Thursday, March 24, 2016
Red Notice by Bill Browder
Bill Browder has a fascinating tale to tell, of his family background as the grandson of a noted Communist, of his math-whiz father and mother, of his physicist brother. He was the black sheep of the family…until he became a billionaire in his thirties by investing in undervalued Russian oil stocks. His first foray into Russia, to advise the Murmansk Trawler Fleet on privatization, must go down in the annals as a classic of West meets East. The whole story of Browder’s rise to wealth, with its moments of terrifying vertigo as markets collapsed with the Asian economic crisis in 1997, is propulsive and gripping. But more was to come, and no one could imagine the way the saga unfolded.
A red notice is issued by Interpol for the provisional arrest and extradition of an individual for whom an arrest warrant has been issued in the requesting country. Russia requested a red notice from Interpol with regard to Bill Browder, charging him in absentia with tax evasion among other crimes including the murder of Sergei Magnitsky, a Browder lawyer who perished in a Russian jail after medical interventions were withheld. This book tells the story of how Magnitsky’s oppressors became international pariahs, had their U.S.-based assets frozen and visas revoked or refused, a result of The Sergei Magnitsky Rule of Law Accountability Act passed in the United States in December 2012.
Browder’s Hermitage Capital Management hedge fund still operates, though after his expulsion from Russia Browder was obliged to expand his investment purview, opening Hermitage Global which focused on emerging markets. Hermitage Capital Management almost from its inception was an activist fund which exposed criminal wrongdoing by majority shareholders in undervaluing or “stealing” company assets in order to allow profits to flow to corrupt bureaucrats and their businessmen partners. Browder would purchase a minority share in a [often large oil] company, and then expose how the shares were undervalued, prompting many investors to jump into the market for the shares, enriching Browder. One year Browder paid $230 million in income taxes to the Russian state on $1.3 billion in profits. It is just this sum which was later the subject of Russia’s state investigation.
Putin and his circle including Medvedev are implicated in Browder’s story, though Browder shows how Putin was initially outraged at the theft of assets from state coffers, back at the beginning of Browder’s hedge fund successes. Actually, the whole setup—the issuing of vouchers to every Russian for “ownership” of state assets—is a fascinating history that requires further investigation. This compelling story of Browder and Magnitsky does what good nonfiction is meant to do: it makes you hungry for more depth, more history, more info on Putin, Pussy Riot, and Russia itself.
Browder’s writing is best in the beginning, when he tells of his early interest in East European stocks and how he came to look at the investment banking scene. It is pure Michael Lewis-style disbelief at the life of a Wall Street banker. We revel, then, when he sets off on his own, scaring up seed money and taking chances. Browder also shares his personal life, his expensive (and often working) vacations, including resort names, which allowing us a little vicarious vacationing ourselves.
If Browder’s gee whiz writing style began to grate a little by the end, and become a little less believable coming from a much older and wiser billionaire, I put it down to his awareness of his role in creating the disaster that resulted in the need for the Magnitsky Act. There may be something inherently corrupting about making vast amounts of money, albeit perfectly legally, by exploiting the discrepancies in unfair or exploitative valuations as a result of societal and political dislocations. There appears to be no shortage of real oppression in Russia today, and laws have not been robust enough to protect people from exploitation. It looks like a place where we can see naked human nature on display. I thank Browder for the introduction.
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