Bill Browder's Hermitage Capital Management fund was the biggest foreign investor in Russia until he was kicked out of the country in 2005.
Once one of the Kremlin's biggest public supporters, Browder is now spearheading a campaign to enact international sanctions against 60 Russian officials after a lawyer for Hermitage, Sergei Magnitsky, died in prison last year.
Browder spoke to RFE/RL correspondents Irina Lagunina and Gregory Feifer about that campaign and the reasons behind it.
RFE/RL: Would you outline what happened to Hermitage Capital in Russia?
Bill Browder: Originally what happened was that our offices were raided in Moscow on June 4, 2007, by several dozen police officers. During the raid they took away all of the stamps, seals, and certificates for our investment holding companies.
Three months after the raid, those stamps, seals, and certificates, which were in the custody of the police, were used to fraudulently reregister our companies out of our name and into the name of a man convicted of murder who'd been let out of jail after a year and half by the Interior Ministry.
We hired a team of lawyers to try to figure out how to stop this corruption we were being exposed to. One of them was 36-year-old lawyer Sergei Magnitsky from the American law firm Firestone Duncan.
Sergei learned that not only had our companies been stolen from us, but after the documents had been seized by the police, they were used to create a bunch of fake backdated documents to claim that our companies owed a billion dollars to three empty shell companies.
He learned those contracts had been taken to court by the shell companies and that lawyers had been hired that we knew nothing about to show up and defend our companies in court. Then those lawyers plead guilty to a billion dollars of fake liabilities, so the courts ordered a billion dollars of fake liabilities against our companies.
The most cynical thing Sergei discovered was that the people who stole our companies took those fake liabilities to the tax authorities and said these companies that paid $230 million of taxes a year ago on a billion dollars of profits shouldn't have. They said we'd like that $230 million back.
RFE/RL: You've said the Russian authorities were holding Sergei Magnitsky hostage and essentially killed him. What is the proof of that?
Browder: The first proof is that they arrested him for a crime that they couldn't have possibly committed. They said that he was the director of a company that didn't pay taxes. But he wasn't a director of that company, and the company did pay taxes.
Second, he was arrested by the same officers he testified against for being involved in the major tax-rebate fraud. And those officials then had him arrested after he testified against him.
He was then subjected to unbelievable, indescribable torture in prison for having testified against those officers. In the end he got sick from the torture, they denied him medical treatment, and he died. It's about as open and shut as you can get and there's a ream of thousands of pages of documents to prove it.
It's about the most provable case of false arrest and torture that you can have, because the documents are so unbelievably compelling. Which is what's inspired politicians from around the world to do something about this. It's just such a black-and-white case.
Reaching A 'Tipping Point'
RFE/RL: Would you comment on the United Nations' decision to investigate Magnitsky's death?
Browder: We were obviously extremely pleased the UN agreed to take a role because the Russians have tried to stifle any kind of real investigation at every step. The more they stifle, the more they procrastinate, and the more they promote the people who killed Sergei Magnitsky, it's important to have credible international organizations hold their feet to the fire, and the UN is the most credible international organization that could do that. We're hopeful that the three special rapporteurs who've been assigned to the case will do just that.
RFE/RL: There have been numerous initiatives to get politicians in Western countries to try to hold Russian officials accountable but little action. Are you disappointed?
Browder: Quite the opposite. I've spent quite a bit of time speaking to politicians in every country and there's a huge appetite right now after the scandalous verdict against [former oil tycoon] Mikhail Khodorkovsky and the arrest of [opposition leader] Boris Nemtsov to do something about what's going on in Russia. I don't see any resistance whatsoever.
I was just in Washington last week and the politicians I was meeting with are gnawing at the bit to do something about our case and other cases. It's reached a tipping point as far as I can see.
RFE/RL: But so far there have only been declarations from Western parliaments. There have been no specific steps.
Browder: That's all happening as we speak. I'm here in Prague today. I've met with a number of ministers to implement the European Union Parliament's call for visa sanctions [against 60 Russian officials involved in Magnitsky's death] and I've been in touch with the Polish parliament and Foreign Ministry. And we're working with a number of other countries.
This will be the year that you see visa sanctions, that's been my New Year's resolution, which is to make sure that all of this talk turns into reality. The Russians can be busy covering up this murder as much as they want, but in the West, it's the end of the road and this year will prove that.
No Accountability
RFE/RL: How would you describe the list of 60 officials? Are they characteristic of the Russian authorities in general or a rogue gang?
Browder: The list was constructed because Russia has a crazy bureaucratic process in which everyone who does terrible things writes it down on a piece of paper. As a result of true torture done to Sergei, it was all documented so we were able to get the name of the judge who rejected Sergei's request for medical attention, the names of the investigators who put forward false evidence to get him incarcerated and the name of the prison doctor who denied him medical attention. We were able to put this whole list together based on the bureaucracy's own documentation.
We said anybody we don't have evidence for doesn't go on the list. It's only the most provable people involved, there are many others who played a role and it probably goes much higher up the chain than what we've alleged. But we want to be very conservative here and say for all the politicians and other states we're showing this that here's the evidence.
In terms of whether this is just a rogue gang, the more we've been public about the case, the more people who've been victimized have come forward to say that some of the people from this list of 60 did terrible things to us or our family. We've been approached on 10 different occasions by people who've been victimized by the same group.
The more people approach us, the more it seems this is a criminal brigade that works for the Russian top brass. It's not a rogue gang, it's fully authorized to go about illegal, fraudulent business and to ruin lives and kill people.
RFE/RL: The Magnitsky case prompted widespread international condemnation, as did last month's sentencing of former Yukos CEO Mikhail Khodorkovsky. But despite all the terrible news coming out about the Russian authorities and the incontrovertible evidence that authoritarianism is growing in Russia, there's an ongoing debate about whether there's a split between authoritarian Prime Minister Vladimir Putin and would-be liberal President Dmitry Medvedev, who some still say is just waiting to take power these more than two years into his presidency. How do you respond to that?
Browder: I just look at the facts. I tend not to look at statements. And the facts are pretty straight-forward. In our case, Medvedev called for an investigation a week after Sergei Magnitsky was tortured to death and in the year since then, the people who tortured Sergei were promoted and awarded state honors. Then they blamed Sergei for the crime that he had uncovered and they had committed. It makes a mockery of this man [Medvedev].
Of course, who wouldn't like to see his anti-legal-nihilism campaign bear fruit? But the facts speak for themselves and unless he wants to put his foot down and show he's truly the man in charge, we can only conclude that he's essentially not.
Third Time Unlucky?
RFE/RL: You've warned Western companies not to invest in Russia. And yet this month we saw an $8 billion deal between BP and Russia's state oil company, Rosneft. How did you react to the news?
Browder: Why shouldn't Western companies invest in Russia? The answer is because it's Russian-roulette capitalism. It's entirely possible at any point to literally have your head blown off doing business in Russia, and my own case is a prime example.
But it's just the tip of the iceberg. For every case like mine you know about, there are 20 other people just like me who are suffering in silence. I get contacted by these people all the time, it's just heartbreaking the kind of misery people go through. This is not business risk like any other, this is true Russian roulette.
As far as BP and Rosneft, I know that story very well because I know all the players. It's amazing to me that BP is in such a desperate situation that they would have had to resort to going back to their abusive relationship for the third time.
They got ripped off when they invested in a Russian company called Sidanco back in 1997. They got completely humiliated in their fight with the majority shareholder of their joint venture TNK-BP in ways we don't even know about. What we know is just the stuff that was made public.
And now they're back for a third time? Hurt once, shame on them, hurt twice shame on you, hurt three times, shame on I don't know whom.
RFE/RL: And yet BP made a great deal of money in Russia, by many accounts more than they had expected.
Browder: I made a great deal of money for my clients in Russia as well, but look how it all ended. I got kicked out of the country, they tried to expropriate all my assets and they killed my lawyer when he started to complain about all the crime that was going on. There are some things that just aren't worth it for money.
Talk about lack of corporate social responsibility. How many BP employees have to be taken hostage or killed? There are guys who are criminally charged for espionage back in the TNK-BP dispute. Have they been acquitted or exonerated? What about [former TNK-BP head] Bob Dudley's visa and having been run out of the country?
It's remarkable that they can just brush that aside. It shows either complete obliviousness to ethics or that they're so desperate after what happened in the Gulf of Mexico that they're ready to get into bed with the worst possible partner that could exist on the planet.
Enemy Of My Enemy -- For Now
RFE/RL: Before you were kicked out of Russia in November 2005, you often praised the Russian government and Vladimir Putin. Do you regret that now?
Browder: It was clearly wrong. I thought they were moving toward some type of reform. When I was fighting corporate-governance fights and I got the first support from the government, I believed they were doing it because they believed in the transparency and anticorruption I was fighting for. It turns out what they really believed in was that your enemy's enemy is your friend.
They supported me when the oligarchs I was fighting with were stealing power from Putin and stealing money from me. But the moment they won their war with the oligarchs, when they arrested Khodorkovsky in 2003, that was the end of any reform. Clearly I was wrong in predicting this was a reform process that was going to go on. I regret giving them my voice of support.
RFE/RL: What exactly were you kicked out for?
Browder: Starting in about 1998, we started a process of what we described as corporate-shareholder activism, where we were fighting corruption in the Russian companies we were investing in. There was a huge amount of theft and fraud and we found the only way we could fight that was to research how they did it and share it with the international media.
We were quite successful for a number of years during the period our interests were aligned with the Kremlin's. After Khodorkovsky was arrested, all the oligarchs came and made their peace with Putin and they all found whatever compromise they needed to find.
But I was carrying on with my naming and shaming campaign and there were two companies we were doing this with in 2005. With Gazprom, we exposed multibillion-dollar fraud and with oil company Surgutneftegaz we exposed a hugely corrupt cross-shareholder scheme that was benefitting insiders at the expense of everyone else.
We fought those two battles very publicly and shortly after I was expelled from Russia and declared a threat to national security. I don't know which one of the companies did it, maybe they all decided to get together and get rid of me once and for all.
RFE/RL: As you said, $230 million disappeared thanks to the scheme Magnitsky uncovered. You've said that money left a trace. Where did it go?
Browder: So far we've publicly disclosed two officers who were just foot soldiers in this nasty campaign. Just those two, Artyom Kuznetsov and Pavel Karpov, ended up $4 million richer at the end of the process, with condos and cars and private jet trips. We're doing research and there will soon be more information coming out.
Once one of the Kremlin's biggest public supporters, Browder is now spearheading a campaign to enact international sanctions against 60 Russian officials after a lawyer for Hermitage, Sergei Magnitsky, died in prison last year.
Browder spoke to RFE/RL correspondents Irina Lagunina and Gregory Feifer about that campaign and the reasons behind it.
RFE/RL: Would you outline what happened to Hermitage Capital in Russia?
Bill Browder: Originally what happened was that our offices were raided in Moscow on June 4, 2007, by several dozen police officers. During the raid they took away all of the stamps, seals, and certificates for our investment holding companies.
Three months after the raid, those stamps, seals, and certificates, which were in the custody of the police, were used to fraudulently reregister our companies out of our name and into the name of a man convicted of murder who'd been let out of jail after a year and half by the Interior Ministry.
We hired a team of lawyers to try to figure out how to stop this corruption we were being exposed to. One of them was 36-year-old lawyer Sergei Magnitsky from the American law firm Firestone Duncan.
Sergei learned that not only had our companies been stolen from us, but after the documents had been seized by the police, they were used to create a bunch of fake backdated documents to claim that our companies owed a billion dollars to three empty shell companies.
He learned those contracts had been taken to court by the shell companies and that lawyers had been hired that we knew nothing about to show up and defend our companies in court. Then those lawyers plead guilty to a billion dollars of fake liabilities, so the courts ordered a billion dollars of fake liabilities against our companies.
The most cynical thing Sergei discovered was that the people who stole our companies took those fake liabilities to the tax authorities and said these companies that paid $230 million of taxes a year ago on a billion dollars of profits shouldn't have. They said we'd like that $230 million back.
Sergei Magnitsky's death was "about the most provable case of false arrest and torture that you can have."
It was the largest tax refund in Russian history. The request was made on December 23, 2007, and it was granted one day later, no questions asked.
RFE/RL: You've said the Russian authorities were holding Sergei Magnitsky hostage and essentially killed him. What is the proof of that?
Browder: The first proof is that they arrested him for a crime that they couldn't have possibly committed. They said that he was the director of a company that didn't pay taxes. But he wasn't a director of that company, and the company did pay taxes.
Second, he was arrested by the same officers he testified against for being involved in the major tax-rebate fraud. And those officials then had him arrested after he testified against him.
He was then subjected to unbelievable, indescribable torture in prison for having testified against those officers. In the end he got sick from the torture, they denied him medical treatment, and he died. It's about as open and shut as you can get and there's a ream of thousands of pages of documents to prove it.
It's about the most provable case of false arrest and torture that you can have, because the documents are so unbelievably compelling. Which is what's inspired politicians from around the world to do something about this. It's just such a black-and-white case.
Reaching A 'Tipping Point'
RFE/RL: Would you comment on the United Nations' decision to investigate Magnitsky's death?
Browder: We were obviously extremely pleased the UN agreed to take a role because the Russians have tried to stifle any kind of real investigation at every step. The more they stifle, the more they procrastinate, and the more they promote the people who killed Sergei Magnitsky, it's important to have credible international organizations hold their feet to the fire, and the UN is the most credible international organization that could do that. We're hopeful that the three special rapporteurs who've been assigned to the case will do just that.
RFE/RL: There have been numerous initiatives to get politicians in Western countries to try to hold Russian officials accountable but little action. Are you disappointed?
Browder: Quite the opposite. I've spent quite a bit of time speaking to politicians in every country and there's a huge appetite right now after the scandalous verdict against [former oil tycoon] Mikhail Khodorkovsky and the arrest of [opposition leader] Boris Nemtsov to do something about what's going on in Russia. I don't see any resistance whatsoever.
I was just in Washington last week and the politicians I was meeting with are gnawing at the bit to do something about our case and other cases. It's reached a tipping point as far as I can see.
RFE/RL: But so far there have only been declarations from Western parliaments. There have been no specific steps.
Browder: That's all happening as we speak. I'm here in Prague today. I've met with a number of ministers to implement the European Union Parliament's call for visa sanctions [against 60 Russian officials involved in Magnitsky's death] and I've been in touch with the Polish parliament and Foreign Ministry. And we're working with a number of other countries.
This will be the year that you see visa sanctions, that's been my New Year's resolution, which is to make sure that all of this talk turns into reality. The Russians can be busy covering up this murder as much as they want, but in the West, it's the end of the road and this year will prove that.
No Accountability
RFE/RL: How would you describe the list of 60 officials? Are they characteristic of the Russian authorities in general or a rogue gang?
Browder: The list was constructed because Russia has a crazy bureaucratic process in which everyone who does terrible things writes it down on a piece of paper. As a result of true torture done to Sergei, it was all documented so we were able to get the name of the judge who rejected Sergei's request for medical attention, the names of the investigators who put forward false evidence to get him incarcerated and the name of the prison doctor who denied him medical attention. We were able to put this whole list together based on the bureaucracy's own documentation.
We said anybody we don't have evidence for doesn't go on the list. It's only the most provable people involved, there are many others who played a role and it probably goes much higher up the chain than what we've alleged. But we want to be very conservative here and say for all the politicians and other states we're showing this that here's the evidence.
In terms of whether this is just a rogue gang, the more we've been public about the case, the more people who've been victimized have come forward to say that some of the people from this list of 60 did terrible things to us or our family. We've been approached on 10 different occasions by people who've been victimized by the same group.
The more people approach us, the more it seems this is a criminal brigade that works for the Russian top brass. It's not a rogue gang, it's fully authorized to go about illegal, fraudulent business and to ruin lives and kill people.
RFE/RL: The Magnitsky case prompted widespread international condemnation, as did last month's sentencing of former Yukos CEO Mikhail Khodorkovsky. But despite all the terrible news coming out about the Russian authorities and the incontrovertible evidence that authoritarianism is growing in Russia, there's an ongoing debate about whether there's a split between authoritarian Prime Minister Vladimir Putin and would-be liberal President Dmitry Medvedev, who some still say is just waiting to take power these more than two years into his presidency. How do you respond to that?
Browder: I just look at the facts. I tend not to look at statements. And the facts are pretty straight-forward. In our case, Medvedev called for an investigation a week after Sergei Magnitsky was tortured to death and in the year since then, the people who tortured Sergei were promoted and awarded state honors. Then they blamed Sergei for the crime that he had uncovered and they had committed. It makes a mockery of this man [Medvedev].
Of course, who wouldn't like to see his anti-legal-nihilism campaign bear fruit? But the facts speak for themselves and unless he wants to put his foot down and show he's truly the man in charge, we can only conclude that he's essentially not.
Third Time Unlucky?
RFE/RL: You've warned Western companies not to invest in Russia. And yet this month we saw an $8 billion deal between BP and Russia's state oil company, Rosneft. How did you react to the news?
Browder: Why shouldn't Western companies invest in Russia? The answer is because it's Russian-roulette capitalism. It's entirely possible at any point to literally have your head blown off doing business in Russia, and my own case is a prime example.
But it's just the tip of the iceberg. For every case like mine you know about, there are 20 other people just like me who are suffering in silence. I get contacted by these people all the time, it's just heartbreaking the kind of misery people go through. This is not business risk like any other, this is true Russian roulette.
As far as BP and Rosneft, I know that story very well because I know all the players. It's amazing to me that BP is in such a desperate situation that they would have had to resort to going back to their abusive relationship for the third time.
They got ripped off when they invested in a Russian company called Sidanco back in 1997. They got completely humiliated in their fight with the majority shareholder of their joint venture TNK-BP in ways we don't even know about. What we know is just the stuff that was made public.
And now they're back for a third time? Hurt once, shame on them, hurt twice shame on you, hurt three times, shame on I don't know whom.
RFE/RL: And yet BP made a great deal of money in Russia, by many accounts more than they had expected.
Browder: I made a great deal of money for my clients in Russia as well, but look how it all ended. I got kicked out of the country, they tried to expropriate all my assets and they killed my lawyer when he started to complain about all the crime that was going on. There are some things that just aren't worth it for money.
Talk about lack of corporate social responsibility. How many BP employees have to be taken hostage or killed? There are guys who are criminally charged for espionage back in the TNK-BP dispute. Have they been acquitted or exonerated? What about [former TNK-BP head] Bob Dudley's visa and having been run out of the country?
It's remarkable that they can just brush that aside. It shows either complete obliviousness to ethics or that they're so desperate after what happened in the Gulf of Mexico that they're ready to get into bed with the worst possible partner that could exist on the planet.
Enemy Of My Enemy -- For Now
RFE/RL: Before you were kicked out of Russia in November 2005, you often praised the Russian government and Vladimir Putin. Do you regret that now?
Browder: It was clearly wrong. I thought they were moving toward some type of reform. When I was fighting corporate-governance fights and I got the first support from the government, I believed they were doing it because they believed in the transparency and anticorruption I was fighting for. It turns out what they really believed in was that your enemy's enemy is your friend.
They supported me when the oligarchs I was fighting with were stealing power from Putin and stealing money from me. But the moment they won their war with the oligarchs, when they arrested Khodorkovsky in 2003, that was the end of any reform. Clearly I was wrong in predicting this was a reform process that was going to go on. I regret giving them my voice of support.
RFE/RL: What exactly were you kicked out for?
Browder: Starting in about 1998, we started a process of what we described as corporate-shareholder activism, where we were fighting corruption in the Russian companies we were investing in. There was a huge amount of theft and fraud and we found the only way we could fight that was to research how they did it and share it with the international media.
We were quite successful for a number of years during the period our interests were aligned with the Kremlin's. After Khodorkovsky was arrested, all the oligarchs came and made their peace with Putin and they all found whatever compromise they needed to find.
But I was carrying on with my naming and shaming campaign and there were two companies we were doing this with in 2005. With Gazprom, we exposed multibillion-dollar fraud and with oil company Surgutneftegaz we exposed a hugely corrupt cross-shareholder scheme that was benefitting insiders at the expense of everyone else.
We fought those two battles very publicly and shortly after I was expelled from Russia and declared a threat to national security. I don't know which one of the companies did it, maybe they all decided to get together and get rid of me once and for all.
RFE/RL: As you said, $230 million disappeared thanks to the scheme Magnitsky uncovered. You've said that money left a trace. Where did it go?
Browder: So far we've publicly disclosed two officers who were just foot soldiers in this nasty campaign. Just those two, Artyom Kuznetsov and Pavel Karpov, ended up $4 million richer at the end of the process, with condos and cars and private jet trips. We're doing research and there will soon be more information coming out.