueller could come to Russia to interview the twelve indicted intelligence officers. In exchange, Putin explained to the gathered press, Russian investigators would question certain Americans who the Kremlin believes “have something to do with illegal actions on the territory of Russia.”
Putin singled out William Browder, an American-born hedge-fund manager who had worked in Moscow in the nineties and early aughts. Putin falsely claimed that Browder’s business associates had earned more than $1.5 billion in Russia and “never paid any taxes,” and that Browder had donated some four hundred million dollars of this money to Hillary Clinton’s Presidential campaign. (Browder has said that he has “not given Hillary Clinton’s campaign or anybody else’s campaign a single penny ever.”) Browder watched the press conference on his computer: Putin’s “forehead was getting all twisted and furrowed, and you could just tell—he was not playing poker,” he said. “He was pissed.”
At the lectern in Helsinki, Putin did not speak of what is surely the true source of his animus: Browder’s decade-long campaign against Russian corruption. In 2009, Browder’s tax adviser Sergei Magnitsky testified that the Russian police and tax authorities had attempted to steal two hundred and thirty million dollars in Russian taxes paid by Browder’s Moscow-based investment firm, Hermitage Capital. Magnitsky was arrested, and died in a pretrial detention center in Moscow. In the years that followed, Browder strenuously lobbied for a law that would punish those responsible. The Magnitsky Act, which sanctions Russian human-rights violators and other officials implicated in corruption and abuse-of-power cases, was passed by Congress in 2012 and has been a subject of furious preoccupation for Putin ever since.
The law has made Browder, if not quite a household name, then a central figure in the Trump-Russia drama. Last summer, news broke of a meeting that took place at Trump Tower in June, 2016, at which members of the Trump campaign team, having been offered damaging information on Hillary Clinton, met with Natalia Veselnitskaya, a Russian lawyer with close ties to Russian government officials. In Donald Trump, Jr.,’s initial statement about the meeting—which the President’s lawyers later admitted had been dictated by the President himself—he insisted that he, Jared Kushner, and Paul Manafort, who was then Trump’s campaign chairman, had attended simply hoping for “information helpful to the campaign.” The main topic of the meeting was “the adoption of Russian children,” he said, although Veselnitskaya had also “mentioned the Magnitsky Act.” According to Veselnitskaya, she talked mostly about Browder and his alleged misdeeds, to the disappointment of the Trump team, which was, she said, hoping for “some sort of grenade.”
The President has maintained that he was not aware of the meeting at the time, despite recent claims of his former lawyer Michael Cohen to the contrary. Earlier this month, Trump tweeted, “This was a meeting to get information on an opponent, totally legal and done all the time in politics—and it went nowhere. I did not know about it!” Mueller’s investigation is almost certainly exploring the question of whether the meeting was, in fact, “totally legal,” or an attempt to collude with a foreign government, and whether the Administration’s initial version of events and the actions of the President constituted an obstruction of justice.
Since the Magnitsky Act passed, the Russian government has charged Browder with myriad crimes, and has periodically tried to lodge warrants for his arrest via Interpol. “Their main objective is to get me back to Russia,” Browder has said. “And they only have to get lucky once. I have to be lucky every time.” In 2012, in Surrey, England, Alexander Perepilichny, one of Browder’s chief sources of information on the movement of the stolen funds, collapsed while jogging near his home and died. The case is still under investigation. Browder, who has taken to relating to as large an audience as possible the danger he faces, has called this “a perfect example of why you don’t want to be an anonymous guy who drops dead.”
In Helsinki, Trump’s apparent openness to handing Browder over seemed to play into Browder’s fears. (It also raised practical questions: in 1998, Browder, who lives in the U.K., acquired a British passport and renounced his American citizenship.) The next day, Russian prosecutors added Michael McFaul, a top adviser on Russia policy in the Obama Administration and, later, the U.S. Ambassador to Russia, to the list of those they wanted to question. That the White House considered the proposal was an extraordinary breach of diplomatic protocol. “I couldn’t believe it,” McFaul told me. “So being involved in a policy process is now somehow considered criminal behavior?” The State Department’s spokesperson Heather Nauert called the notion “absolutely absurd,” and, after lawmakers from both parties raised an outcry, the White House rejected Putin’s offer. Browder was reassured by the bipartisan response. “The whole world knows that Vladimir Putin hates me, Vladimir Putin wants to get his hands on me, and, if anything happens to me, Vladimir Putin is going to be blamed,” he told National Review.
Browder, who is fifty-four, with a dusting of silver hair and rimless eyeglasses, has a forceful yet understated authority and a talent for telling a coolly suspenseful tale. In 2015, he published a memoir, “Red Notice,” which sold three hundred and fifty thousand copies in the U.S. and was described by a reviewer in the Times as “riveting” and “marred only by Browder’s perhaps justifiable but nevertheless grating sense of self-importance.” He is a persuasive speaker, and careful in selecting the details of the story he presents. (He declined to talk to me for a profile.) As an anti-corruption activist, Browder has spoken out against the exploitation of offshore tax havens—for example, the ones detailed in the documents that were leaked from the Panamanian law firm Mossack Fonseca, in 2016. Many companies listed in the so-called Panama Papers were entirely legal. Still, Browder tends not to mention that Mossack Fonseca set up at least three firms for him and Hermitage.
In April, 2016, Robert Otto, a top intelligence official at the State Department, wrote in one of many e-mails that were later leaked online, in a hack widely linked to Russia, “I am beginning to feel we are all just part of the Browder P.R. machine.” That machine has been singularly effective, allowing Browder to turn his experiences into a fable for why the West should confront Putin—a tale he has told as a frequent guest on cable news shows and as a speaker at congressional hearings. Browder is obviously nothing like the cartoon villain that Putin portrays him to be, and yet his political influence means that his every move, past and present, has global reverberations. Putin’s actions, too, can seem to prove Browder’s case about the need to combat the Russian state’s corruption and malfeasance. His singling out of Browder in Helsinki, McFaul told me, “only gives Bill a bigger global platform—it was a huge public-relations coup, which of course Bill will use.”
As Browder often points out, he has an improbable background for a millionaire hedge-fund manager. His grandfather Earl Browder became active in socialist politics during the First World War and lived in the Soviet Union for five years before becoming the secretary-general of the Communist Party of America. Earl’s son Felix was a noted mathematician. William Browder took an interest in business while in boarding school in the seventies. “I would put on a suit and tie and become a capitalist. Nothing would piss my family off more than that,” he writes in “Red Notice.”
Browder studied economics at the University of Chicago, and then did a stint at the management-consulting firm Bain & Company. In 1989, he got his M.B.A. at Stanford before going to Poland as a consultant for the Boston Consulting Group. He became entranced by the opportunities in the country’s newly privatized industries and bought up shares of formerly state-held enterprises. In the early nineties, he spent several years in London as a trader at Salomon Brothers, and met his first wife, who is British. In 1996, Browder moved to Moscow and founded Hermitage Capital.
This was the peak of the chaotic post-Soviet “Wild East,” a time of lawlessness and speculation. Over the next two years, Hermitage’s portfolio grew to more than a billion dollars, but it was nearly wiped out in August, 1998, when Russia defaulted on its sovereign debt, causing widespread panic. Browder was one of the few Western financiers who chose to remain in the country. Between 1998 and 2005, the price of oil quadrupled and the Russian stock index went up by nearly three thousand per cent.
Browder gained attention for publicly criticizing the management of companies in which his fund had invested as a minority shareholder, in an effort to goad them into being more efficient and transparent. He held combative press conferences outlining Russian corporate malpractice and passed along to journalists dossiers that described the way venal oligarchs engaged in asset stripping, wasteful spending, and share dilutions. Bernie Sucher, a prominent American banker in Moscow throughout the nineteen-nineties and the aughts, told me, “Looking back, I think he was absolutely right. The government needed that harsh spotlight.” But, he added, “I don’t think Bill started out with a passion for corporate governance. He found it to be an instrument that helped him and his investors make a lot of money. Ultimately, it became a sincere crusade.” According to Steven Dashevsky, then the head of research at a Russian investment bank, Browder’s anti-corruption stance was a kind of “free marketing” for Hermitage.
Despite his public campaign, Browder was not immune to the era’s spirit of financial adventurism. One of the most attractive investments for Western funds and banks operating in Russia was Gazprom, the state-owned natural-gas behemoth. Regulators had instituted a dual price structure for the company’s shares: one class of shares, priced relatively cheaply, could be held only by Russian citizens and firms; the second class, priced much higher, could be purchased by anyone. Hermitage got the cheaper price by buying Gazprom stock through companies it registered in Russia. It was a work-around used by a number of Moscow-based investment funds that, as Dashevsky put it to me, “fell into a gray zone: it was clearly against the spirit of the law, but never prosecuted or pursued.”
Browder also minimized how much Hermitage paid in Russian taxes. The government, in an effort to stimulate regional investment, had established a special zone in Kalmykia, a republic north of the Caucasus, that offered a lower tax rate. The rate went down even more if disabled workers made up a majority of a company’s employees. To take advantage of this, Hermitage hired disabled people for its companies in Kalmykia. A banker who managed a number of Russian funds said, “We’re not generally disciples of Mother Teresa, but Bill was singularly bottom-line focussed.” Other investors, the banker said, considered tax-avoidance measures like Hermitage’s hiring of disabled people “too risky, and borderline illegal, with the possibility of too much danger if revealed.” (A spokesperson for Browder said, “The use of Kalmykia and disabled-employee tax incentives were standard practice at the time and fully in compliance with the law.”)
Browder received a British passport in 1998 and, rather than become a dual citizen, renounced his U.S. citizenship. He has explained that he had been motivated by the discrimination that his grandparents faced in America during the McCarthy era as a result of their political activism for the Communist Party: his grandfather was forced to testify in front of the House Un-American Activities Committee, and his grandmother was threatened with deportation to Russia. “This type of thing could never happen in Britain, and that was the basis of my decision to become British,” he recently told an audience in Colorado. But those I talked to who knew Browder in the nineties assumed that the reasons were financial. U.K. tax rules governing foreign income are less stringent than those in the United States. A person who was friendly with Browder at the time said, “He told me he didn’t want to pay U.S. taxes.” He added, “If there has been a consistent passion in Bill’s life over the last twenty or thirty years, it is not wanting to pay taxes.”
Vladimir Putin assumed the Presidency in 2000, and at first Browder was an ardent supporter. He believed that Putin’s predecessor, Boris Yeltsin, had allowed Russia’s oligarchs to manipulate the economy for their own profit. “Yeltsin let the animals get out of the cages and start running the zoo in Russia,” Browder told a trade publication for investors in 2000. “I think Putin’s going to put them back in, and that’s good for business.” In 2003, when the billionaire head of the Yukos oil company, Mikhail Khodorkovsky, was arrested and charged for fraud and tax evasion, many saw it as evidence that Putin was becoming uncompromisingly authoritarian. But Browder welcomed the prosecution of Khodorkovsky, with whom he had clashed in the past. In 2004, he told the Times, “We want an authoritarian—one who is exercising authority over mafia and oligarchs.” He added that Putin “has turned out to be my biggest ally in Russia.”
Business was going well for Browder until one day in November, 2005, when Russia’s border guards denied him entry at Moscow’s Sheremetyevo International Airport. He was told that his Russian visa had been annulled on national-security grounds. In 2006, Celeste Wallander, a program director at the Center for Strategic and International Studies (she later worked as an adviser to President Obama on the National Security Council), ran into Browder at a conference. She recalled that he was convinced his visa problems could be resolved if he could only explain his predicament to Putin himself. Browder expressed the incongruity of his plight to The Economist: “Logic dictates that it’s not in the national interest to ban the biggest investor in Russia and one of the biggest supporters of the government’s policy.”
In July, 2006, Putin was asked at a press conference about Browder. Putin said that he didn’t know the particulars of the case, but added, “I can imagine this person has broken the laws of our country, and if others do the same we’ll refuse them entry, too.” Browder instructed his Hermitage colleagues to sell off the firm’s Russian assets and moved key staff to London.
As Browder tells it in his book, on June 4, 2007, while he was on a business trip to Paris, he got a call from Moscow. The offices of Hermitage and its law firm were being raided by dozens of police officers as part of a tax-fraud investigation into Kameya, which, in “Red Notice,” Browder describes as “a Russian company owned by one of our clients whom we advised on investing in Russian stocks.” (Kameya was, in fact, one of the companies that Hermitage had initially set up in Kalmykia.) The allegations were curious: Hermitage had been under investigation for tax avoidance in previous years, but it was not in arrears at the time, and the Russian authorities had no active tax claims against it. During the search, police officers seized thousands of documents. They also made off with Hermitage’s original corporate seals and stamps, bureaucratic instruments needed to register a new company and to act on its behalf.
Browder has often said that, in response to the raid, he went out and hired Sergei Magnitsky, “the smartest lawyer I knew in Moscow.” Actually, Magnitsky, then thirty-five, was a tax adviser who worked for the firm that had advised Hermitage for a decade. Magnitsky, Browder, and others at Hermitage began to piece together what they believed had happened next: police had used the impounded seals and stamps to reregister Hermitage’s companies in the name of low-level criminals, and those companies then applied for tax refunds totalling two hundred and thirty million dollars, the amount that Hermitage had paid in capital-gains tax. Two state tax offices in Moscow appeared to have approved the refunds the next day.
Hermitage filed criminal complaints, some of them more than two hundred pages long. Magnitsky testified to Russian state investigators in June, 2008, after which his lawyer advised him to leave the country. He refused, and gave further testimony that October. Several weeks later, he was arrested on charges of abetting tax evasion through Hermitage, and held in pretrial detention. Over the next eleven months, he was transferred from one Moscow prison to another, held in increasingly foul and torturous conditions. He developed gallstones and pancreatitis; a doctor ordered surgery, but he was not treated. On November 16, 2009, he felt deeply unwell, and was brought to Matrosskaya Tishina, or Sailor’s Rest, a notorious prison in northeast Moscow that had a medical wing. According to Magnitsky’s lawyer and Russian human-rights advocates who later investigated the case, Magnitsky was put in a holding cell, handcuffed to a bed, and beaten. By 10 P.M., he was dead.
In “Red Notice,” Browder describes getting the news of Magnitsky’s death, at home in London. “The pain I felt was physical, as if someone were plunging a knife right through my gut,” he writes. A few low-level officials were admonished for Magnitsky’s maltreatment, but no one in Russia faced criminal punishment. Browder and his colleagues at Hermitage conducted their own investigation. In 2010, Browder went to Washington with a list of Russian officials he said were to blame. The Obama Administration placed sanctions on some of them, a routine procedure that barred them from entering the United States. McFaul, then in charge of Russia policy at the National Security Council, recalls, “Bill, to his credit, said, ‘That’s not enough. You didn’t make it public. You didn’t seize any assets.’ ” In “Red Notice,” Browder calls the Russia policy of the Obama Administration at the time “appeasement.”
Browder then approached the Helsinki Commission, an independent federal agency in Washington that monitors human rights, where he met Benjamin Cardin, a Democratic senator from Maryland. Cardin told me that visitors routinely bring him tales of injustice and atrocity. “But what was unique here was Bill Browder,” he said—in particular, Browder’s ability to tell the story of Magnitsky’s suffering. “We were as outraged as he was,” he told me. David Kramer, who was the president of Freedom House at the time and sat in on a number of congressional meetings and hearings where Browder gave testimony, said, “I think it boils down to one phrase I heard him use numerous times: ‘They killed my guy.’ He feels a responsibility and obligation to make sure Sergei didn’t die in vain, and it’s hard to argue with that.”
Even so, the Magnitsky Act might have languished had it not been for the fact that, in 2012, Russia was about to become a member of the World Trade Organization. In order to grant Russia what the group calls “permanent normal trade relations” status, Congress would have to repeal the Jackson-Vanik amendment, a 1975 measure aimed at the Soviet Union that penalized trade with countries that had restrictive emigration policies. Legislators did not want to rescind the law without sending the Kremlin a message about American toughness on human rights. Stephen Sestanovich, who worked on Russia policy in the Reagan and Clinton Administrations, explained to me that, more than the legislation’s particular merits, “the real question was whether Congress and the White House could find any substitute for Jackson-Vanik other than Magnitsky. The answer turned out to be no, they couldn’t.”
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