|NY Times, Feb. 2 2015
To Russia, With Capitalist Ambitions
Bill Browder’s ‘Red Notice,’ About His Russian Misadventures
by William Grimes
A True Story of High Finance, Murder, and One Man’s Fight for Justice
By Bill Browder
Illustrated. 396 pages. Simon & Schuster. $28.
In the early 1990s Bill Browder invested $2,000 in a handful of Polish
companies being privatized after the collapse of Communism. Eastern
Europe was dipping a toe into the cold bath of free-market capitalism,
and Mr. Browder, fresh out of Stanford University’s business school,
wanted to jump in, too.
His small investment quadrupled in value within the year and went on to
repay him tenfold. “For those who don’t know, the sensation of finding a
‘ten-bagger’ is the financial equivalent of smoking crack cocaine,” he
writes in “Red Notice: A True Story of High Finance, Murder, and One
Man’s Fight for Justice.” “Once you’ve done it, you want to repeat it
over and over and over as many times as you can.”
Mr. Browder continued to smoke the crack pipe with gusto, shifting his
action to Russia and creating a wildly successful investment fund,
Hermitage Capital Management. His freewheeling, snappy book describes
the meteoric rise, and disastrous fall, of a buccaneer capitalist who
crossed the wrong people and paid a steep price.
The highs were very high. Mr. Browder excelled at sniffing out
undervalued companies, rolling the dice and reaping fantastic returns.
After determining that a little-known oil company called Sidanco was
actually worth as much as Lukoil, for example, he bought about $11
million worth of its stock at $4 a share. The gamble was vindicated a
year later when British Petroleum bought a block of the company’s stock
at a 600 percent premium over that price.
Within two years after Hermitage’s founding in 1996, its assets had
swelled from $25 million to more than $1 billion, making Mr. Browder the
largest foreign investor in the Russian stock market. In 2000, Hermitage
was named the best-performing emerging-markets fund in the world, having
generated returns of 1,500 percent to its original investors. Its assets
would grow to $4.5 billion by 2005.
The lows, however, were very low. A hefty portion of the book describes
Mr. Browder’s frantic efforts to fight off a wolf pack of oligarchs
trying to muscle in on Hermitage’s action and strip its assets.
The cut and thrust, and the high stakes, make for a zesty tale. Mr.
Browder and his Russian team became adept at amassing scandalous
information about their foes and then presenting the findings, tied up
in a neat package, to Western journalists who could inflict maximum damage.
Mr. Browder admits to a fatal miscalculation. He assumed that his
American citizenship made him untouchable. In fact, he was living on
borrowed time. When Vladimir V. Putin was intent on reining in the
oligarchs, his interests and Mr. Browder’s coincided. But at a certain
point, they did not.
In 2005, deemed a “threat to national security,” Mr. Browder was kicked
out of Russia, and his companies were seized. Later the Russian
government asked Interpol to issue an all-points bulletin, or red
notice, for his arrest on tax evasion charges. Interpol rejected the
request, calling it politically motivated. Mr. Browder was then
convicted by a Russian court in absentia. “When the Russian government
turns on you, it doesn’t do so mildly — it does so with extreme
prejudice,” Mr. Browder notes ruefully.
Worse, the Interior Ministry arrested Sergei L. Magnitsky, Hermitage’s
tax lawyer. After being held in custody for more than a year, Magnitsky
was found dead on a prison floor in Moscow after being beaten and tortured.
Mr. Browder began a relentless campaign to expose and punish Mr.
Magnitsky’s persecutors, turning his case into an international cause
célèbre. His efforts helped pressure Congress to pass a law in late
2012, commonly known as the Magnitsky Act, that barred 18 Russian
officials connected with Magnitsky’s death from entering the United
States or using its banking system, and set a precedent for future visa
sanctions and asset freezes. Last spring the European Parliament passed
its own version of the act.
It’s a Hollywood ending, right down to the standing ovation given by
more than 700 European members of Parliament after passing the legislation.
Mr. Browder makes an unlikely hero and even more unlikely capitalist.
His grandfather was the head of the American Communist Party and
featured on the cover of Time magazine in 1938 as “Comrade Earl
Browder.” Felix Browder, Earl’s son, became a mathematics professor at
the University of Chicago. Bill Browder’s brother, Thomas, is an eminent
particle physicist. “In my family, if you weren’t a prodigy, you had no
place on earth,” he writes.
Mr. Browder, by contrast, was a slacker. He goofed off at boarding
school and barely made it into the University of Colorado, Boulder,
where he spent his freshman year reliving “Animal House.”
In the ultimate act of rebellion, he set his sights on a business
career, a decision that straightened him out academically and no doubt
would come as a shock to his grandfather. Adding insult to injury, Mr.
Browder turned his gaze eastward, toward the former Communist heartland,
with plunder on his mind.
“The dominoes were falling: soon all of Eastern Europe would be free,”
he writes of the tumultuous weeks after the Berlin Wall came down. “My
grandfather had been the biggest Communist in America, and as I watched
these events unfold, I decided that I wanted to become the biggest
capitalist in Eastern Europe.”
For a while, he was. But as Mr. Magnitsky warned him, Russian stories
never have happy endings.
Mr. Browder concludes on a grim note. “I have to assume that there is a
very real chance that Putin or members of his regime will have me killed
someday,” he writes. For good measure, he adds, “If I’m killed, you will
know who did it.”
If this sounds histrionic, there is more than one dead body littering
Mr. Browder’s pages. Alexander Litvinenko probably felt safe in London
until he drank a cup of radioactive tea. As Mr. Browder discovered on
more than one occasion, Russians are not always known for their light touch.