Bill Browder thought investing in Russian companies was a simple, straightforward way to make a lot of money–and it was. It also turned out to be a great way to make some powerful enemies.
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This an autobiography about hedge fund founder, Bill Browder, and what he went through in the late 90s early 00’s, when he decided to invest in Russia’s transition from communism to capitalism. Basically, in his early 20s, he was doing financial consulting when he went to work for this company called BCG Capital run by a crotchety man named Robert Maxwell. He doesn’t mention this in his book, but guess who is related to Robert Maxwell? None other than Ghislaine Maxwell. To hear about who Robert Maxwell was as a boss, you start to feel less surprised about what a bad egg his daughter turned out to be. He would fire people left and right like he was Donald Trump on meth – he would yell so ferociously at people that he once caused a dude to have a heart attack.
Browder, the author, knew about Maxwell’s reputation before he went to work there, but he saw a lot of potential in investing in Eastern Europe as they increasingly privatized, that he went to work for him anyway. But just within a few months of starting his new job, Robert Maxwell, 68, was found dead at sea. To this day, it’s unclear whether it was murder, suicide, or murder – it was probably murder.
Almost as soon as Maxwell dies, shit goes seriously south at the company. Browder’s boss calls him in and tells him that they’re paying out bonuses early this year, and he hands Browder a check for 50K pounds – this is the largest sum of money Browder had ever received so he was stoked. Strangely, the check was written out by hand instead of printed – that’s fishy, but Browder goes straight to the bank. But the bank teller comes back, looking a little sheepish, and says, sorry but the funds are not available for this check. Now BCG should be a multibillion pound company – so how in the world is his 50K check bouncing.
To make a long story short, Robert Maxwell had pulled 460 million pounds from the company’s pension fund to prop up the share price, and so overnight, 32 thousand pensioners lost their pension. Tons of people at the company get fired, but Browder doesn’t because he is in charge of all these Eastern European investments that the company doesn’t know what to do with. He thinks this is a good thing and that it will buy him time to find his next job, but the fact that he has working for Maxwell on his resume makes him complete kryptonite – no one will hire him.
So he ends up taking a demotion at Salomon Brothers, and there he ends up running investments in Russia – because no one wants to work with them. So Browder, when he goes to his first consulting opportunity with some fishing / boating company, figures out that, as Russia was attempting to transition from communism to capitalism, and they were essentially selling significant assets for pennies.
He’s so excited about this, and runs back to the company to tell as many people as he could that they were essentially giving money away for free in Russia. The first dude he asks says,
“What are the advisory fees?” Now, with the kind of profit that stands to be made, this question couldn’t be less important. The next guy was like, “what are the spreads and trading volumes?” Again, the most unimportant detail to focus on. Surely these men were clever people – so this goes to show how caught up in details even smart people can become – and they totally miss the forest for the trees. He continues to harp on Russia for weeks, no one pays attention, people start to think he’s crazy – he stops getting invited to lunch. He’s the office pariah. Pretty soon, his year at Salomon is about up, and he’s only made 50K for the company when he gets a call from this executive at the company who’s interested in hearing his Russia presentation. So he goes and gives the presentation, and he’s not even done with it before the exec is like, “holy shit, here’s 25 million, go to Russia and make us some money.”
And he does, to make a long story short. He makes 100 million almost overnight, and now all the same people who had stopped inviting him to lunch are crowding around his desk. He’s a huge success, and he’s meeting with major investors like Sir John Templeton, and whoever Michael Douglas played in Wall Street.
So he’s made his company so much money, but he sits in this meeting where a bunch of people try to take credit for the Russia business, and he just realizes that he wants out of working for other people altogether. So he quits Solomon and starts to meet with people asking for startup capital.
Here’s a crazy, and pretty infuriating, story. He meets with this dude from an English Bank called Flemings, discusses his business plan, and says that he’ll give 50% of his business to the investor for 25 million. The investor says, “well, who will get the other 50%?” Browder says, “I will.” Here is the investor’s response:
“But if the Russian market goes up as much as you say, you would make millions.”
“Yes, that’s the point – and so would you.”
“I’m terribly sorry Mr. Browder. That type of arrangement definitely wouldn’t fly around here.”
Stunning. What. A. Dick.
So after running around a bit, he was able to get money from this rich guy named Edmond Safra. Strangely, Safra normally only did deals with people he’d known for years, so this was a nice compliment. He then moved to Moscow and married his gf so she’d come with him. But she gets pregnant and decides she needs to stay in London – so he goes to Moscow alone.
So, while he’s in Moscow, he finds out that a lot of companies – maybe even the majority – are selling preferred vs ordinary shares; and the preferred shares are essentially selling at a 95% discount. Why? Who the heck knows?! As nearly as he can tell, it’s because no one is asking why. He doesn’t say this in the book, but I got the impression that this system of selling shares was sort of newly being set up because they were just getting back into capitalism after years of communism, and people are so used to communism sucking the life and resources out of them, that they don’t even know a good deal when they see it. Browder, sees it for the good deal it is, and he gets his business partners to send money to invest right away.
Meanwhile, he hires a few people to his company – finding good people was also a huge challenge due to communism. One of the people is this hot secretary named Svetlana. I think we all know where that’s heading. But he ends up marrying Sabrina, his pregnant gf a few weeks later. Meanwhile, he’s making money hand over fist buying shares in all of these companies.
One day, one of his contacts tells him that a Russian Oligarch named Vladimir Potanin is interested in selling him 4% of his oil company, Sidanco. Browder does his research, and realizes that this deal is just stunning, so he buys 1.2% for a steal. He makes money, Potanin makes money, drinks all around. A few weeks or months later, he’s on vacation in South Africa, when a colleague of his gives him a call to tell him that apparently, Potanin is now selling shares for much less, and he’s not allowing Browder and his buds to partake of this deal. It’s basically screwing him and his clients out of tons of money, but even stranger, Potanin seems to be screwing himself out of tons of money.
And, shockingly, that is exactly what he is doing. Here is the conversation that Browder has with a representative from Potanin’s company:
Browder: If this dilution goes forward, it’s going to cost me and my investors … $87 million.
Leonid: Yes, we know. That’s the intention, Bill.
Browder: You’re deliberately trying to screw us?
Leonid: Yes.
Browder just can’t believe it. Leonid is just walking away and Browder has no fucking recourse, so Browder just yells at him, “If you do this, I’m going to be forced to go to war with you.” This is a ridiculous statement. He’s an American, and he’s threatening a Russian Oligarch on his home turf, but Browder’s been pretty much backed into a corner.
Browder starts by basically telling all of Potanin’s business partners about what Potanin is capable of doing; They all bitch back to Potanin, which just basically pisses him off. The next thing he does is talk to a reporter. Now this is really not done in Russia. Browder’s totally asking to be murdered. The story goes global – all of the financial reports are talking about it. It’s making Potanin look very bad. But it’s also putting a target on Browder’s back. He starts traveling around with 15 guards, literally.
He then meets with the chairman of the Russian Federal Securities and Exchange Commission. And he actually takes on the case, and shuts the entire thing down. So basically, Bill wins the fight. He also goes on to make insane amounts of money, and he’s only 33 years old.
But then, things go really south with his investment firm — Russia basically defaults, and his firm loses 90% of its wealth; and his wife also tells him she wants a divorce. So he’s now at a place pretty close to rock bottom. But then he gets a call and finds out that his business partner, Edmund Safra, was dead at 67 – he’d died in a house fire which was purposely caused, so he was basically murdered.
Anyway, so back in Moscow, Browder is trying to make back all the money he’s lost his clients, but he’s finding that the Russian Oligarchs are engaging in all sorts of nefarious and illegal practices to essentially steal anything they can from shareholders. Browder wants to combat this, so he gives a presentation one morning to the American Chamber of Commerce in Moscow about all of the strategies the oligarchs are using to steal. He’s apparently the only one stupid or brave enough to speak out against the oligarchs.
He meets this woman there and she just has this amazing quality to him, he’s totally in to her right away – her name is Elena. But she’s like the woman every man in Russia wants to date. He tells a friend of his that he went on a date with Elena Molokova, and his friend is like, THE Elena Molokova?! She’s really hard to get; she seems aloof during many of their dates…I don’t get it – I’ve played aloof trying to get hot guys and it totally doesn’t work… Anyway, he finally convinces her to give him a shot, and they fall in love blah blah blah;
Well, this is the shot in the arm he needs to fight the Russians. Now it’s still totally true that the Russians will murder anyone who gets in their way with impunity. So this guy has balls the size of Canada – and a brain the size of a hockey puck.
So Browder and his partner, Vadim, start researching into this oil company Gazprom. They believe that the management of Gazprom has stolen exorbitant wealth from the company, but they can’t prove it. Everything they know is hearsay, so that’s that.
Here’s how they prove it – this defies all belief, btw – one day, this street kid is hocking wares to Vadim while he’s stuck in traffic, selling things like newspapers, pirated CDs. This kid tells Vadim that he’s selling, wait for it, databases. So he has all these CD-ROMs with tax records, info about pension funds…really?!? So at this street corner you can buy newspapers, gum, maybe a bottle of water; or, for the same money, you can buy all of the Records of the Moscow Chamber of Commerce — this is what they call a Tuesday in post-communist Russia.
When they looked into these records, they saw that Gazprom management had basically sold major company assets for pennies to relatives, essentially. But, interestingly, 90% of Gazprom’s assets remain in Gazprom – something other investors are not aware of. Browder says, and I quote:
What should an investor do in a situation like this? I’ll tell you what: you buy the shit out of that stock.
But Browder also shared the story of Gazprom’s corruption with 6 different major media outlets – this became world news. So then Gazprom got the Russian commerce watchdogs to say that there was nothing wrong with what they did. They also got Price Waterhouse to say the same thing – that Gazprom had done nothing wrong. And that’s where Browder thought the entire situation was going to be left – the bad guys won. But enter newly elected President Vladimir Putin. He steps in and basically bitch slaps the Gazprom oligarchs. Overnight, this leads to the Gazprom stock skyrocketing, and Browder’s fund makes money hand over fist.
Browder then dives into the next corrupt company and exposes them – all the while with Putin ensuring that these companies don’t get away with it. So, how is Browder not being murdered again and again? Well, it turns out, what he’s doing is so insane and brazen, that people literally think that he’s got some serious muscle behind him – like he must be backed by some big and scary organization, when in reality, he’s a slightly less intimidating version of a My Little Pony.
Anyway, Browder is enjoying making a lot of money and also turning around a lot of the corruption in Russia when one day, Putin shows his true colors – mauve. JK, but basically Putin starts to persecute the oligarchs with jail time in what turns out to be a successful effort to put them all into his pocket. Suddenly, the work Browder is doing to expose corruption actually works against Putin’s best interest; so in 2005, Browder is expelled from Russia.
So after some back and forth – he finally finds out that he’s been banned from Russia due to being a threat to Russian security. This is obviously ridiculous, but it comes from the highest level in Russia, so there doesn’t seem to be anything he can do.
The cool thing is that he’s actually able to sell all of his assets secretly with another banker in Russia, so he is able to save his client’s money before Putin gets his hands on it, but his business dealings in Russia are over and he starts losing all of his clients. This is when he starts to do business in other emerging countries – looking for the same kinds of sweet deals he was able to find in Russia – and this actually goes well. So here is where the story should have ended, but the Russians, and by Russians I think I mean Putin, have it in for Browder. They start raiding his offices with accusations that are based on lies; and they’re even going public – making it seem like Browder was engaged in all this illegal shit. Worse, there doesn’t seem to be anything he can do about it.
But he and his company have one small Ace in the hole. There is an inside in the Russian government, who goes by the alias Aslan, who wants to take down the corrupt ones in the government, so he will feed them what information he can.
There’s a lot of back and forth detail here that I’m skipping, but ultimately, Bill is being accused of tax evasion. The weird thing is that they basically raided all of Hermitage fund’s offices, and I think pretended that they found some documents showing that Hermitage had stolen some company worth millions – ultimately, they created over a billion dollars worth of companies which they claimed that Hermitage had stolen – all completely fabricated. But they can’t figure out what the motive is for generating this story; then, they finally figure it out – Hermitage paid 230 million in taxes the year they were reported to have stolen these companies. The Russian baddies look to be attempting to retrieve the 230 million in taxes back into their pockets.
Browder and his pals are actually able to show that certain banks received taxes back from the Russian government in the amt of 230 million dollars – all due to this fraudulent claim of stolen companies. They put together all the evidence and share it with the press, but instead of taking the bad guys down, the situation just gets worse. His lawyer, Eduard, has to leave Russia in the middle of the night to an undisclosed location with no idea when he’ll be able to return to his wife.
One of the Lawyers who worked with him, Sergey Magnitsky, didn’t leave Russia like the others because he knew he hadn’t done anything wrong. THe police came, raided his house, and arrested him. He told his wife and kids that he’d be back soon. This arrest began a months-long ordeal for Sergei. Basically, they wanted him to retract his original statement which incriminated the people who fraudulently claimed 230 million in tax money. While he was in prison, he basically lived with his own sewage, almost froze to death, wasn’t allowed to see his wife or mom, wasn’t allowed to speak to his 8 year old kid – still, he wouldn’t retract his statement.
But there was a small glimmer of hope – Sergei was able to help other inmates with legal advice, so he becomes very popular – kind of like the sleazeball lawyer in the documentary Crazy Love – where he went to prison for throwing acid on his ex-fiance’s face, but then became super popular in prison because he was able to help everyone with legal advice. But Sergei is a good guy helping folks. The Russian prison system is dedicated to torturing Sergei, and his health is starting to fail – he loses 40 pounds due to some sort of stomach issue.
Then, one day, a 24 yo secretary recommends they do a YouTube video – this is 2009, so that was still an up and coming thing. He creates a video, but before releasing it, he wants Sergei to approve it.
Meanwhile, the Russians are keeping up with their accusations of Browder and plan to issue an interpol Red Notice with their baseless claims. Browder puts together a press statement to attempt to get the real story out – but he’s going up against Goliath. But then he remembers the YouTube video – I’ve included this in the shownotes.
It did well, but it did not get Sergei out of prison in time, and he passed away — basically he was beaten to death — in November of 2009. Browder writes this in the book:
Sergei Magnitsky was killed for his ideals. He was killed because he believed in the law. He was killed because he loved his people, and because he loved Russia. He was 37 years old.
Everyone is devastated by Sergei’s death, and Browder can’t really function. Sergei died because he uncovered some serious corruption, and because he wouldn’t lie about it. Browder can think of only one thing, and that is to get justice for Sergei – but how? He starts going to various government officials in DC, but is getting largely ignored. Then, he has this meeting with Kyle Parker. Browder doesn’t have much hope in this meeting, since Parker had left off Sergei’s imprisonment in a briefing which went to Obama just 4 months earlier. Well, Parker turns out to feel a lot of remorse for making this decision when he finds out that Sergei was killed in prison. He read Browder’s words about Sergei when he was on the train, and just cried. He felt very responsible for what happened to Sergei, so Parker is on a mission to try to right the wrong as best as he can.
The goal at this point is to essentially punish the many people who were responsible for what happened to Sergei by blocking them from entering the US and doing business in the US. There’s about 60 people on this list, and some of whom will be severely affected if this measure goes forward. The people at the top of this list are Kuznetsov and Karpov. They’re both just getting away with such bloody murder, its’ outrageous. Here’s where YouTube steps in to save the day. Browder and co make a video about these guys, and they go viral – everyone in Russia is seeing how these guys live like insane millionaires, yet make pretty meager salaries. It’s simply not possible unless they are engaged in some sort of criminal activity. So the Russian authorities act like there’s nothing to see here, but the Russian people definitely take notice.
There’s a lot of back and forth for Browder getting the Magnitsky Act passed. At one point Senator John Kerry basically stands in the way because he was, is and always will be a dick. JK, but this is a quote from the book:
The rumor in Washington was that John Kerry was blocking the bill for one simple reason: he wanted to be secretary of state after … Clinton … . According to the story making the rounds, one of the conditions for his getting the job was to make sure that the Magnitsky Act never saw the light of day… .
But Browder is finally able to get the Magnitsky Act passed, and it really pisses Russia off. Putin apparently then puts in a law that blocks Russian children from being adopted by American families. And a lot of these kids need medical care that they will now not be able to get – it’s pretty devious.
Anyway, the saga continues – Browder talks about a man who was an informant to him about a corrupt Russian Oligarch get murdered on the streets in the UK, and Russia puts out an interpol Red Notice accusing Browder of murdering Magnitsky. He’s able to have the Notice blocked or revoked by Interpol, just with overwhelming evidence of his innocence; but frankly, if I were this guy, I might always feel like I had a bit of a target on my back. And Browder even says that part of the reason he wrote the book was to get the story out there as an additional measure of protection.
That’s it for this time – see you soon!
