WATCH ABOVE: A preview for 16×9’s “The Man Who Took on Putin”
Last month Vladimir Yevtushenkov, one of Russia’s wealthiest men, was placed under house arrest on accusations of money laundering.
Yevtushenkov, who’s worth $9-billion (US), is chairman and largest shareholder of Sistema, a conglomerate that controls Russia’s largest mobile phone operator, the oil company Bashneft and other lucrative assets.
One person the media turned to for insight about this unexpected arrest was Bill Browder, an American hedge fund manager who lives in London, England. He said Yevtushenkov’s detention was intended to send a message to any oligarch plotting moves against Russian president Vladimir Putin, as the value of their assets drops in the wake of Western sanctions.
Browder is intimately familiar with Russia’s power structure and Putin’s close ties with the current generation of oligarchs who preside over the country’s economy. At 50, Browder is a multi-millionaire who runs an asset management company called Hermitage Capital Management from a warren of offices in one of London’s tonier neighborhoods.
Browder’s story lends insight into what’s happening in Russia because it suggests Putin manages a deeply corrupt kleptocracy – an economy run by his pals who steal whatever they can and allows Putin to profit personally. Since the Ukrainian crisis, there has been a renewed search for Putin’s personal fortune by US authorities, which may be hidden in offshore bank accounts and could amount to tens of billions.
As he told 16×9, Browder’s links to Russia begin with his family: he’s the grandson of Earl Browder, arguably the most successful leader the United States Communist Party ever had. Earl led the party from 1930 until he was kicked out in 1945 for trying to disband it, arguing that Soviet-style socialism and American capitalism could co-exist peaceably.
It was his grandfather and father’s left-wing beliefs that led a teenaged Browder to become a strident capitalist. He went to Stanford business school and, upon graduating with an MBA, worked in London at the investment firm Salomon Brothers.
This was the early 1990s when the former Soviet bloc was trying to revert to free market economies. Browder soon got work helping Eastern European governments privatize their economies and sell off state assets – often extremely cheaply. Browder set up Hermitage and made himself spectacularly rich investing in under-valued ex-Soviet companies.
By 2005, Hermitage was the largest private fund in Russia, with more than $4.5 billion (US) in assets.
Browder soon learned that once state assets were privatized, the new managers had a propensity to steal the profits for themselves. “It was what I called the largest orgy of stealing that’s ever taken place in the history of business,” he told 16×9.
So his investments in Russian firms came with the caveat they be run corruption-free. If he found the management wanting, he exposed their misdeeds to the media in what he called “naming and shaming” campaigns. In the process Browder became convinced most of the businessmen who took over the former state assets after the collapse of socialism were crooks.
Yet Browder’s anti-corruption campaign eventually ran into an immoveable force – that of Vladimir Putin, he says. When Putin first came to power in 2000, Browder was a big fan of the former KGB agent, largely because Putin went after the oligarchs. In Putin, Browder saw a man after his own heart – an anti-corruption crusader.
But Browder says he had misunderstood Putin’s real intentions. This became clear in 2005 when Browder flew home to Moscow from London and was unexpectedly denied entry to the country. Stunned, Browder tried to find out why.
In 2007, Hermitage’s Moscow offices were raided by the tax police. The officers grabbed the investment fund’s records. Browder suspected police planned to use the records to steal money Hermitage had invested in Russian companies. Hermitage pulled its investments before this could happen.
Meanwhile, Browder had hired a young Russian tax lawyer, Sergei Magnitsky, to investigate why Hermitage was targeted. “Sergei was by far the most vigilant, smartest and most self confident lawyer we knew,” Browder says.
Browder told 16×9 he believes Hermitage was in the crosshairs because he was exposing too many crooks at the highest echelons of the Russian economy. Magnitsky eventually uncovered a sophisticated crime ring made up Russian tax police, high-ranking members of the government’s revenue ministry and organized crime figures, all of whom were protected by judges and other top officials, Browder claims.
Magnitsky discovered this ring had used Hermitage’s records to steal $235-million (US) from the Russian government by claiming tax money Hermitage had paid in the past now be returned to this group of criminals.
In the fall of 2008, Magnitsky was suddenly arrested after testifying against some of the crooked tax officials. He was held in pre-trial detention for 358 days where he was starved, denied medical treatment and then eventually beaten to death by prison guards with rubber truncheons. He died on November 16, 2009. His death was one of seven murders or mysterious deaths associated with the $235-million theft.
After Magnitsky’s death, Browder went on line and published the details of who was responsible for stealing the $235-million and killing the lawyer, expecting Putin and the Russian government to arrest the culprits. Instead, the Russian government went after Browder and Magnitsky, charging them both with fraud in 2013 They were both found guilty last year. Browder, who by this time, had moved his operation to London, was slapped with a nine-year prison sentence in absentia.
By then, Browder says, Putin’s real agenda was clear: He had gone after oligarchs in the early 2000s not because he was an anti-corruption crusader, but because the oligarchs were not his group of friends. Once he drove those oligarchs from Russia, he installed his circle of cronies in the senior management positions of the corporations the oligarchs were once running, Browder says.
“Putin changed everything, he was the top-down vertical management. He essentially turned the entire government into one large crime apparatus,” Jameson Firestone, an American lawyer who worked in Russia for Hermitage, told 16×9.
This was most visible during the Sochi winter Olympics, where reports of the thievery of Putin’s pals reached unparalleled heights.
READ MORE: Did Putin’s pals receive bulk of Sochi budget?
Browder has since used his wealth to wage an international campaign to bring the culprits who stole the (US) $235-million to justice, along with those responsible for the murder of Sergei Magnitsky.
“I couldn’t live with myself if I didn’t get justice for Sergei Magnitsky,” he says. “You know by any objective measure they were going after me, not him. And he died, and I didn’t. And it’s my duty to him and his memory and to justice that we make sure that the people who did this don’t get away with it.”
16×9’s “The Man Who Took on Putin” airs this Saturday at 7pm.
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