Browder, Red Notice

Bill Browder has written a book that is by turns gripping, chilling, and moving—a book that impels a reviewer to pile one outraged adjective upon another. Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice (Simon & Schuster, 2015) is a scathing indictment of Putin’s brutal kleptocracy, which Browder and the people connected to his firm, Hermitage Capital, experienced firsthand.

Browder, the grandson of Earl Browder, head of the American Communist Party who ran for president twice on the Communist ticket, rebelled and became a capitalist, though he still felt the pull of Eastern Europe. His first major deal was for his employer, Salomon Brothers: buying $25 million worth of Russian privatization certificates that were then exchanged for shares in undervalued Russian companies. In a short time the portfolio was worth $125 million, and the 29-year-old Browder became a hero at Salomon.

Soon enough, he decided to go out on his own. With considerable difficulty he launched his firm, based in Moscow, in 1996. A year later his investors were amply rewarded: the fund was ranked the best-performing fund in the world, up 235 percent for the year and 718 percent from inception. Started with assets of $25 million, the firm now had AUM of more than $1 billion. In 1998, hit by the Russian currency crisis, it dropped a whopping 90 percent, but by the end of 2003 it had managed to climb out of its hole, and then some. It had rallied more than 1,200 percent from the bottom of the market.

Its spectacular recovery was the result of a joint, though uncoordinated effort. Hermitage Capital exposed corruption in Russian companies owned by oligarchs who posed, early on, a challenge to Vladimir Putin’s power. Putin was only too happy to use Hermitage’s research to his own ends. His intervention reined in some of the oligarchs and led to increased corporate profits. Putin won, Hermitage won.

In October 2003, however, Putin upped the ante: Mikhail Khodorkovsky, the CEO of Yukos and Russia’s richest man, was arrested. In June of the next year he was sentenced to nine years in prison. His fellow oligarchs got the message. What could they do to avoid ending up in that cage? Browder speculates that Putin’s response was “50 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.” (p. 164)

Browder, unaware that he and Putin were on a collision course, continued to name and shame 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.” (p. 165)

This would not do. In 2005 Browder was expelled from Russia, and things would only get worse from there. As Browder’s lawyer Sergei Magnitsky told him, and as his own imprisonment and subsequent murder would make manifest, “Russian stories never have happy endings.” And in Putin’s Russia stories are a pack of lies, justice is a joke, endings are final.