Why Khodorkovsky Matters

New York Times

Over the past six months, I’ve written three columns about Mikhail Khodorkovsky, the former Russian oligarch who has been in prison since 2003, charged, tried, convicted — and recently reconvicted — on transparently bogus tax and embezzlement charges.

Partly, I keep returning to the subject because his lengthy imprisonment offends my sense of justice; his real crime, after all, was challenging Vladimir Putin, the Russian strongman. More importantly, Khodorkovsky’s fate stands as a powerful illustration of Russia’s biggest problem: the contempt the country’s corrupt rulers have for the rule of law.

Yet after each of those columns, I received feedback saying, essentially, that Khodorkovsky deserved what he got. Even if the crimes for which he went to prison were fictitious, he undoubtedly did bad things on his way to becoming Russia’s richest man. “He stole Russian national resources, truly the wealth of the nation,” read one e-mail, referring to Khodorkovsky’s role in founding the now-defunct oil company Yukos. “I have zero sympathy for him.”

A man named William Browder once had zero sympathy for him, too. Browder is an interesting character: the grandson of Earl Browder, a prominent, early American communist, he “rebelled,” he told me recently, not only by becoming a capitalist but by moving to Russia and setting up an investment fund. Started with $25 million, Browder’s Hermitage Fund swelled to $4.5 billion in assets by the early 2000s, making it the biggest Russia-only fund in the world.

“I always knew Russia was corrupt,” he says. “Our theory was that stocks would rise in value as Russia went from complete chaos to merely terrible chaos.”

Still, galled by the blatant theft of shareholder assets by many of the oligarchs, Browder decided to prod things along by becoming a shareholder activist. He hired investigators to root out fraud, which he then exposed in the news media. Quite often, Putin’s government, which was trying to wrest power away from the oligarchs, would step in and take corrective action. Which, of course, would cause the stocks to rise.

Khodorkovsky was one of the executives Browder tangled with over the years. As a result, says Browder, “I was happy when he was arrested.” He adds ruefully, “I didn’t understand that everything had changed.”

But it had. Khodorkovsky’s trial and sentencing forced the other oligarchs to either flee or fall in line. Suddenly, government officials were partaking in the theft instead of trying to stop it. Foolishly, Browder continued his shareholder agitation. But instead of pleasing Putin’s henchmen, his actions angered them.

In the fall of 2005, Browder, returning from London, was refused re-entry into the country. His office was raided, and documents were taken. Officials doctored the documents to fraudulently register his company under new ownership. Then they backdated contracts that made it appear as if the company owed $1 billion. But there was no way to get the $1 billion because Browder had moved Hermitage’s assets to London.

No matter. After some more fraudulent legal maneuvering, the new “owners” asked for a tax refund of $230 million. It was granted within 24 hours.

Browder had hired seven lawyers to help try to untangle the mess. One of them, Sergei Magnitsky, doggedly pursued the fraud, bringing it to the attention of other government officials, and even testified against those who had been the ringleaders. “He said we should bring complaints because it was so obviously a rogue operation,” says Browder.

In fact, there was nothing rogue about it; this was how Russia’s plutocrats now operated. Instead, Browder’s lawyers were the ones feeling the heat, and six of the seven fled Russia. Magnitsky, 36, with a young family, refused Browder’s entreaties to leave as well.

Magnitsky today is dead. He was arrested in 2008 — on “tax evasion” charges — and sent to prison. Held without so much as a hearing, his health deteriorated. In August 2009, a week before a scheduled surgery, he was transferred to a prison that lacked hospital facilities. He died three months later. This week, in a final indignity, Oleg Silchenko, the Interior Ministry official most directly responsible for Magnitsky’s detention and ongoing abuse in prison, was officially exonerated for his role in the case.

“Sergei wasn’t an oligarch,” says Browder. “He wasn’t a human rights activist. He was just a guy doing his job. His mistake was having the wrong client.”

And that’s the real point, isn’t it? Khodorkovsky’s illegal jailing leads, inevitably, to Magnitsky’s death. It leads the powerful to have troublesome journalists beaten or killed with no consequences. It allows plutocrats to steal companies from shareholders, to jail whistle-blowers, to extort with impunity. The rule of law either applies to everyone or no one. You can’t carve out exceptions.

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