Why we should be very careful when dealing with....


Investor Bill Browder has long framed himself as Vladimir Putin’s top enemy. “He has hunted me down through Interpol, made numerous requests of the British government to extradite me,” said Browder, who was briefly detained in Spain two months ago. “Putin made it clear I was his No. 1 foe in Helsinki a week ago, and it’s been the case since 2012.”

Last month, the Russian president used a joint appearance with President Donald Trump to accuse Browder’s business associates of tax evasion. The next day Browder was named alongside 10 former U.S. diplomats, intelligence officials and others who Moscow wanted to interrogate.

But the U.S.-born businessman, whose company made billions in Russia until he was barred from the country for unexplained reasons in 2005, said the real grounds for the opprobrium is his decade-long lobbying for the 2012 U.S. Magnitsky Act. It levies sanctions on Russian officials for corruption and human rights abuses, banning those named from visiting the U.S. or doing business with Americans. Since it was passed, the U.S. has imposed sanctions on 49 people in six separate rounds.

Moscow has often sought to play down the impact of sanctions, but this latest episode underlines the Kremlin’s preoccupation with the Magnitsky curbs and the significance of the infamous 2016 Trump Tower meeting, a focus of Robert Mueller’s investigation into collusion between the Trump campaign and Russia.

Bill Browder Red Notice is a great read!

Ian K.
5.0 out of 5 starsI stayed up way too late reading this book….
November 13, 2014
Format: Hardcover|Vine Customer Review of Free Product( What’s this? )
I’ve read a lot of Russian and Soviet history and I am interested in hedge funds, so I picked this book off the Amazon Vine list. What I did not expect was a book that was so hard to put down that it would keep me up late reading. Bill Browder has written a remarkable and compelling book.

Red Notice is the story of Bill Browder’s hedge fund, Hermitage Capital, which at one time was the largest foreign investor in Russia. Hermitage produced extremely high returns and, before its demise, Browder had four and a half billion dollars under management. Unlike hedge funds like Long Term Capital Management (Inventing Money), the fund didn’t blowup (although it came close in 1998). Instead, it was destroyed by the corrupt Russian government. This the story of Heritage Capital’s rise and fall. It is also the story of the murder of a Russian tax lawyer, Sergei Magnitsky who worked for Browder. Red Notice is also an account of Bill Browder’s crusade for at least some measure of justice for Magnitsky.

Boris Yeltsin and his advisers who inherited the Russian state wanted to make sure that communism would never return. To do this they wanted to create a capitalist state that would replace the centrally planned communist economy. Gorbachev had almost been overthrown in a coup by the communist old guard, so Yeltsin and his advisers felt that they had to put the state on an irreversible course away from communism as soon as possible. This meant privatizing the assets of the communist state (which was all of Russian) in a vast fire sale. Many assets and newly formed companies were sold for a fraction of their value. This was the environment that gave rise to the Oligarchs, brilliant and ruthless men who built multi-billion dollar fortunes from the rubble of the Soviet State.

Bill Browder’s grandmother was Russian and his grandfather was the head of the American Communist Party. He was fascinated by Eastern Europe and when few people saw the possibilities in Russia he established a hedge fund that became wildly successful buying up under priced Russian assets.

The first half of the book is the story of how Browder built Hermitage Capital. Browder comes from a brilliant family. His father is a noted mathematician and his brother is a physicist. When he was young, Bill seemed to be something of an underachiever, at least compared to the rest of his family. Browder did manage to work his way into Stanford Business school and from there to a job at Salomon Brothers.

One of the things that impressed me about Browder is his self-confidence and ability to take risks. Salomon Brothers reaction to the “out-of-the-ballpark” investments that Browder made for them was to form a “task force” to study the issue (and then take credit for Browder’s work). Browder quite Salomon Brothers and founded Hermitage Capital. He managed to get the famous billionaire investor Edmond Safra to put up the initial money for the fund and went on to make huge profits.

Browder seems to honestly recount his history, even when the admissions must have been painful. He did not foresee the Russian bond default in 1998 and Hermitage Capital lost 90% of its capital. He managed to build the fund back up in he next few years, recovering all of the losses and delivering record profits. The standard share for hedge funds is 20% of the profits, so Browder must also have become a very wealthy man (e.g., hundreds of millions of dollars).

Post-Soviet Russia developed into a kleptocracy. People in the government and those with the necessary connections were stripping assets and stealing. Some of the assets, like the energy company Gazprom, were so huge that even a gang of dedicated thieves could only steal a fraction of the assets. Hermitage Capital invested in Gazprom and other companies. After buying the under-priced assets they exposed the corruption, which at least for a time drove the thieves away and caused stock prices to rise.

Browder writes that exposing corruption worked well while Putin was gaining power, since it cleared away some of the oligarchs that were in his way. But once Putin came to power and became the kleptocrat-in-chief, Hermitage Capital’s investment strategy was no longer tolerated.

Browder was making vast amounts of money and lauded as a brilliant fund manager. He writes that he did not see the new reality of Putin unfold until it was too late. The second half of the book is about how Putin’s gang tried to crush Hermitage Capital and everyone associated with it. Ultimately this resulted in the murder of Sergei Magnitsky.

Before founding Hermitage Capital Browder worked for the London office of Salomon Brothers. He married a British woman and they had a son. Somewhere along the way, Browder became a British subject and renounced his US citizenship. Britian allows dual citizenship, so Browder could have become a British subject and remained a US citizen. But he chose not to do this.

People who renounce their US citizenship generally do so for tax reasons. Whether this is true for Browder is not clear. The United Kingdom is hardly a low tax haven. There may have been other, more emotional reasons. What ever the case, there is some irony in Browder’s renouncing his US citizenship, since it was the US that allowed him to gain some measure of retribution by passing the Sergei Magnitsky Act. Of course the fact that Browder is extremely wealthy helped him gain access that would have been denied to ordinary mortals.

Through this remarkable tale the reader sees Browder grow through the adversity he experiences. At the end of the book he regrets that he was not wiser and did not see Russia clearly for what it was. Such regrets are common for anyone who examines their life. Browder has written a remarkable book about his painful journey to his wiser self.