It is Insane to Invest in Russia

Bill Browder, Hermitage Capital Management CEO, on with investing in Russia, his experiences with high level government corruption and the death of his lawyer, Sergei Magnitsky, in a Russian jail.

Transcript

Our next guest will tell a story that seems unbelievable, but, unfortunately, absolutely true. He was head of the multimillion-dollar hedge fund in Moscow before the Russian government has robbed him of his assets. He fled the country.

But the matter did not end there. Russian police arrested him a lawyer, put him in a filthy prison, and demanded that he helped the prosecution. He refused – and died in prison. Since then, a native of Chicago, Bill Browder has openly advocated as a critic of corruption in Russia. He now lives in London, having a small part of those assets that are disposed of before. Bill, glad to see you again.

Bill Browder, head of Hermitage Capital Management: Thank you very much.

So you’ve arrived here in Washington, from London, because you are saying … We have guests who constantly recommend to Russia. You’re here to say that this is a dangerous place, where corruption is rampant.

Bill Browder: I have been the largest investor in the country. Under my direction was 4.5 billion dollars on the spot, I had a team of 20 people involved in investments. And one day I was expelled from the country. They came to seize all my assets and I hired a group of lawyers so that they have helped me. My lawyer was arrested and put away in jail. Then they subjected him to torture, that he gave false testimony. He declined to give false testimony, and eventually died at the age of 37 years. He left a wife and two children.

Here it is. This is a tragic story, and, of course, the Russian government … You know, these guys say that you yourself were your business with corruption and that, well, he was not killed in jail, he just died in prison. I want to say that they challenge your version. You are one of the most prominent investors in the world – but they say: “All this is not true.”

Bill Browder: Well, they can say that it’s not true … can say whatever they want. But we are doing this: we travel around the world and set the visa sanctions and freeze the accounts of all countries, to those who had killed Sergei, this handheld does not agree. And in the U.S. Congress is now considering a bill which called for the Justice Sergei Magnitsky “: it would freeze their account and ban the issuing of visas to the United States. December 15 the European Parliament adopted a resolution that froze their bank accounts in Europe and banned the issuing of European visas. Canadian Parliament is doing the same.

So that Russian can invent any sort of nonsense, but the fact remains: the 37-year-old boy who was my lawyer, is dead, because they zapytali him to death in prison. They can invent any story, but it is something dead.

Yes. Corruption in Russia lasts a long time. Look at the corporation Shell. They have spent billions of dollars to build an oil platform under the name of Sakhalin, a few years later the Russian government declares: “Let’s make a deal.” And even true: “We had a deal.” And in fact controlling stake bought out for about the same amount that Shell has invested in the project. In other words, they act by force, right? Mikhail Khodorkovsky, former head of Yukos, is still in prison and has just convicted a second time. And your story … But at the same time, the company Pepsi buys Russian network of supermarkets within a few billion. You see, despite all these stories, we still continue to pour money into Russia.

Bill Browder: Yeah, it’s like moths flying into the fire. While this does not happen to them, people say: “It’s not my problem. This guy should not have to raise your voice. These kids should not have to go into politics. And these guys from Shell concluded a bargain too. Everyone can find an explanation for the problems of the individual, but each of whom we know – and people are constantly communicate with me – there are ten or fifteen cases of which we do not know.

The climate of business in Russia creates the criminal actions of the government, and no one can go there without fear. Either you act honestly and thereby violates the Russian rules, and then have problems like mine, or in breach of U.S. rules, giving bribes, acquiesced in extortion and so on. In Russia, did not get to practice before the normal way, as is done in the West.

Tell us what it is. Explain by an example that would be me if I was an American head of the company and I was transferred to Moscow. And there I would have developed the business, such as consumer goods. How do I keep going?

Bill Browder: One day you’ll sit in my office, and you descend to the guys from the tax inspectorate. And they say: ‘You know what? You have huge tax arrears. You say: “No, no, no! I regularly pay taxes. ”

And I have hundreds of solicitors and accountants, who will say that I do not owe.

Bill Browder: And they say: “You owe a considerable amount of money.” And they say: “Is there a way to solve this problem. You know, bring a paper bag in the office, give it back and then back and then put it in this package so much money, and this problem will not. ”

But what if you do not? After all, if you’re an American, who heads the company that you least want to please arrested or jailed in the U.S. for bribing a foreign official.

Bill Browder: You will be taken to a prison in the United States. And what do you do? You can either bribe and go to jail in America …

And what happens if you refuse?

Bill Browder: Well, if you refuse, they will come and will probably be arrested for your assistant. Or your lawyer. Or your accountant. And then say: “You’re next.” And while the man sits in jail, as I sat Sergei Magnitsky, they will torture him. And then what? And it happens regularly with normal, civilized, normal western people.

This is fixable?

Bill Browder: It’s fixable, if …

After all, as I said, Pepsi has paid several million for the sales network in Russia. We see these people buying oil from them, see them as a growing consumer market. The Corporation has large interests here, and American money is going to Russia.

Bill Browder: Do corporations have interests in Russia and in Stalin’s time. Some people are ready to make money on anything, but sometimes it’s not worth it. And in particular it is not worth it when you are in Russia, risking not only money. Understand, you’re risking your life and the lives of people working for you.

You were born in Chicago, many years you lived in Russia and now live in London … I mean, after all, if you are again set foot on Russian soil, you will immediately be arrested?

Bill Browder: I was immediately arrested, I was placed in the same conditions as that of Sergei Magnitsky, and I would be tortured. And probably all be over my death.

So what is your advice to potential investors?

Bill Browder: Investing in Russia – absolute madness, do not go for it.

Bill Browder, unfortunately, our time is running out. It is a sad story, and this story makes a great impression. I wish you success in Washington. Listen, you also oppose the very serious corporate interests in Russia against sending hundreds of billions of dollars.

Bill Browder: Yes, indeed.

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