by Bill Browder
It seemed as if it was all too good to be true, and it was.
Early one Saturday morning in October 2003, as I was running on the treadmill in my apartment watching CNN, a breaking-news headline came across the screen saying that Mikhail Khodorkovsky, the CEO of Yukos and Russia’s richest man, had been arrested.
I jumped off the treadmill, wiped the sweat from my brow, and hurried to the kitchen, where Elena was preparing breakfast. “Have you heard the news?” I shouted, still out of breath.
“Yes. I just heard it on the radio. It’s unbelievable.”
“What do you think will happen?”
“I don’t know. I can’t imagine that he’ll be in jail by Monday morning. Rich people don’t tend to spend much time in jail in Russia.”
My emotions were mixed about Khodorkovsky’s arrest. In the short term, the Russian market would take a big hit and my fund would lose money if he stayed in jail for even a few days. Longer term, however, if he miraculously stayed in jail and this was to be the beginning of a crackdown on the oligarchs, it meant that Russia had a chance at becoming a normal country. Ultimately, that would be a good thing, not just for the fund, but for everyone living in Russia.
When I arrived at the office on Monday morning, Khodorkovsky was still in jail, and the market opened at 10 percent down. His arrest and detention was on the front page of every major newspaper in the world. My clients started panicking, and I fielded calls from them all day. What did this mean? What was going to happen next? Should they take their money out of Russia?
I didn’t know—nobody did. It all came down to the personal negotiation between Vladimir Putin and Mikhail Khodorkovsky, a negotiation in which neither law nor logic played any role.
For reasons that no one will ever really know, this negotiation went badly for Khodorkovsky, and he was still in jail by the end of the week. Then the Russian government escalated matters by seizing Khodorkovsky’s 36 percent block of Yukos.
This was unprecedented. Not only was it a personal disaster for Khodorkovsky, but for the whole financial market. The fear of expropriation sat at the back of every investor’s mind, and now it was happening under Vladimir Putin. Over the next four business days, the market slid a further 16.5 percent, and Yukos lost 27.7 percent of its value.
Why was Putin doing this? The most popular theory was that Khodorkovsky had broken Putin’s golden rule: “Stay out of politics, and you can keep your ill-gotten gains.” Khodorkovsky had violated this maxim when he’d sent millions of dollars to the opposition parties for the upcoming parliamentary elections, and when he had begun to make statements that were clearly anti-Putin. Putin is a man who believes in symbols, and since Khodorkovsky had overstepped the mark, Putin had to make an example out of him.
As if to drive this home, Putin engaged in a full-scale witch-hunt against anyone connected to Khodorkovsky. In the weeks that followed his arrest, Russian law enforcement agencies went after the political parties he’d financed, his charities, and scores of his employees.
In June 2004, Khodorkovsky and his business partner, Platon Lebedev, were put on trial and convicted of six counts of fraud, two of tax evasion, and one of theft. Each was sentenced to nine years in prison. Since this was all about symbolism, Putin did something unprecedented: he allowed television cameras in the courtroom to film Russia’s richest man as he sat silently in the courtroom cage.
It was a powerful image. Imagine you’re Russia’s seventeenth-richest oligarch. You’re on your yacht moored off the Hôtel du Cap in Antibes, France. You’ve just finished screwing your mistress and you wander out of your stateroom to the galley to pick up two glasses of Cristal champagne and some caviar. You grab your remote and switch on CNN. There, right before your eyes, you see one of your peers—a man who is far richer, smarter, and more powerful than you—sitting in a cage.
What would your natural reaction be? What would you do?
Anything to make certain that you don’t end up in that cage.
After Khodorkovsky was found guilty, most of Russia’s oligarchs went one by one to Putin and said, “Vladimir Vladimirovich, what can I do to make sure I won’t end up sitting in a cage?”
I wasn’t there, so I’m only speculating, but I imagine Putin’s response was something like this: “Fifty percent.”
Not 50 percent to the government or 50 percent to the presidential administration, but 50 percent to Vladimir Putin. I don’t know this for sure. It could have been 30 percent or 70 percent or some other arrangement. What I do know for sure was that after Khodorkovsky’s conviction, my interests and Putin’s were no longer aligned. He had made the oligarchs his “bitches,” consolidated his power, and, by many estimates, become the richest man in the world.
Unfortunately, I wasn’t paying enough attention to see that Putin and I were on a collision course. After Khodorkovsky’s arrest and conviction I didn’t alter my behavior at all. I carried on exactly as before—naming and shaming Russian oligarchs. There was a difference this time, though. Now, instead of going after Putin’s enemies, I was going after Putin’s own economic interests.
You might wonder why I couldn’t see this. It all came back to that incident with the man in the road. The police had ignored me that day because I wasn’t Russian. I believed that, because I was a foreigner, I was somehow exempt from the informal rules that governed everyone else’s lives in Russia. If I had been a Russian citizen engaging in my anti-corruption work, I would certainly have been arrested, beaten, or murdered.
But Putin was not as brazen then as he is now. Back then killing a foreigner would have been too drastic a move. And putting me in prison would have made Putin just as much of a hostage to the situation as I was. If he did this, every Western head of state would have been forced to spend a third of their meetings with Putin arguing for my release. In the end, Putin came up with a compromise that satisfied everyone in his circle—on November 13, 2005, upon returning to Moscow from London, I was stopped in the VIP lounge at Sheremetyevo-2, detained for fifteen hours, and expelled from the country.
19
A Threat to National Security
As soon as I got off my deportation flight from Moscow, I began making calls to try to figure out what had gone wrong. Elena, who was eight months pregnant, tried helping me in any way she could. I’d spent the previous ten years painstakingly building my business brick by brick, forgoing a social life, obsessing about every move in the stock market, treating weekends like workdays, all to create a $4.5 billion investment-advisory business. I couldn’t let the cancellation of my visa destroy it in one fell swoop.
My first call was to a well-connected immigration lawyer in London. He listened to my story and was intrigued. He’d just heard that another British citizen, Bill Bowring, a human rights lawyer, had been denied entry to Russia on the day after me and suspected that my expulsion was a case of mistaken identity. I thought that was pretty far-fetched, but this was Russia we were dealing with.
My next call was to HSBC, my business partner after Edmond had sold the bank. As an enormous bureaucratic bank, it’d been wholly uninspiring when it came to moneymaking, but it was world-class when it came to dealing with the British establishment.
I first spoke to the CEO of HSBC’s private bank, Clive Bannister. Within fifteen minutes he connected me to Sir Roderic Lyne, a former British ambassador to Russia who was on retainer to HSBC for issues like these. Sir Roderic promised to help me navigate the departmental maze of the British government. Fifteen minutes after speaking to him, I had an appointment with Simon Smith, head of the Russia Directorate of the Foreign and Commonwealth Office, Britain’s version of the State Department.
A couple of days later I made my way to the Foreign Office building in London, an ornate and imposing neoclassical building on King Charles Street, just down the road from No. 10 Downing Street. After announcing myself at the reception area, I was escorted across a big courtyard to the main entrance. Inside were vaulted ceilings, marble columns,
and Victorian imperial details. The place had been designed at the height of the British Empire to intimidate and awe visitors, and although I had met with many corporate CEOs, politicians, and billionaires, it had that same effect on me.
Simon Smith arrived a few minutes later. He was about five years older than me with thick, graying hair and wireless glasses that framed a ruddy face. “Hello, Mr. Browder. So glad you could make it,” he said jovially with an educated British accent. We sat and he poured tea from a blue-and-white china pot for each of us. As the smell of Ceylon tea filled the room, Smith said, “So, it sounds as if you’ve got yourself into a bit of trouble with our friends in Moscow.”
“Yes, it seems that way.”
“Well, actually, you’ll be happy to know that we’re already on the case,” he said professionally. “Our minister for Europe is in Moscow right now. He’s planning to raise your case tomorrow with Putin’s foreign policy adviser, Sergei Prikhodko.”
That sounded reassuring. “Wonderful. When do you think we might know something from that meeting?”
Smith shrugged. “Soon, I hope.” Then he leaned in and held his cup with both hands. “Bill, there’s one important thing here, though.”
“Yes?”
“I watched your shareholders’ rights campaigns with great admiration when I was at the embassy in Moscow, and I know how successfully you used the press to advance your causes. But in this situation you absolutely must keep this away from the press. If this story is given a public airing, we won’t be able to help you. The Russians will dig in their heels and your issue will never be resolved. Russians always need a way to save face.”
I put down my tea and tried not to show my discomfort. Following this advice would be a totally unnatural thing for me to do. But here I was facing the biggest problem in my professional career, with the British government ready to weigh in on my behalf. I understood that I had to honor Smith’s request, so I agreed and we wrapped up the meeting.
The next afternoon, Smith called with an update. “Prikhodko said he has no idea why you were deported, but promised to look into it.” Smith said this as if he were delivering good news. I thought it was pretty unlikely that Putin’s top foreign policy adviser would be unaware of the expulsion of the largest foreign investor in Russia.
“And Bill,” Smith continued, “we’ve decided to get our ambassador in Moscow, Tony Brenton, involved. He’d like to speak with you as soon as possible.”
The next day I called Ambassador Brenton. I started to tell him my story, but after a few seconds he cut me off. “No need to carry on, Bill. I know all about you and Hermitage. I think the Russians are being quite stupid in alienating an important investor like you.”
“I’m hoping it’s a mistake.”
“Me too. I have to say, I’m reasonably optimistic this visa situation will be resolved once I speak to the right people. Sit tight. You’re in good hands.”
I couldn’t help but feel that I had indeed landed in good hands. I liked Ambassador Brenton. Like Smith, he sounded genuine in wanting to solve this problem. I didn’t know if losing my visa was a case of mistaken identity, or if one of the targets from my anti-corruption campaigns was exacting revenge, but I felt that with the British government on my side, I would ultimately prevail.
The first thing Ambassador Brenton did was to send a request to the Russian Foreign Ministry asking for a formal explanation. If my visa cancellation was indeed due to a mix-up of names, this would become apparent immediately.
A week later, Ambassador Brenton’s secretary called to say that they’d received a reply from the Foreign Ministry. She faxed me a copy. As soon as it came off the machine, I handed it to Elena to translate.
She cleared her throat and read, “We have the honor to inform you that the decision to close entry to the Russian Federation to a subject of Great Britain William Browder has been made by competent authorities in accordance with section one, article twenty-seven, of the federal law.”
“What’s article twenty-seven of the federal law?”
Elena shrugged. “I have no idea.”
I called Vadim, who was in Moscow, and asked him.
“Hold on a sec.” I heard him type something into his computer. After about a minute, he came back on the line. “Bill, article twenty-seven allows the Russian government to ban people who they deem a threat to national security.”
“What?”
“A threat to national security,” Vadim repeated.
“Shit,” I said quietly. “This is not good.”
“No. It’s not.”
With that one letter I understood that my visa denial definitely wasn’t a mix-up of names. I hadn’t been confused with Bill Bowring at all. Someone serious wanted me banned from Russia.
20
Vogue Café
When I told Ambassador Brenton that the Russians had declared me a threat to national security, he said, “That’s unfortunate, Bill, but don’t worry. We’ll continue to work the diplomatic channels. I have a meeting scheduled with one of Putin’s top economic advisers, Igor Shuvalov. I’m guessing he’ll be sympathetic. However, at this point it wouldn’t hurt for you to get your own contacts involved as well.”
I agreed, and Vadim and I began to compile a list of Russian officials we knew who might be helpful.
Since meeting in Moscow five years before, Elena and I had moved in together, gotten married, and she was pregnant with our first child. She stayed in London in the two-month period before her due date. As I sat in bed on the evening of December 15, 2005, adding names to this list, Elena emerged from the bathroom, her robe tied tightly around her bulging pregnant belly. “Bill,” she said with a shocked look on her face, “I think my water just broke.”
I jumped up, paperwork scattering over the bedcovers and onto the floor, not knowing what to do. My ex-wife Sabrina had delivered David via a scheduled cesarean section, so I had just as little experience with natural childbirth as Elena, a first-time mother. We’d read all the books and gone to all the classes, but once it actually started, all that stuff went out the window. I grabbed our prepacked hospital bag with one hand and wrapped the other around Elena, quickly shepherding her to the elevators and then to the garage near our apartment building, where I helped her into our car. The St. John and St. Elizabeth Hospital was only a short drive away, but in my panic I took a wrong turn on Lisson Grove and ended up in a one-way system that I had no idea how to get out of. As I looked desperately left and right, Elena, normally pleasant and unflappable, started to scream words I’d never heard come out of her mouth. Evidently, the contractions had started.
Ten minutes later we arrived at the hospital. Thankfully, she hadn’t given birth in the passenger seat. The rest was a whirlwind, but after ten hours, our daughter, Jessica, was born, a healthy, seven-pound, six-ounce baby. The joy I experienced from Jessica’s birth completely overwhelmed any negative thoughts I had about my visa situation.
We left the hospital two days later. Friends started arriving at our apartment with flowers, food, and baby presents. David, who’d just turned nine, immediately took to having a little sister. Watching him hold Jessica all wrapped up in a little hospital waffle blanket and giving her kisses for the first time remains one of my most cherished memories. Christmas—which we celebrate in spite of the fact that David and I are Jewish—came and went, and for a week or more, my troubles disappeared.
The New Year passed in equally blissful and uneventful fashion. There was no news from Russia because the whole country was shut down for the Orthodox Christmas holiday, but then, early on the morning of January 14, 2006, Vadim called from Moscow. “Bill, I just got off the phone with Gref’s deputy.”
German Gref was the minister for economic development and one of the most visible reformers in Putin’s government. Vadim had approached his deputy before Christmas to ask for his help with my visa.
“And? What did he say?”
“He said that Gref managed to get pretty
high up—in fact, he got to Nikolai Patrushev, the head of the FSB, to discuss your case.”
“Wow,” I said, both impressed and a little frightened. The FSB was Russia’s Federal Security Service, its secret police, which during Soviet times was universally known as the infamous KGB. If this weren’t ominous enough, Patrushev was reputed to be one of the most ruthless members of Putin’s inner circle.
“Apparently, he told Gref, and I quote, ‘Stay out of this. You shouldn’t put your nose in things that aren’t relevant to you.’ ” Vadim paused as this news sank in, then he added, as if it weren’t obvious, “There are some pretty serious people behind this stuff, Bill.”
Hearing this was like stepping into an ice-cold shower. All the good feelings of the holidays and Jessica’s birth and my expanding family were pushed to the back of my mind, and I was dropped harshly back into reality.
A week later, Ambassador Brenton called with similarly discouraging news. “Shuvalov was sympathetic, but said that there was nothing he could do.”
While these messages were disappointing, we still had the head of Russia’s version of the Securities and Exchange Commission, Oleg Vyugin, working on my case. He’d written to the deputy prime minister asking for my visa to be reinstated. He was due to be in London in mid-February for an international investment conference, and I hoped that he would bring some better news.
We arranged to meet in Mayfair at the bar of Claridge’s Hotel on the first night of his trip. But when I laid eyes on him, I could immediately tell that something was wrong. We sat on the low velvet stools and ordered drinks. While we waited, I said, “Thank you for the strong letter you wrote to the deputy prime minister.”
“There’s no need to thank me, Bill,” he said in excellent English. “But I’m afraid it achieved nothing. The government’s position on your visa is entrenched.”
My heart sank. “How entrenched?”
He stared at me and raised his eyebrows ever so slightly. He then pointed a slender finger at the ceiling and said nothing more. Was he saying Putin? It wasn’t clear, but that was the only way I could interpret his mysterious gesture. If this really was Putin’s decision, then I had no chance of fixing it.