I’ve known Bill Browder for a while as an investor. He runs two Funds out of London now (the Hermitage and Hermitage Global funds) but he used to have just one, run out of Moscow. He started the Russia Fund, a deep value investor equity fund, around 1997 with USD 20 million or so (with I think half from Edmond Safra). The Fund promptly lost more than 90% in the ’98 crisis but Bill persevered and ended up doing spectacularly well. Activist investing in Russia was really dangerous then, one target of Bill’s actually threatening to kill him in public. For years, he used to commute between London and Moscow, preferring to keep his family out of harm’s way in London. When I visited him in Moscow once, I remarked on the lack of bodyguards around him. He quipped “well, they’re much smarter now, they come after me with lawyers.”
Pretty soon after that, Bill Browder was refused entry into Russia for very obscure security reasons and never allowed back in. He made the best of his situation and set up shop in London. Pretty soon after that, the attacks and tax liens on him started and he pretty much wound up all his investments in Russia — from the largest foreign private investor in the country to pretty much nothing. He’s still done all right, parlaying his stellar investment record into a global deep value equity investment fund. And that one is still doing pretty well. But the most recent installment of the Russia saga should give Russia permabulls some pause.
Now, before anyone gets excited, I remain pretty positive Russia, but I also remain sanguine that people thinking they could put one over Russians should reconsider; these guys play hardball. But, before we get too cynical about Russia, here’s a story (again from Bill) about a Norwegian psychologist who’d moved to Moscow around the time of Stalin. He said
At first, I didn’t understand the Russians at all. Then, after I’d spent a few decades there, I became confident I was beginning to understand these people. But then, after I’d spent another couple of decades here, I realized the truth: that I don’t understand these people at all.
Now, here’s the story from The Independent
Russian officers leading a discredited investigation into a British-based hedge fund have switched their inquiries to London, threatening to provoke a diplomatic row.
The case has been blamed for the death of an anti-corruption lawyer who was imprisoned after accusing Russian government officials and others of theft and tax fraud.
Sergei Magnitsky, 37, a lawyer commissioned by Hermitage Capital Management to defend allegations of tax evasion, was awaiting trial for alleged conspiracy when he died of heart failure last year at Matrosskaya Tishina detention centre in Moscow, after being denied access to medicine. This prompted an international outcry.
Now the Interior Ministry has won a court order to secure a search warrant of the London address of an unnamed senior Hermitage executive. It is also seeking help from Interpol to trace six Hermitage-linked lawyers who left Moscow and are now in London.
Hermitage said it had also received an order signed by Major Oleg Silchenko of the Russian Federal Interior Ministry seeking the arrest in absentia of senior Hermitage executive Ivan Cherkasov, who is also in London. Major Silchenko led the investigation and 12-month detention without trial of Mr Magnitsky, the firm said. Bill Browder, chief executive of Hermitage, said the Russian authorities are continuing their “attack” on his executives and lawyers in retaliation for the criminal complaints filed by Mr Magnitsky and Hermitage about the involvement of Russian government officials and others in tax fraud.
Last year, a damning report by the Council of Europe condemned the investigation. The Council, of which Russia is a permanent member, said the proceedings targeting Hermitage Capital executives represent an “emblematic case” of the politically motivated abuse of the criminal justice system, and called on all member states to deny any Russian Federation requests for mutual legal assistance targeting Hermitage Capital executives and lawyers.
Mr Browder said: “If Major Silchenko seriously thinks he can come to London and try the same thing here, he will find himself in a legal mess so large, he will need a very good lawyer for a very long time.”
Oleg Sepelev, of the Russian embassy, said he could neither confirm nor deny the request to extend to the Hermitage investigation to London.