Bill Browder: “The Impunity Bubble Is Broken”

Institute of Modern Russia

After the Magnitsky Act was passed by the U.S. Senate, Bill Browder, founder and CEO of Hermitage Capital and one of the bill’s most active proponents, spoke at Columbia University Law School. He told the story of Sergei Magnitsky, who exposed the largest embezzlement scheme in Russian history, was jailed and died in Moscow prison. Ian Hague, co-founder of Firestone Management, and Kimberly Marten, acting director of the Harriman Institute, also shared their views on the issue.

It so happened that the event entitled “Failed Mafia State” at Columbia University Law School was held on December 6th, the same day the Sergei Magnitsky Rule of Law Accountability Act was passed by the U.S. Senate. On December 14th, the bill was signed by President Obama and came into full effect. The new law imposes a visa ban and asset freeze on individuals involved in the imprisonment and death of Sergei Magnitsky, as well as on those responsible for other gross human rights violations in Russia.

Speaking at Columbia University, Bill Browder, founder and CEO of Hermitage Capital Management investment fund, told the story of Sergei Magnitsky: how he was arrested, tortured and died in prison—the story that he must have told thousands of times during the last three years. Yet the horrors of these tragic events have not faded away.

“I’m going to talk about Russia as seen through my own eyes and my own experience,” Browder said in the beginning of his story. He has always been interested in Russia, because his grandfather, Earl Browder, was “the biggest communist in the United States” (he was the general secretary of Communist Party USA.) After the Soviet Union collapsed, Bill Browder decided that he could become “the biggest capitalist in Russia.” He got his MBA from Stanford, and worked for Boston Consulting Group and Salomon Brothers before setting up his own investment fund, Hermitage Capital. In 1996, Browder moved to Russia, and within two years his company became the largest hedge fund in the country, with a $1 billion portfolio.

“At that moment all Russian companies were very corrupt, they were stealing a lot of money,” continued Browder. “So I came up with this idea that I could stop the stealing.” Browder and his team ran what they called “a stealing analysis” to see what was being stolen and why. One of the companies that attracted Browder’s attention was Gazprom, Russian gas monopoly. Its stocks were traded very cheaply—with a 99.7 percent discount, though in reality the discount should not have been more than 10 percent. “Over time we found out that nine top-managers of Gazprom stole from their own company the oil and gas reserves the size of Kuwait,” he said.

Browder’s team compiled a database of evidence proving that Gazprom was engaged in corruption schemes. They gave this information to the world’s leading media outlets: The Financial Times, The New York Times, The Wall Street Journal, et al. The Russian media followed the lead, and, as a result, thousands of articles exposing corruption in Russia were published.

When Vladimir Putin came to power in 1999, “he was not the real president,” as Browder put it, “he was the president of the Presidential Administration.” Putin wanted to get real power,and he decided to support Browder in his fight against corruption. “It seemed like a great confluence of interests,” Browder explained. “I thought that Russia was going in the right direction. But after a while, it became clear that Putin was doing it not to fight ‘the bad guys’, but because he didn’t like that they were stealing power from him.” Putin fired Rem Vyakhirev from the position of Gazprom CEO and appointed Alexei Miller, his old friend from St.Petersburg. “The new guy was not allowed to steal assets—he could steal cash flow, but not assets,” Browder pointed out sarcastically. Quite soon, Gazprom’s share prices went up by a hundred times.

In late 2003, when Putin sanctioned the arrest of Mikhail Khodorkovsky, the head of Yukos, Russia’s largest oil company, it became clear to Browder that he began to dispose of potential rivals. “He put Khodorkovsky in a cage and allowed state media to broadcast this power image of a man who used to be the richest man in Russia, and now was kept in prison. Russia’s businessmen heeded the message.”

In 2005, it was Browder’s own turn. He was banned from entering Russia under the pretext of being a “threat to national security”. Browder sold all the shares of the companies he had invested in to prevent Russian authorities from stealing from his fund. He also transferred his staff to London. “It was a scary moment, but at the time I didn’t realize how lucky I was,” Browder said.

Soon enough, the Moscow office of Hermitage Capital was raided by the authorities, which confiscated the fund’s documentation. It was not until a few months later that Browder found out that his company was no longer his. He hired a group of lawyers to investigate the situation. One of them was Sergei Magnitsky, a 36-year old attorney who worked for the American firm Firestone Duncan.

After six months of investigation, Magnitsky discovered a “web of corruption” organized with the help of Russian tax officials. As a result of their embezzlement scheme, $230 million were stolen from the Russian budget. “Sergei found out that the people who stole our company reported to the tax authorities that they had made a mistake in their profit reports. On December 31st, they applied for a $230 million tax refund. The next day, their request was satisfied. It was the largest tax refund in Russian history,” Browder noted. It was also Russia’s largest tax embezzlement scheme.

Browder’s team decided to give this information to the media. But what they least expected was that, instead of arresting the perpetrators, Russia’s authorities went after the lawyers themselves, opening criminal cases against them.

“I contacted all my lawyers in Russia and told them to leave the country. I offered to fly them to London. Six people accepted my offer. Sergei was the only person who decided to stay,” Browder continued. “He was young, he had ideals, and he was a patriot. He knew the law and he thought that the authorities cannot convict him on false accusations.” But Magnitsky underestimated his opponents. In October 2008, he testified against a number of Interior Ministry officials involved in stealing $230 million. A month later, he was arrested on the charge of embezzling the very same money on Browder’s orders, and placed in detention.

As Browder detailed the inhumane conditions under which Magnitsky was kept in detention, and the tortures he went through, the audience fell silent. “They wanted him to withdraw his testimony and to confess that he stole this money on my instruction,” Browder said. “But Sergei was a man of great integrity and he refused to sign the confession.” After months of intolerable conditions, Magnitsky’s health deteriorated dramatically. He developed an acute pancreatitis, but, despite his numerous requests, he was denied medical help. On November 16th, 2009, Magnitsky was transferred to another Moscow prison, where he died after being beaten by rubber batons.

“It was the most heart-breaking news I’ve ever heard in my life,” Browder confessed. “And I decided that I would never let these people [who were involved in Magnitsky’s death] get away with it.”

“Sergei was a great lawyer,” Browder continued. “He wrote a 450-page report of what was happening to him, all the details. We had the most detailed human rights case on our hands. But it didn’t help. The Russian authorities wanted to prove that Sergei was a crook. So they put him on trial post mortem—another first for Russia.”

It became clear to Browder that he wouldn’t be able to get justice inside Russia, and he began exploring other options. “Essentially, it was a matter of money—a theft of $230 million,” he explained. “People who stole this money like to travel abroad. So we decided to look for justice outside of Russia.”
An opportunity presented itself when Browder met with U.S. Senator Benjamin Cardin, who later wrote a note to Secretary of State Hillary Clinton, enclosing a list of people involved in Magnitsky’s death. The State Department took no action, and the Senator published this list (which became known as the “Cardin List”) on his website.

Browder later testified at the U.S. Helsinki Commission, where he received the support of Democratic Congressman Jim McGovern who suggested drafting legislation that would ban people from the “Cardin List” from entering the U.S. and doing business here. The concept was also supported by Republican Senator John McCain, thus ensuring bipartisan backing on Capitol Hill. Russia’s opposition leaders actively supported the idea of U.S. visa and financial sanctions on human rights abusers—both in the Magnitsky case and beyond.

The Obama Administration opposed the bill until 2012, when Russia joined the WTO. For a long time, American businesses were trying to get wider access to the Russian market, but were restricted by the 1974 Jackson-Vanik Amendment, which limited trade with the USSR over the lack of the freedom to emigrate. President Obama, who actively supported Russia’s WTO membership, promised that the outdated amendment would be lifted. The Congressional condition was the passage of the Magnitsky Act, “the modern version of the human rights legislation.” After a two-year discussion, the legislation was passed by the U.S. Senate by a more than convincing margin of 92 votes to 4.

“The bubble of impunity is broken,” Browder said in conclusion of his speech. He looked tired, and the signs of satisfaction were hardly visible on his face. He kept his promise, but there is much work ahead: a number of Western countries, including Canada and the EU states, are discussing the possibility of passing similar legislation.

Kimberly Marten, acting director of the Harriman Institute, made a few comments after Browder’s speech; her point of view differed from his. She quoted American diplomat George Kennan, who once said that the U.S. should not embark on “world crusades.” In Marten’s opinion, it is not right to single Russia out of a number of countries where human rights are being violated. “It’s inaccurate to call Russia a ‘mafia state,’” she added, “It’s a humiliating bill for Russia, and the outcomes can be unpredictable.”

The last to speak was Ian Hague, CEO of Firebird Management, an investment fund operating in Russia. “I approve of this Act,” he stressed, “I don’t think it intends to stigmatize Russia, but targets a few individuals. This legislation sends a message to Russia that we welcome it to the international economic community, but that its behavior should change.” Hague suggested that this bill can have a positive impact on investment activities in Russia, as well as on its overall economy. займы онлайн на карту срочно hairy woman https://www.zp-pdl.com www.zp-pdl.com займ срочно без отказов и проверок