Red Notice

by Bill Browder

  What was I supposed to do? There was still a chance Yeltsin would win, so I wasn’t going to back out of Safra’s deal. But I also couldn’t pour Safra’s money into a country that could literally take it away overnight. I decided that the best course of action was to go through with the move to Moscow and wait. The fund could keep all the money in cash until it became clear who would win the election. In the worst case, I could pack it all in, the fund could return the money to Safra, and I could return to London and start over.

  Whatever my plans were, Sandy Koifman had his own ideas about how to protect Safra’s interests. In January 1996 he called to tell me that I needed to produce something called an operating procedures manual before they would release any money. What the hell is an operating procedures manual? I thought. This wasn’t in the contract. Safra was obviously getting cold feet, and this request seemed like an elegant way for him to buy some time as he decided whether to move forward or renege on his commitment to the fund.

  I could have fought Sandy on this, but I didn’t want to force the issue. I started working on Sandy’s project while watching the Russian opinion polls to see if things were going to break in my favor.

  A week into writing the operating procedures manual, I got a call from my friend Marc Holtzman. Marc and I had met in Budapest five years earlier when I was working for Maxwell. He ran a boutique investment bank that focused on Eastern Europe and Russia and was the most capable networker I had ever met. He could parachute into any developing country and within twenty-four hours secure meetings with the president, the foreign minister, and the head of the central bank. Although he was roughly my age, I felt like an amateur around him whenever he turned on his finely tuned political skills.

  “Hey, Bill,” Marc said as soon as I picked up the phone. “I’m going to go to Davos—you want to come with me?”

  Marc was referring to the World Economic Forum in Davos, Switzerland, an annual event that was attended by CEOs, billionaires, and heads of state. It was the ultimate A-list party of the business world, and the terms of admission—running a country or a globally important corporation, along with a $50,000 registration fee—were intended to make sure that rabble such as Marc and I could not just “go to Davos.”

  “I’d love to, Marc, but I haven’t been invited,” I said, pointing out the obvious.

  “So what? Neither have I!”

  I shook my head at Marc’s unique combination of chutzpah, obliviousness, and sense of adventure. “Okay, but where would we stay?” This was another obstacle since it was well known that every hotel for miles around was booked a year in advance.

  “Oh, that’s not a problem. I found a single room at the Beau-Séjour Hotel, right in the center of town. It’s basic, but it’ll be fun. C’mon.”

  I didn’t know. I had a lot of work to do. But then Marc said excitedly, “Bill, you have to come. I’ve organized a big dinner for Gennady Zyuganov.”

  Gennady Zyuganov? How the hell had Marc pulled that off?

  Apparently, Marc had had the foresight to cultivate Zyuganov long before he’d registered on anyone’s political radar. When it was announced that Zyuganov would attend Davos, Marc called him up and said, “A number of billionaires and Fortune Five Hundred CEOs I know are very eager to meet you. Would you be interested in having a small private dinner with us in Davos?” Of course Zyuganov was interested. Marc then turned around and wrote letters to every billionaire and CEO attending Davos, saying, “Gennady Zyuganov, the possible next president of Russia, would like to meet you personally. Are you free for dinner on January twenty-sixth?” Of course they were. That’s how Marc got things done. The strategy was crude but amazingly effective.

  After hearing about Zyuganov, I jumped at the opportunity. The following Tuesday we flew to Zurich and took the train up to Davos. Although Davos has a reputation as an exclusive resort, I was surprised to discover that it wasn’t fancy at all. The town has an almost industrial and utilitarian feel. It’s one of the most populated towns in the Swiss Alps and is lined with large, functional apartment blocks that look more like public housing than something you’d expect in a quaint Swiss ski resort.

  Marc and I arrived at the Beau-Séjour. The clerk behind the desk gave us a funny look as we checked in—we were two grown men bunking in a room with a single twin-size bed—but we didn’t let that bother us. We went upstairs and unpacked our bags. He got the bed and I got the floor.

  It felt ridiculous. We were total interlopers. We hadn’t been invited, we hadn’t paid the registration fee, and we lacked any credentials to get into the actual conference center. But none of that mattered because the action we were interested in took place at the Sunstar Parkhotel, where all the Russians convened for meetings in the lobby.

  As soon as we were settled, we went to the Sunstar and made a circuit through the lobby. Russians of all shapes and sizes were there. I quickly spotted a businessman I knew named Boris Fyodorov, the chairman of a small Moscow brokerage firm who’d been Russia’s finance minister from 1993 to 1994. He was chubby and had short brown hair, round cheeks, and beady eyes that were framed by a pair of square glasses. Fyodorov carried himself with an absurd air of arrogance considering he wasn’t even forty. As Marc and I approached the table where he was having coffee, he shot us a condescending look and said in English, “What are you doing here?”

  It reminded me of high school. Fyodorov may once have been the finance minister of Russia, but he was now just a small-time Moscow stockbroker.

  “I’ve got twenty-five million dollars to invest in Russia,” I said matter-of-factly. “But before investing I have a lot of questions about how things are going to play out for Yeltsin in the election. That’s what I’m doing here.”

  The moment I said “twenty-five million dollars,” Fyodorov’s manner changed completely. “Please, please join me, Bill. What’s your friend’s name?” I introduced Marc and we sat. Almost immediately, Fyodorov said, “Don’t worry about the election, Bill. Yeltsin is going to win for sure.”

  “How can you say that?” Marc asked. “His approval rating is barely six percent.”

  Fyodorov stuck out his hand and swept his finger over the lobby. “These guys will fix that.”

  I followed his hand and recognized three men: Boris Berezovsky, Vladimir Gusinsky, and Anatoly Chubais. This trio was engaged in an intense huddle in a corner. Berezovsky and Gusinsky were two of the most famous Russian oligarchs. Each had clawed his way up from nowhere, knocking over anyone in his way, to become billionaire owners of banks, television stations, and other major industrial assets. Chubais was one of Russia’s shrewdest political operators. He had been the architect of Yeltsin’s economic reforms, including the disastrous mass privatization program. By January 1996, he had resigned from the government to focus full-time on turning around Yeltsin’s failing campaign.

  I didn’t know it at the time, but this scene in the lobby of the Sunstar Parkhotel was the infamous “Deal with the Devil,” where the oligarchs decided to throw all their media and financial resources behind Yeltsin’s reelection. In exchange, they would get whatever was left of the unprivatized Russian companies for next to nothing.

  As Marc and I made our way around the room, various other oligarchs and minigarchs we spoke with each repeated Fyodorov’s sentiment that Yeltsin would be reelected. They might have been right, but these men might just have been predicting what they wanted to be true. Russian oligarchs are hardly the most credible people at the best of times, and Yeltsin had a long way to go to get the 51 percent needed to win the presidency.

  I thought it was far better to assess the intentions of the candidate who was the front-runner than to listen to the pipe dreams of some people who stood to lose everything if Yeltsin was defeated. This whole trip was about assessing Zyuganov, which I would have the opportunity to do at Marc’s dinner.

  The evening of the dinner arrived and I went to a packed private dining room in the Bridge Room at the Flüela Hotel. The Flüela was
one of only two five-star hotels in Davos, and Marc had scored a major coup by hosting the dinner there. That night, Marc’s dinner was the hottest ticket in town.

  The table was arranged in a large square, the chairs around the outside. I scanned the faces of the guests as they arrived and took their seats. I’d never before seen such an impressive collection of people: George Soros; Heinrich von Pierer, CEO of Siemens; Jack Welch, CEO of GE; and Percy Barnevik, CEO of Asea Brown Boveri, among others. In total there were a couple of dozen billionaires and CEOs—plus Marc and me. I wore my best suit in an attempt to look the part, but I knew I was the only person in that room who would be sleeping on the floor that night.

  A few minutes after everyone was settled, Zyuganov made a grand entrance with a translator and a pair of bodyguards and took his seat. Marc clinked his glass and stood.

  “Thank you all so much for joining us this evening. I’m very honored to be hosting this dinner for Gennady Zyuganov, the leader of the Communist Party of Russia and candidate for president.” Zyuganov was about to take his cue and stand as well, but then Marc added spontaneously, “And I’d like to also thank my cohost, Bill Browder, who helped to make all this possible.” Marc held out his hand, palm up, in my direction. “Bill?”

  I rose halfway out of my seat, gave a perfunctory wave, and quickly sat back down. I was completely mortified. It was a nice gesture for Marc to recognize me, but all I wanted to do at that moment was blend into the woodwork.

  When the main course was over, Zyuganov stood and gave his speech through his translator. Zyuganov rambled on, covering all sorts of unmemorable talking points, until he said, “For those of you who are afraid that I’m going to renationalize assets, you shouldn’t be.”

  I perked up.

  He carried on. “These days communist is just a label. A process of private property has started in Russia that cannot be reversed. If we were to renationalize assets, there would be civil unrest from Kaliningrad to Khabarovsk.” He gave a curt nod. “I hope to meet all of you again when I’m president of Russia.”

  In the stunned silence, Zyuganov sat, took up his silverware, and tucked into his dessert.

  Had he really just ruled out renationalization? That’s what it sounded like.

  The dinner finished shortly afterward, and Marc and I eventually ended up back in our room. As I lay on the floor, my mind raced. If what Zyuganov was saying was true, then regardless of who won the election, I was back in business. I had to share this news with Sandy Koifman as soon as possible.

  I called him in Geneva early the next morning and told him the story, but he wasn’t impressed. “You don’t honestly believe him, do you, Bill? These guys will say anything.”

  “But Sandy, Zyuganov said it in front of the most important businessmen in the world! That has to count for something.”

  “That means nothing. People lie, politicians lie, everybody lies. Christ, you’re talking about a Russian politician. If I believed everything politicians said to me, Safra would be broke by now.”

  I didn’t know what to think, but everything I’d heard in Davos made me feel that things had at least a small chance of working out, and I intended to do everything I could to see that they would.

  10

  Preferred Shares

  I finally finished writing Sandy’s operating procedures manual six weeks after Davos. Now Sandy either would have to send the money that Safra had committed to the fund or renege on the deal.

  If Yeltsin’s approval rating had stayed at 5.6 percent, Sandy would surely have reneged. But the oligarchs’ plan appeared to be working. By early March, Yeltsin’s approval rating had risen to 14 percent and this put Sandy in a quandary. A clause in the contract said that if Safra pulled out, then he would have to pay a multimillion-dollar penalty. However, if Sandy released the money and Yeltsin wasn’t reelected, Safra stood to lose even more than that. To buy a little more time, Sandy released $100,000 of working capital, which allowed me at least to set up the office in Moscow.

  I was in a quandary too. I didn’t like the idea of moving to Moscow without any real business, but it didn’t make sense for me to force the issue. If Safra decided to pull out now, I wouldn’t be able to find another $25 million investor in the three months before the Russian elections.

  I went about my work and continued to prepare for the move to Moscow with Sabrina, but things had become more complicated between us. She had become pregnant almost the moment I proposed and was hit with severe morning sickness. She was in such bad shape that several times I had to take her to the hospital to be rehydrated.

  As we were packing our bags in our bedroom on the eve of our trip to Moscow, she finally said what I was dreading she might say.

  “Bill, I’ve been up all night thinking, and I’m . . .”

  “What is it?”

  “I’m sorry, but I just can’t go to Russia.”

  “Because of the morning sickness?”

  “Yes, and . . .”

  “What? You’re going to come when the morning sickness passes, right?”

  She turned away, looking confused. “Yes. I mean, I think so. I don’t know, Bill. I just don’t know.”

  While I wanted her to be with me in Moscow, I couldn’t fault her. She was going to be my wife and she was carrying our child. Whatever our previous arrangements were, she had to be comfortable and happy. That was what mattered most.

  I accepted that she would stay in London, and the next morning Sabrina drove me to Heathrow. We said our good-byes on the curb and I promised to call her twice a day, every day. I kissed her and went through the airport, hoping that she would be able to join me soon.

  I thought about all of this as I flew east. But then I landed at Sheremetyevo and was confronted with the crowds and the chaos, and I didn’t have the capacity to think about anything other than dealing with real life on the ground in Moscow.

  I had a two-page-long to-do list, and the first item was to find an office. After checking into the National Hotel, I called Marc Holtzman, who had recently set up his own office in Moscow. He told me about an empty room just down the hall from his and I made an appointment to see it right away.

  The next morning, I left the hotel to hail a cab. As soon as I stuck out my hand, an ambulance swerved dangerously from the middle lane and came to an abrupt stop in front of me. The driver leaned across, rolled down the window, and said, “Kuda vy edete?” He wanted to know where I was headed.

  “Parus Business Center,” I told him without a hint of a Russian accent. “Tverskaya Yamskaya dvacet tre”—the street address in Russian. That was about the extent of my fluency. Unlike many other Westerners in Moscow, I had never studied Russian literature, trained as a spy, or done anything useful to prepare for life in Russia.

  “Piat teesich rublei,” he said. Five thousand rubles—roughly one dollar—to go about two miles. As he spoke, four other random cars also stopped, queuing in case I decided to reject the ambulance. I was in a hurry so I jumped in. I looked over my shoulder as I slid into the passenger seat, praying that no bodies or injured people were in the back. Thankfully there weren’t. I shut the door and we pulled into traffic, heading up Tverskaya.

  I soon learned that an ambulance stopping to pick up a fare in Moscow wasn’t unusual. Every vehicle was a potential taxi. Private cars, dump trucks, police cruisers—everyone was so desperate for money that any and all would take fares.

  Ten minutes later we stopped in front of the Parus Business Center. I gave the driver his money, got out, and walked through the underpass to the other side of the street. I entered the building, passing a Chevy dealership on the ground floor, and met the building’s manager, a fast-talking Austrian.

  He took me up to the empty office on the fourth floor. It was only two hundred square feet, about the size of an average master bedroom. The plate-glass windows, which opened only a few inches, looked over the parking lot to the west and a decrepit set of Soviet apartment blocks beyond that. The space was
n’t pretty but it was functional, had multiple phone jacks, and was just down the hall from Marc. The Austrian wanted $4,000 a month, making this one of the most expensive office spaces in Moscow per square foot. I tried to negotiate, but the Austrian just laughed at me. After a bit more bickering, I gave in and signed the lease.

  Once I had the office, I needed people to help me run it. While tens of millions of Russians were desperate to make a living, hiring a good English-speaking employee in Moscow was almost impossible. Seventy years of communism had destroyed the work ethic of an entire nation. Millions of Russians had been sent to the gulags for showing the slightest hint of personal initiative. The Soviets severely penalized independent thinkers, so the natural self-preservation reaction was to do as little as possible and hope that nobody would notice you. This had been fed into the psyches of ordinary Russians from the moment they were on their mothers’ breasts. To run a Western-style business, therefore, you either had to completely brainwash a fresh young Russian about the virtues of efficiency and clear thinking or find some miraculous person whose natural psychology had somehow defied the pressures of communism.

  Fortunately, I got lucky. A local brokerage firm with a number of Western-trained employees had recently gone bankrupt, and less than a week after arriving in Moscow I was able to hire three good people: Clive, a British junior trader and researcher; Svetlana, a secretary who spoke perfect English; and Alexei, an experienced driver who spoke only Russian.

  After getting them in the office, I sent Svetlana to find some furniture. She was a short, pretty, twenty-two-year-old Lithuanian with dark hair and a sunny disposition, who enthusiastically went about her mission. When she got to the furniture store, she called to tell me about some nice Italian chairs and desks she thought would be perfect for the office.