Thursday, 11 September 2008

Russian Mafia exposed - The Browder Story

Posted by Nick Kochan

This is the first in a three part series on Bill Browder, the multi-millionaire chairman of Hermitage Capital who quit Russia following allegations of fraud at the highest levels.

The deeds of the Russian mafia may be murky, but they rarely get exposure. The members of organised crime are often hidden behind political and judicial structures. However, those that have done business in Russia are no longer shocked. They have seen it all, they claim. One such man is Bill Browder, the multi-millionaire chairman of Hermitage Capital. His $4 billion portfolio of Russian stocks made him the largest foreign investor in the country.

Now that he has quit Russia, he presents a document which he alleges shows the involvement of “a group of criminals at a reasonably high level in the Russian government” in the theft of $230 million from the Russian Tax Ministry. The document is entitled, Persecution of Hermitage in Russia in order to steal $230 million from the Russian People.

Browder is on a mission to cleanse Russia of its criminal class. He speaks with a zeal rarely found among financiers. He cannot overstate the “dire state” of business practices and ethics in Russia. “It is bent at every turn,” he claims. The alleged scam confirms Browder’s view that business conditions in Russia have retreated to the state he found them in when he set up his firm in Russia in 1992, with the assistance of money from the banker, Edmund Safra.

The key to Browder’s success was attacking Russian companies with poor corporate governance and seeing their stock prices rise as they improved their management and ethics. According to Browder, this approach upset senior members of the country’s political and economic elite and in 2005, his entry visa was withdrawn.

He mounted a crusade at the highest levels to re-instate his visa, even approaching Dmitry Medvedev, the man destined to be the president of Russia, at Davos last year. “I saw him tucking in to his dessert,” said Browder. “He was sitting on his own. I saw this as an interesting opportunity to have a chat with him and so I went to talk to him. He stood up. We knew each other. I know him, we have worked with him because he was the chairman of Gazprom and we were always very active in Gazprom. I asked him if he could get my visa reinstated. He knew all about me. He said yes, he would help me. He asked me for a copy of the visa application, which I got my office to produce.”

A month after the Medvedev meeting, Browder claims that his office in London received a call from a lieutenant colonel of the Interior Ministry, which it construed as a request for a bribe. Hermitage have a recording of the conversation.

According to Hermitage’s report, the lieutenant colonel asked if he could meet Browder. Hermitage’s report alleges the lieutenant colonel said, ‘The sooner we meet and you provide what is necessary, the sooner your problems will disappear.’ Browder says that the company receives requests like this every day. “People try and shake you down in every different place in Russia. We ignored it. This was the one case out of a hundred when something happened.”

End of part one

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