Ali Velshi: You come from a family where your grandfather wasn’t just a communist — he was possibly one of the biggest communists in America.
Bill Browder: My grandfather Earl Browder was a labor union organizer in Wichita, Kansas. And he was so good at organizing the union that in 1927 the International Communist Party said, “If you like labor unionism, you’re gonna love communism. Why don’t you come to Russia?” So 1927, my grandfather goes to Russia. He ends up meeting a Russian girl, who becomes my grandmother. My father is born there. And then five years later, in 1932, the Communist Party sends him back to America to become the general secretary of the American Communist Party. He runs for president in 1936 and ’40 against [Franklin] Roosevelt. He’s imprisoned by Roosevelt in ’41, pardoned the next year. And then ultimately kicked out of the Communist Party in 1945 for being too capitalist. And one would’ve thought that would be the end of the story. But then in the 1950s he was persecuted for being a communist. They didn’t distinguish between good communists and bad communists.
I graduate [from] Stanford Business School in 1989, the Berlin Wall comes down, and I had this epiphany, which was if my grandfather was the biggest communist in America, I’m going to become the biggest capitalist in Eastern Europe. And that’s what I set out to do in 1989.
You end up with the Boston Consulting Group. You end up in London. I don’t know how you came about it, but there was some deal that needed consulting in Poland. A bus company that under the communists was selling all of these buses to the government.
The Boston Consulting Group was hired by the World Bank to go and fix a failing bus company in Poland.
They send me out to this little town, with no experience. I don’t know anything about buses or business or anything, for that matter. I get to this town I’m supposed to be helping them fix the bus company. It’s effectively unfixable unless the state started buying more buses, which they didn’t.
But while I was there I discovered something very interesting, which was that my translator was carrying a newspaper, and in his newspaper I noticed a bunch of financial figures on the front page. And so I said, “What’s that?” And he said, “Ah, these are the very first privatizations in Poland.”
And then I said, “Well, what’s that number, right below there?” And he said, “That says, ‘Net profit for the last year.’” And that number was $160 million. So they were selling the company for a value of $80 million and they had made $160 million the year before.
So that company would’ve paid for itself in six months. This is in the post-communist era. These Eastern European governments are now trying the get the private sector to invest in what used to be government health companies.
Right. So they were privatizing government-held companies. And they didn’t know how to do it. Then I decided to go all in. All in for me at that time was $2,000.
That was your money. So you had it sent over to Poland?
And I became a shareholder in the very first privatizations in Poland for $2,000. But what was most exciting about this whole experience was that after the whole assignment was done and everything was over, my shares went up 10 times. I made $20,000. And so I knew from that moment on that I wanted to be an investor in the privatizations of Eastern Europe. And that’s what I set out to do.
You then figure out Russia is the place to go. You end up in Russia. You’re finding companies that are not well covered by analysts, that are deeply, deeply undervalued, and you start investing in those. You’ve now raised money from other people as well.
So I started an investment fund. So we fast-forward a number of years. I go from my $2,000 to $20,000. I ended up raising $25 million for an investment fund called the Hermitage Fund. I move to Moscow. I’m the only Wall Street–educated investor on the ground in Moscow at the time.
And the banker Edmond Safra is your partner at this point.
If Poland was cheap, Russia was 50 times cheaper. Russia, in order to go from communism to capitalism — Boris Yeltsin, who was the president of Russia at the time, decided that the best way to do that was to do what they called mass privatization. To give everything away for free to the people. And so the math was similarly crazy to the whole Polish situation. They issued vouchers to each person, 150 million vouchers. They traded for $20 each. So $20 times 150 million gets you to $3 billion of the vouchers.
And that was exchangeable for 30 percent of all the shares of all Russian companies. Which meant that the value of the entire Russian economy was $10 billion. And so we started to just bet on the vouchers even without knowing what the price was going to be.
You were the most successful hedge fund in the world. Probably in the history of the world.
I was the most successful hedge fund. I had more than $1 billion, which was a huge amount of money in any circumstance but certainly back then and in Russia.
In the middle of all this thing, Vladimir Putin comes to power. Where did your interests align with Vladimir Putin’s?
After all this going up 850 percent, $1 billion, et cetera, the market crashes. The market goes down 90 percent. I lose $900 million for my client.
This is as a result of Russia defaulting on its —
In 1998 the market crashes. They default. They devalue. It’s all a complete disaster. At this point I’m in a very rough place because I need to make my money back for my investors. And so I decide to try and stick it out and try to fight my way out of this hole for my clients. But what I discover is that the oligarchs, all these rich guys we all have heard about, now they had a completely opposite set of incentives. They had been behaving themselves up until this point, when Russia defaulted in hopes of getting free money on Wall Street. Wall Street closes for business.
The Russian oligarchs then say, “Well, why are we behaving ourselves? We might as well misbehave and steal because there’s no incentive to behave.” So they misbehave. They start stealing. Then they start doing asset stripping, transfer pricing, embezzlement dilutions. Everything you can think of, they were doing. And so I had to start to fight them to save my last 10 cents on the dollar.
You’re fighting as a shareholder, a minority shareholder, fighting the leadership of these companies to get greater value out of the shares.
Well, I’m just fighting them to stop stealing all the last money that they have left in the company. It was a strange thing, where Vladimir Putin, the oligarchs were stealing power from him. They were stealing money from me. And so, every time that I would publicize a scandal about them, I was going after his enemies.
And that suited him.
And that suited him perfectly. I’ve never had a conversation with Vladimir Putin. But I would publicize these things, and he would go around selectively crushing these guys based on my exposes.
For this brief period of time, up until 2003, he was kind of not sure of where he where he was in the whole scenario. He goes out in October of 2003 and arrests the richest man in Russia, Mikhail Khodorkovsky, who was the owner of Yukos, an oil company. He arrests him. He puts him on trial.
As you write, if you’re the 17th-richest guy in Russia and you’re watching the richest guy in Russia in a cage on a televised trial —
What are you gonna do?
Yeah, your first call is to Vladimir Putin.
And they say, “Vladimir, what do I have to do to make sure I don’t sit in a cage?”
I wasn’t there, so I’m just speculating here, but I can speculate, based on what I have learned since, is his answer was “50.” Not 50 percent for the Russian government, not 50 percent for the presidential administration of Russia — 50 percent for Vladimir Putin. And at that moment in time, Vladimir Putin becomes the richest man in the world.
How do you corroborate that?
I can corroborate it now by just going onto the U.S. Treasury website. And some of the biggest oligarchs in Russia they’re sanctioning for being a trustee and holding money for Vladimir Putin.
I was, at one point, a big ally of Vladimir Putin. And after this whole thing happens, and as I continue to do exposes of corruption, I’m no longer exposing his enemies. I’m exposing his own personal financial interests.
And on Nov. 13, 2005, as I was flying back to Russia, having lived there for 10 years, become the largest foreign investor in their country, I was stopped at the VIP lounge of Sheremetyevo Airport. I was locked up overnight. And then I was deported the next day and declared a threat to national security, never to be allowed back into Russia again. At that point it became obvious to me that Putin’s interests had diverged.
The Russian government goes after you. You slowly manage to divest your interests, your investors’ interests. You get your money out, which is great. And you get your staff out, in most cases. You leave a few key people in Russia who are not your employees, but they’re working on your behalf. One in particular was handling your tax affairs, the fact that the government had accused you of tax fraud. What happens then?
My offices get raided in June of 2007. The police are specifically looking for our stamps, seals and certificates for our investment holding companies. They find them at the law firm. They seize those. The next thing we know, we no longer own our investment holding companies.
And by law somebody had used these stamps, seals, and certificates and transferred ownership of the company.
They transferred ownership of the company.
Legally. Illegally but legally.
But I was terrified because if the police were involved in opening criminal cases and seizing documents and working with murderers, God knows what they could do next. So I hired a bunch of lawyers, including a young man named Sergei Magnitsky. Sergei was a tax lawyer working for an American law firm in Moscow. He went out, and he investigated what this was all about. [What] we discovered, with Sergei’s great investigating skills … the purpose was to steal $230 million of taxes that we paid to the Russian government, from the Russian government. And they succeeded in that. So government officials stole our companies, applied for a tax refund of $230 million.
Tax you had already paid.
Tax we already paid. We discovered this. We thought this is not just a theft from us. This is a theft from the Russian government. We got all of our lawyers, including Sergei, to draft criminal complaints. We filed them with all the different law enforcement agencies of Russia. Then we waited for the good guys to get bad guys. It turns out there were no good guys over there, just bad guys. They opened up criminal cases against all of our lawyers. It turns out our lawyers were in harm’s way. So I went to every lawyer and I said, “You gotta leave Russia.”
But Sergei, who is about 10 years younger than the other guys and hadn’t been sort of fully aware of how horrible the Soviet system was, he was an idealist. He said specifically, “This is not 1937.” Which is the year that [Joseph] Stalin did his purges. He stayed in Russia, and he testified against the police officers who were involved in this raid. And then the same police officers he testified against, one month later, came to his home at 8:00 in the morning in front of his wife and two children, arrested him, put him in pretrial detention. He then began to be tortured to get him to withdraw his testimony against these police officers.
He was incarcerated for 358 days. They tortured him, and they tortured him. He lost 40 pounds. He developed pancreatitis and gallstones. He needed an operation. They kept on coming to him saying, “If you sign a false confession saying you stole the $230 million and you did so at [Browder’s] instruction, then everything will be OK.” He refused to sign their false confession. And so as a result, they moved him to a prison without any medical facilities. Eventually his body could no longer tolerate it. On the night of Nov. 16, 2009, he went into critical condition.
When he arrived at the new prison, instead of putting him in the emergency room, they put him in an isolation cell. They chained him to a bed. Then eight riot guards with rubber batons came into that cell and beat him until he died. He was 37 years old. That was Nov. 16, 2009.
I said to myself that I was going to do everything in my power to get justice for Sergei Magnitsky. And for the last six years, that’s what I’ve been doing.
You focused on the idea that if the United States were to impose sanctions on certain people in power, certain wealthy people or people of influence, that would be a good road to go down.
He wrote … 450 complaints in his 358 days in detention. We had this incredible, unprecedented testimony from the grave of what they did to him. We took this testimony, and we figured that if we publicized it and filed it in courts and so on, that the Russians, no matter how corrupt they were, that Putin would have to at least let the midlevel guys go. He’d have to throw them under the bus.
But he didn’t. They just lied blatantly.
But it was obvious from the autopsy photos.
Everything was obvious. We knew who did it. We had all the evidence. They decided to just completely circle the wagons, cover it up and exonerate every single person involved. Putin did, personally.
I said to myself, “Well, how do we get justice outside of Russia?” I discovered something really terrible about the world, which is that if something like this happens, there are no mechanisms of international justice. The best thing you can do is go to the State Department and if they’re willing, they’ll write, like a sentence or maybe two sentences in a report to say that they’re not so happy with how Russia behaved in this situation.
I said to myself, “This was not a crime of ideology. This was a crime of money.” They killed Sergei Magnitsky to steal $230 million. Those people who stole that $230 million, they don’t keep that money in Russia. Because as easily as they stole it, somebody could take it from them.
Where do they keep it? They keep it in New York. They keep it in London. They keep it in France and Germany. I went to Washington after Sergei was killed. I went to two senators, Sen. Benjamin Cardin, who’s a Democrat from Maryland, and Sen. John McCain, who’s a Republican from Arizona. I said, “Can we take away their visas and freeze their assets and make a law?”
They said yes. And they came up with something called the Magnitsky Act, named after Sergei Magnitsky, my lawyer who was killed. They came up with it in October of 2010. They introduced it to Congress. Right afterward, their phone lines lit up. They were getting telephone calls from many, many Russian victims of other crimes. Those people said, “Can you sanction the person that killed my father?” They realized that they were onto something much bigger than just Sergei Magnitsky. They’d found the Achilles’ heel of the Putin regime. And so after about 10 of these calls they said, “Well, this has got to be bigger than Sergei Magnitsky.” And they added 65 words to the law to sanction all other gross human rights abusers in Russia. From that moment, the thing just snowballed. And we ended up with 39 Senate cosponsors. The Magnitsky Act passed 92 to 4 in the Senate, 89 percent of the House of Representatives, signed by President [Barack] Obama on Dec. 14, 2012.
This interview has been edited and condensed.