Last February , after the Russian invasion of Ukraine, the word ‘oligarch’ experienced a brief spike in Google searches, just as a volley of Western sanctions hit these Russian billionaire businessmen, who were deemed responsible for propping up the government of Vladimir Putin. The oligarchs are a diverse bunch, but they have certain characteristics in common. Most made their initial fortunes from the opaque and often criminal privatisation of former Soviet state-owned enterprises in the early 1990s. They backed Boris Yeltsin in his desperate bid for re-election in 1996, and gained untold dividends from his victory. Not all welcomed Putin’s election in 2000, but most eventually accepted the deal he offered: their wealth would be left alone so long as they supported him at home and acted as his lobbyists and moneymen abroad. Those who reneged were either jailed (Mikhail Khodorkovsky) or went into exile, sometimes meeting mysterious deaths (Boris Berezovsky).
It’s easy to reduce the oligarchs to caricature. Until recently, they flitted between London, Moscow, New York, Switzerland and the French Riviera. They sent their children to Ivy League universities. They wooed glamorous women at three-star restaurants and grand hotels. They never missed Davos. Much of their time was spent suing one another in Western courts, dodging subpoenas, spreading kompromat on rivals and hiring libel lawyers to threaten unfriendly journalists. In recent years, both the UK and the US have experienced moral panics over the oligarchs’ alleged attempts to sway the political process in the West. Both Johnson’s Conservatives and Trump’s Republicans were accused of being in thrall to them. Johnson spent a weekend at the Italian villa of Alexander Lebedev, like Putin a former KGB officer, without any aides present, and made Lebedev’s son, Evgeny, a member of the House of Lords. There are clearly criticisms to be made of all this, but they tend to be made most strongly when the Kremlin flexes its muscles.
The war in Ukraine, which once again thrust the oligarchs centre stage, has also given a new platform to Bill Browder, one of their most vocal critics. A US-born British citizen, Browder made millions in Russia in the 1990s and early 2000s through his hedge fund, Hermitage Capital. For several years, Hermitage was the largest foreign investor in the country, and Browder was one of Putin’s highest-profile Western champions. But in 2005, returning to Moscow from a routine trip abroad, Browder was prevented from entering the country. He has never been able to go back. Two years later, Hermitage’s offices were raided by the Ministry of Internal Affairs. Browder says that the officers who carried out the raid fraudulently used company seals and computer data they had seized to set up an elaborate embezzlement scheme. Having taken over several Hermitage subsidiaries that were then forced to incur artificial losses, the officers who had hijacked Browder’s company received a $230 million tax rebate from the Russian treasury, equivalent to the sum Hermitage had paid in taxes in 2006. The money, Browder thinks, was quickly laundered by the fraudsters, largely through investments in New York real estate.
Browder wasn’t allowed back into Russia, but his tax accountant Sergei Magnitsky, who remained there, studied the paper trail, spotted the fraud and, according to Browder, identified those responsible as Artem Kuznetsov and Pavel Karpov, who worked for the Ministry of Internal Affairs. In November 2008, Magnitsky was arrested. He developed gallstones and pancreatitis but was denied urgent medical care; after nearly a year of detention he was found dead in his cell. In July 2013, he was posthumously convicted of tax evasion. At the same time, Browder was found guilty in absentia of tax evasion, sentenced to nine years’ imprisonment and deprived of the right to carry out entrepreneurial activities in Russia for three years. Browder strongly denies all the claims made against him and says the Russian government has for years actively tried to discredit and silence him.
Browder’s story of fraud, Magnitsky’s death and his own quest for justice was breathlessly told in Red Notice, published in 2015, which immediately became a New York Times bestseller. The book’s title comes from the international arrest warrant issued for Browder by Interpol on instructions from the Kremlin. Red Notice turned Magnitsky’s fate into an international cause célèbre. The publicity, combined with Browder’s personal fortune and connections, helped generate support for his lobbying efforts. He had already persuaded Congress to pass a law punishing the Russian officials responsible for Magnitsky’s death – the Magnitsky Act became law in 2012 – and now began campaigning to have similar legislation targeting foreign officials involved in corruption and human rights abuses adopted by other countries. Today, there are equivalents of the Magnitsky Act in the UK, Canada, Australia and the EU, as well as European states such as Estonia, Lithuania, Latvia and Kosovo.
Freezing Order, the sequel to Red Notice, recounts Browder’s efforts to pursue Magnitsky’s killers, promote the Magnitsky Act internationally, and thwart various Russian attempts to discredit him. Its staccato sentences are full of ‘bad guys’, ‘hot blondes’, ‘fuck’s and a generalised sense of paranoia. But the book’s central theme is Browder’s selfless struggle for justice. ‘There was only one thing for me to do,’ he writes. ‘Put aside everything else in my life and devote all of my time, all of my resources, and all of my energy to making sure that anyone involved in Sergei’s false arrest, torture and murder, as well as anyone who had received any of the $230 million, would face justice.’ Later he says: ‘This inclination toward justice is part of who I am. It’s in my nature.’
He is an unlikely idealist. Browder arrived in Russia in 1992 as a 28-year-old associate at Salomon Brothers trying to make his name in that cut-throat firm. His first assignment was to advise the management of the Murmansk Trawler Fleet, one of the world’s largest fishing fleets, on the privatisation of the company, which was worth at least $1 billion even after accounting for depreciation on its vessels, and without factoring in its quasi-monopolistic fishing quotas. Yet its directors were able to exercise the right to purchase a 51 per cent stake in it for as little as $2.5 million. Although vouchers were issued to everyone in Russia, to be exchanged for shares in state-owned businesses that were being auctioned off, many rank and file workers didn’t know what to do with them and were happy to exchange the vouchers for cash or hard-to-find consumer goods. Browder was among those who saw an opportunity in buying up these vouchers and using them to acquire stocks in underpriced companies. By his calculation, Yeltsin’s privatisation drive, launched in June 1992, valued the entire Russian economy at $10 billion – one-sixth of the value of Walmart. Browder persuaded Salomon to invest $25 million in various formerly state-owned companies, and in 1996 he founded his own hedge fund, Hermitage Capital. By 1997, he was posting 700 per cent returns for his clients.
The 1998 ruble crash all but wiped out Hermitage. But, unlike most of his peers, Browder chose to stay in Russia and rebuild his company. This proved to be the right decision. Putin’s election as president in 2000 opened an even more lucrative chapter for Browder and Hermitage. The Kremlin’s crackdown on oligarchs put a temporary dent in the industrial-scale looting of major Russian enterprises, but those – like Browder – who had invested early on saw outsized returns. Until it all went wrong for him in 2005.
Red Notice and Freezing Order turn a highly complex fraud and the ensuing judicial cat and mouse into accessible political thrillers. They spotlight Russia’s institutional impunity and its abuse of Interpol to pursue political opponents. Most of all, they provide a persuasive and emotionally charged account of the human and financial costs of official corruption. The word ‘true’ is emblazoned on the covers of both books. ‘Reads like a classic thriller … but it’s all true,’ Lee Child’s blurb for Red Notice says. Freezing Order is subtitled: ‘A True Story of Russian Money Laundering, Murder and Surviving Vladimir Putin’s Wrath’. Inside, Browder says: ‘This is a true story that will surely offend some very powerful and dangerous people. In order to protect the innocent, some names, locations and details have been changed.’
A small number of critics were not persuaded by Browder’s account, but he has been quick to challenge and stand up to those who question it. In 2016, after conducting extensive interviews with Browder and others connected to the Magnitsky case, the Russian documentary filmmaker Andrei Nekrasov released The Magnitsky Act: Behind the Scenes, which suggests, among other things, that Hermitage was guilty of the tax evasion charges. The film was due to be screened at the European Parliament and shown by Arte, a Franco-German public television channel. At the eleventh hour, Browder hired Carter-Ruck, the well-known London libel lawyers, to send legal letters to the European Parliament and every organisation involved in making and distributing the film. The screening was cancelled and Nekrasov’s film never found a distributor. When I wrote to Browder to ask why he had hired lawyers, he told me that the film had been ‘denounced by the Magnitsky family as false, offensive and degrading of Sergei’s memory’ and was ‘condemned by Russian human rights activists who investigated the circumstances of Sergei’s murder’.
In 2019, Der Spiegel published an article by Benjamin Bidder, its former Moscow correspondent, headlined ‘The Case of Magnitsky: Questions Cloud Story behind US Sanctions’. ‘Ten years after his death,’ Bidder writes, ‘inconsistencies in Magnitsky’s story suggest he may not have been the hero many people – and Western governments – believed him to be.’ Bidder casts doubt on Browder’s claim that Magnitsky was targeted after voluntarily approaching Russia’s investigative committee in 2008 with a witness statement incriminating Karpov and Kuznetsov, the two officials allegedly involved in the fraud. In fact, Bidder argues, the Russian government had been investigating Hermitage for alleged tax evasion since 2004, four years before Magnitsky’s arrest, and he had been summoned as a witness in that investigation ‘based on reasonable suspicion of his having committed a criminal offence’. Bidder claims that Magnitsky helped Browder reduce the taxes paid by Hermitage companies by acting as CEO for ‘dubious letterbox firms’ that gave employment contracts to apparently unqualified disabled people in order to claim tax breaks.
After Bidder’s article was published, Browder complained to Der Spiegel’s editor-in-chief and the German Press Council, accusing the newspaper of ‘serious factual mistakes and false and misleading statements’. But the council told Browder that ‘the position you represent is at least not to be regarded as a proven,’ and refused to force Der Spiegel to issue a retraction, though that was within its powers as an industry body. Browder strongly disagrees with the decision, and told me that ‘the council did not examine the veracity of B. Bidder’s statements, the bias and trustworthiness of sources he chose, and his reasons to ignore others.’
There are Russian court documents that purportedly back Bidder’s claims that Browder’s companies had been investigated for tax irregularities long before he was refused entry to Russia in 2005. Following an audit in 2002, the tax inspectorate of Elista, the capital of Kalmykia, demanded that the Hermitage-controlled company OOO Saturn Investments pay back taxes of 4,676,404 rubles and penalty interest of 487,653. This judgment was upheld in February 2003 by the Arbitration Court of the Republic of Kalmykia after Saturn appealed. The court’s decision hinged on whether Saturn was eligible for a 50 per cent tax break offered by the Russian republic at the time to companies in which disabled people made up at least half of the headcount – so long as they were full-time employees. While Saturn did employ the requisite number of disabled people, the presiding judge wrote, ‘bearing in mind their education and qualification’ – two were unskilled while the third was a machine engineer – they ‘were only used by the claimant to get the income tax relief’. In 2005, Kalmykia’s arbitration court also ordered another Hermitage company, OOO Dalnaya Step, to pay 91,964,929.94 rubles after it was found to have ‘wrongfully reduced its taxable income’ for 2004.
These Russian court papers were produced as part of a 2015 civil case launched by US prosecutors against Prevezon Holdings, a company run by the son of a senior Russian official which was alleged to have laundered some of the proceeds from the Hermitage fraud through the purchase of luxury real estate in New York. The case, discussed at length in Freezing Order, was settled in 2017. When I asked him about it, Browder denied that these companies were responsible for any tax irregularities and told me that ‘the Hermitage Fund’s Russian companies operated in full compliance with the Russian law and tax regime. They used lawful tax credits in relation to employees that were offered by the Russian government at the time. Tax audits confirmed that Hermitage Fund’s Russian companies did not owe taxes.’
Does it really matter if Browder’s story isn’t widely challenged? After all, the main themes of the Magnitsky case echo many other examples from the past two decades. We know that Russia’s security services have been involved in racketeering, that the Russian judiciary is an instrument used by the state to go after its enemies, that Russian officials are implicated in corruption and money laundering, that whistleblowers are frequently killed for speaking out, that Russian prisons are places where innocent people often die, whether deliberately or through neglect. These facts hold true whether or not Browder’s particular account is wholly accurate.
A year before the raid on Hermitage, and three years before Magnitsky’s death, Russia was rocked by a similar case that became known as the Three Whales scandal. It began when three mid-level police and customs officials discovered that a group of senior figures in the security services were using a furniture company called Three Whales to conduct large-scale smuggling and money-laundering operations. Yet instead of arresting them, the authorities charged the investigating officials with abuse of office. Later, a veteran journalist who broke the story of the case was found dead after suffering a rare allergic reaction. Numerous witnesses who agreed to testify against the Three Whales principals were killed or injured in apparent assassination attempts. Just as Magnitsky’s killers allegedly did, the securocrats behind Three Whales laundered their illicit gains, in this case the proceeds from smuggling oil and weapons in various parts of Europe. Some of the funds made their way back into Russia where they were used to bribe officials in the General Public Prosecutor’s Office (according to some estimates, they received $2 million) to suppress the investigations.
Three Whales was far from being an isolated case. In 2019 Dmitry Zakharchenko, a colonel at the General Directorate of Economic Security and Anti-Corruption of Russia’s Ministry of Internal Affairs was sentenced to thirteen years in prison after being found in possession of nearly $140 million in bribes from businesses he had blackmailed. The money was hidden in shopping bags and cardboard boxes. In 2021 Kirill Cherkalin, a former lieutenant colonel in the FSB’s so-called banking department, was jailed for bribery and fraud alongside two of his colleagues after nearly $200 million in cash was found stashed at their properties and his parents’ house. Corrupt Russian security officials routinely conduct raids on businesses with the intention of extracting bribes or blackmailing owners into signing over stakes in their companies. Questions of guilt and innocence tend not to have all that much to do with an investigation’s being launched, or what it then turns up. In arguing that Browder’s role in exposing corruption at Gazprom and other state-owned companies had nothing to do with the raids on Hermitage, some of his critics betray a naive view of the Russian criminal justice system. Even if Browder were guilty of evading taxes, as they claim (and he denies), the order to take him down in 2005 will have been politically motivated.
But Browder’s critics argue that he didn’t merely profit from Russian oligarchy as it transformed into Putinism; he may even have helped usher that system into existence by pioneering and refining the structures that continue to enable it. Hermitage was one of the first companies in Russia to set up shell companies incorporated in offshore tax havens, it used aggressive tax minimisation techniques and, even as it championed investor rights, questions were being raised about failures of governance in the companies in which it invested.
One of the firms Hermitage invested in was the oil company Yukos. In 1997 Yukos’s managers unilaterally reorganised one of its subsidiaries, allowing them to divert profits elsewhere at the expense of minority investors. Browder appeared to defend these actions. ‘When a company does terrible things to the subsidiary,’ he told the New York Times, ‘I would rather be on the side with the power.’ Six years later, Putin’s government seized and broke up Yukos after its majority owner, Mikhail Khodorkovsky, started funding opposition parties and trying to strike unauthorised deals with Western oil companies. When Khodorkovsky was arrested, Browder once again stood by those with the power – but now the power seemed to be in the Kremlin. ‘If he miraculously stayed in jail and this was to be the beginning of a crackdown on the oligarchs,’ Browder writes of Khodorkovsky in Red Notice, that ‘would be a good thing, not just for the fund, but for everyone living in Russia’.
It was clear enough during the Yukos case, but by 2005 the character of Putin’s regime had surely become obvious to anyone paying attention. More than thirty journalists had been killed in suspicious circumstances in the first five years of the millennium alone. Among them was Paul Klebnikov, the American-born editor of Russian Forbes, assassinated after investigating corruption involving Berezovsky and other oligarchs. By the end of his first term, Putin had already begun to crack down on democracy at home and abroad. In December 2004 he banned direct gubernatorial elections, a move condemned as anti-democratic even by pliant opposition parties. That year Moscow also attempted to interfere in the Ukrainian elections in favour of the corrupt pro-Moscow incumbent, Viktor Yanukovych, whose victory led to the mass protests that would become known as the Orange Revolution.
Yet in January 2005, less than a year before he was barred from entering Russia, Browder was still talking up Russia. He held a special breakfast in Davos for prominent journalists during which he argued that the Yukos takeover, the cancelled elections, the meddling in Ukraine and the backsliding on banking reforms were no reason to stop investing in the country. His faith seemingly remained undimmed even in the immediate aftermath of his own expulsion. Speaking to the Observer’s Nick Kochan in March 2006, Browder described himself as ‘sympathetic’ to Putin in his crackdown on oligarchs such as Khodorkovsky. ‘I see myself as Russia’s true believer,’ he told Stephen Moss a month later in an interview with the Guardian. According to Moss, Browder said that ‘the oligarchs were destroying Russia and that only when Putin came to power did things start to improve – for all the population, not just wealthy Western investors.’ Addressing concerns about Russia’s lack of democracy under Putin, Browder is quoted as saying: ‘Of course, there are unpleasant aspects to the system of governance – you can’t have pluses without minuses. But the pluses in Russia far outweigh the minuses, and as they get richer hopefully they can have a less autocratic system.’
In Red Notice, Browder acknowledges that ‘everyone thought I was Putin’s guy.’ He says he never met Putin and that people just assumed he was close to the government. Working with Putin to undermine the power of the oligarchs was good for Hermitage because it improved corporate governance and therefore the stock valuations of its portfolio companies; for the Russian president, it was a way to consolidate absolute power under the guise of strengthening the state. Browder claims he ‘naively thought that Putin was acting in the national interest and was genuinely trying to clean up Russia’. Another explanation is that Putin tolerated Browder’s shareholder activism because it helped him undermine his opponents. It was only after Browder’s business was confiscated and his colleague died in prison that he turned against Putin.
‘I thought that Putin was genuine in stamping out the oligarchs and corporate embezzlement. I hoped for the country to get less autocratic in its governance over time. I persisted with my anti-corruption and corporate governance campaigns which affected oligarchs close to Putin,’ Browder told me. ‘It turned out that instead of stamping out oligarchs, Putin decided to become the biggest oligarch himself. I thought he wanted to act in Russia’s national interests and restore the nation’s glory. In fact, his plan was to embezzle as much money as he could. I was banned from Russia as a threat to national security.’ On the Hermitage case specifically, he said: ‘It became painfully clear that Putin was not acting in the national interest when he allowed corrupt officials to steal $230 million from the Russian budget, to enrich themselves with money that should have gone to education, healthcare, and other public projects. For the last fifteen years I have consistently spoken out about the dangers of his kleptocratic and criminal regime.’
Is Bill Browder an oligarch? His critics think he ticks many of the boxes. He made his fortune in Russia in the 1990s, profiting heavily from the newly privatised industries. He was a vocal supporter of Putin even after the dark truths of his regime had become clear, even after Putin had cracked down on numerous other oligarchs, and was allowed to continue to accumulate wealth – until suddenly he wasn’t. The way that Browder engineered the passage of the Magnitsky laws involved many of the techniques used by the oligarchs to capture the state in the first place: expensive media campaigns and relentless political lobbying behind the scenes. These tactics aren’t illegal, of course, but they are far beyond the reach of ordinary citizens and could be thought to distort the democratic process. Browder’s (ghostwritten) books have successfully anchored his version of events in the public and political imagination. Along with an army of lawyers, government relations specialists, PR agents and friendly journalists they helped the Magnitsky laws get passed.
According to James Carden, a former adviser at the State Department’s Office of Russia Affairs, the Magnitsky Act is a prime example of the privatisation of law-making. ‘Should ultra-wealthy foreign nationals like Browder be able to transform their personal vendettas against foreign governments into law?’ Carden asked in the Nation, which has been nearly alone among English-language media in critiquing the Magnitsky Act. He argues that the Act was ‘passed solely on the strength of the questionable accusations of one man’. Browder calls this statement ‘false and defamatory’. He told me that ‘the Magnitsky Act passed on the strength of the idea of justice and the need for redress for victims who suffer from corruption and human rights abuse. Russian civil society was the body which convinced US lawmakers that adopting this ground-breaking human rights sanctions legislation would be in the interest of the Russian people.’
It’s one thing to denounce the Putin government as a criminal enterprise, but Browder seems to see the entire country as a land of cowards, killers and conmen, with the exception of a handful of saintly outliers. There are about four of them: Magnitsky, Browder’s researcher Vadim Kleiner, the murdered opposition politician Boris Nemtsov and the activist Vladimir Kara-Murza, whom Browder describes as ‘a good Russian’. (On 17 April, Kara-Murza was found guilty of treason, spreading false information about the Russian army and being affiliated with an undesirable organisation due to his public opposition to the war in Ukraine. He was sentenced to 25 years in a high security correctional colony, a type of jail reserved for those found guilty of having committed especially serious crimes.) His books are also unremittingly sexist – adult women are routinely described as ‘girls’; his wife, he tells us, has ‘flawless, porcelain-white skin and a long, regal neck’ – and Russophobic: ‘He warned me about how dangerous Russians could be’; ‘she knew … what Russians were capable of’. It’s hard to believe a man who spent more than a decade in Russia, made his fortune there and married a Russian woman, can think this way.
Putting all that aside, does the Magnitsky Act work? It is impossible to gauge the deterrent effect of any legislation, but since the 2012 passage of the Magnitsky Act Russia hasn’t become discernibly less corrupt or authoritarian. The alleged perpetrators of the tax fraud remain at large. It could be argued that the Ukraine war demonstrates that Moscow has become ever more irredentist and emboldened. In an email to me, Browder described the Act as ‘a highly effective tool in fighting corruption and human rights violations’. It ‘has delivered serious consequences for those who commit atrocious abuses’, he said, ‘has given victims of human rights abuse a tool to fight their abusers back’ and it ‘sends a strong message each time someone is listed under the Magnitsky sanctions’.
The Act’s formal name is the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012. Jackson-Vanik was a Cold War piece of legislation that made normal trade relations with the Soviet Union conditional on Moscow giving Jews the right to emigrate. But decades after the collapse of the Soviet Union, Jackson-Vanik remained on the books, repurposed as an instrument to put pressure on Russia in various trade disputes. When Obama tried to repeal it, Browder’s supporters demanded that it be replaced with the Magnitsky Act. The Act’s potential to damage bilateral relations became clear very quickly, when in response to its passage, Moscow placed a moratorium on US adoptions of Russian children. The move was an unintended consequence that Browder acknowledges but blames on Putin, dismissing subsequent diplomatic efforts by US lawmakers to have the ban reversed as code for a wish to repeal the Act.
Throughout Red Notice and Freezing Order, Browder claims to have done well by doing good: by flagging up abuse in companies in which Hermitage invested, he argues, he was helping build good governance and a clean business culture in Russia. However, his critics would argue that this mission failed, and they continue to question whether Browder himself should share some of the responsibility for the state of Russian politics and economics with the ‘bad guys’ he likes to denounce.
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