Bill Browder

See also William Browder (mathematician)
Bill Browder

Browder at the Annual Meeting 2011 of the World Economic Forum in Davos, Switzerland, January 27, 2011
Born William Felix Browder
1964
USA
Nationality British (formerly American)
Education Stanford, MBA; Chicago, BSc Economics
Employer Hermitage Capital Management
Title CEO
Parent(s) Felix Browder, father
Relatives Earl Browder, grandfather
William Browder, uncle

William Felix "Bill" Browder (born 23 April 1964) is the Chief Executive Officer and co-founder of the investment fund Hermitage Capital Management and noted critic of Vladimir Putin.[1]

Personal life

Bill Browder is the grandson of Earl Browder, the former leader of the Communist Party USA,[2] and the son of Felix Browder, the noted mathematician.

He grew up in Chicago, Illinois and attended the University of Chicago where he studied Economics. He received an MBA from Stanford Business School[3] in 1989 where his classmates included Gary Kremen and Rich Kelley. He later became a British citizen.[2][4] In 1998, in what was speculated to be an attempt to avoid paying US taxes, Browder renounced his US citizenship.[5]

Prior to setting up Hermitage, Browder worked in the Eastern European practice of the Boston Consulting Group in London and managed the Russian proprietary investments desk at Salomon Brothers.

Hermitage Capital Management

Bill Browder and Edmond Safra founded Hermitage Capital Management in 1996 for the purpose of investing initial seed capital of $25 million in Russia. The business was very successful, profiting from the wave of privatizations occurring in Russia at that time, and increased its investor base substantially. Following the Russian financial crisis of 1998 Browder remained committed to Hermitage's original mission of investing in Russia, despite significant outflows from the fund. Hermitage became a prominent activist shareholder in the Russian gas giant Gazprom, the large oil company Surgutneftegaz, RAO UES, Sberbank, Sidanco, Avisma and Volzhanka.[6] Browder exposed management corruption and corporate malfeasance in these partly state-owned companies.[7] He has been quoted as saying: "You had to become a shareholder activist if you didn’t want everything stolen from you".[2]

In 1995-2006 Hermitage Capital Management was one of the biggest foreign investors in Russia[8] and Browder has amassed a significant fortune through his management of the fund. In 2006 he earned an estimated £125-150 million.[9] In 2007 he earned a further £125-£150 million.[10]

In March 2013, HSBC, a bank that serves as the trustee and manager of Hermitage Capital Management, announced that it would be ceasing the fund's operations in Russia. The decision was taken amid a libel court case in London and a trial in absentia for tax evasion in Moscow, both against Browder.[11]

Conflict with the Russian legal system


In 2006, after ten years doing business in the country, he was blacklisted by the Russian government as a "threat to national security" and denied entry to the country. The Economist wrote that the Russian government blacklisted Browder because he interfered with the flow of money to "corrupt bureaucrats and their businessmen accomplices". Browder had been a supporter of Russian president Vladimir Putin before, though.[12]

As reported by the New York Times in 2008, "over the next two years several of his associates and lawyers, as well as their relatives, became victims of crimes, including severe beatings and robberies during which documents were taken". In June 2007 dozens of police officers "swooped down on the Moscow offices of Hermitage and its law firm, confiscating documents and computers. When a member of the firm protested that the search was illegal, he was beaten by officers and hospitalized for two weeks, said the firm’s head, Jamison R. Firestone." Hermitage became "victim of what is known in Russia as 'corporate raiding': seizing companies and other assets with the aid of corrupt law enforcement officials and judges". Three Hermitage holding companies were seized on what the company's lawyers insist were bogus charges.[2]

Hermitage alleged that the raids in June 2007 enabled corrupt law enforcement officers to steal the corporate registration documents of three Hermitage holding companies, permitting them to perpetrate a fraud, claiming (and receiving) the $230 million of taxes paid by those companies to the Russian state in 2006. In November 2008 one of Hermitage's lawyers, Sergei Magnitsky, was arrested. He was charged with the very tax evasion that he had uncovered.[13] Magnitsky died on November 16, 2009, after eleven months in pretrial detention.[14] Opalesque.TV released a video on February 8, 2010 where Browder spoke about Sergey Magnitsky's ordeal during his eleven months in detention.[15]

In February 2013, Russian officials announced that Browder and Magnitsky would both be put on trial for evading $16.8 million in taxes. Furthermore, as announced in March 2013, Russian authorities will be investigating Hermitage's acquisition of Gazprom shares worth $70 million. The investigation will be focusing on whether Browder violated any Russian laws when Hermitage used Russian companies registered in the region of Kalmykia to buy shares. (An investigation by the Council of Europe's Committee on Legal Affairs and Human Rights cleared Browder of the accusations of improprieties that surfaced at this time.)[16] At the time, according to the Russian law, foreigners were barred from directly owning Gazprom shares. Browder has also been charged with trying to gain access to Gazprom's financial reports.[17] Browder admitted having sought influence in Gazprom but denied any wrongdoing;[18] in his view, purchasing Gazprom shares was an investment in the Russian economy, while the desire to influence the Gazprom management was driven by the need to expose a "huge fraud going on at the company", and the scheme with Russian-registered subsidiaries entitled to tax advantages was practised by other foreign investors at the time and was not illegal.[19] He also said that he believed the trial was in response to the United States passing the Magnitsky Act, which had blacklisted Russian officials involved in Magnitsky's death from entering the U.S. As claimed by The Financial Times, this trial was deemed to be the first in Russian history over a dead defendant.[20] Amnesty International described the trial as “a whole new chapter in Russia’s worsening human rights record” and a “sinister attempt to deflect attention from those who committed the crimes Magnitsky exposed.”[21]

On 11 July 2013, Browder was convicted in absentia by a district criminal court in Moscow on charges under article 199 of the RF Criminal Code (tax-evasion by organisations), and sentenced to nine years.[22][23] In May 2013 and again in July 2013, Interpol rejected requests by Russia's Interior Ministry[24] to put Browder on its search list and locate and arrest him, saying that Russia's case against him was "predominantly political".[25]

Red Notice

In February 2015, Browder published an account of his career, focusing on his years spent in Russia and the Russian government's attacks on Hermitage Capital Management. Browder's ongoing crusade against Russian corruption and the investigation into the death of his attorney Sergei Magnitsky are at the heart of Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice.[26]

References

  1. ↑ "The Weekend Interview: The Man Who Stood Up to Putin - WSJ.com." The Wall Street Journal - Breaking News, Business, Financial and Economic News, World News & Video - Wall Street Journal - Wsj.com. Web. <http://online.wsj.com/news/articles/SB10001424052702304885404579552120262256240?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304885404579552120262256240.html>.
  2. ↑ 2.0 2.1 2.2 2.3 Levy, Clifford J. (July 24, 2008). "An Investment Gets Trapped in Kremlin’s Vise". New York Times. Retrieved 2008-07-24. For Mr. Browder, 44, Russia was more than a place to do business. His grandfather Earl Browder was a committed Communist from Kansas who moved to the Soviet Union in 1927, staying for several years and marrying a Russian. He returned with her to the United States to lead the Communist Party for a time, even running for president.
  3. ↑ "Hermitage CEO Browder: Don't Invest in Russia Today". November 4, 2009. Retrieved 2009-12-15.
  4. ↑ "William Browder". Hermitage Capital Management. Archived from the original on 27 July 2008. Retrieved 2008-07-24. William F. Browder is the Founder and CEO of Hermitage Capital Management, the premier investment advisory firm specializing in Russian equities. The firm’s clients include high-net-worth individuals and major financial institutions. Hermitage Capital Management currently has around $3.3 billion invested in Russia.
  5. ↑ McCormick, Jason (11 July 2012). "5 citizens who left the U.S. to avoid paying tax". CBS News. Retrieved 17 June 2014.
  6. ↑ "The Hermitage Fund: Media and Corporate Governance in Russia,” Harvard Business School Case 703-010, 2002 (26)
  7. ↑ "Gazprom and Hermitage Capital: Shareholder Activism in Russia", Stanford Graduate School of Business Case IB-36, 2002
  8. ↑ "Magnitsky case: Russia accuses Browder over Gazprom". BBC News Europe. 5 March 2013. Retrieved 23 March 2013. In 1995-2006 Hermitage Capital Management was one of the biggest foreign investors in Russia. Mr Browder campaigned for the rights of minority shareholders, criticising the governance of Russia's partly state-owned corporations.
  9. ↑ "World's top-earning traders (2006)". London: Guardian News and Media Limited. Archived from the original on 13 July 2008. Retrieved 2008-07-24.
  10. ↑ "London boasts 25% of best paid traders". Daily Mail, The Mail on Sunday & Metro Media Group. Retrieved 2008-07-24.
  11. ↑ Henry Meyer & Jason Corcoran (26 March 2013). "HSBC Shuts Russia’s Hermitage as Browder Sued in London". Bloomberg. Retrieved 27 March 2013. HSBC Holdings Plc (HSBA) is closing Hermitage Capital Management Ltd.’s flagship Russia fund just as its co-founder, William Browder, is being sued for libel in London and tried in absentia for tax evasion in Moscow. “It was too small to continue as a viable concern,” Browder, 48, said by phone yesterday from London, where he’s based. Browder said the closing is “completely” in the hands of HSBC, which is the trustee and manager of the fund.
  12. ↑ "An enemy of the people: The sad fate of a loyal Putinista". The Economist. March 25, 2006. Archived from the original on 2 August 2008. Retrieved 2008-07-24. As the manager of a big Russian investment fund, Bill Browder has contributed to the circulation of the first kind of money--as well as making a packet for himself, and making his rich clients even richer. But he has also interfered with the supply of the second sort of money--and been ...
  13. ↑ Matthews, Owen (October 17, 2009). "Where Vultures Prey". Newsweek. Archived from the original on 8 December 2009. Retrieved 2009-12-15. Retaliation came quickly. Clearly, the conspirators hadn't reckoned on publicity and so decided to cover their backs. In January, Sergei Magnitsky, one of Firestone Duncan's top lawyers, was unexpectedly arrested as he arrived to give evidence to a prosecutor assigned to investigate the case.
  14. ↑ Browder, William (December 22, 2009). "They Killed My Lawyer". Foreign Policy. Archived from the original on 27 December 2009. Retrieved 2009-12-26. Sergei Magnitsky was our attorney, and friend, who died under excruciating circumstances in a Moscow pre-trial detention center on Nov. 16, 2009.
  15. ↑ "Opalesque BACKSTAGE Video - Bill Browder: Sergey Magnitsky case reveals Russia's ugliest face". February 8, 2010. Archived from the original on 14 February 2010. Retrieved 2010-02-08.
  16. ↑ Council of Europe's Committee on Legal Affairs and Human Rights. "Refusing impunity for the killers of Sergei Magnitsky". Parliamentary Assembly, Council of Europe. Retrieved 10 August 2014. Alleged illegal acquisition of Gazprom shares. 42. On 5 March 2013, the Russian authorities opened a new criminal case against Bill Browder concerning illegal acquisition of Gazprom shares. In fact, under a Presidential decree of 5 November 1992, direct foreign ownership of Gazprom shares was limited to 9% of all shares. Due to strong demand from foreign investors, the "foreign" shares soon traded at a considerable premium over the price of the "local" shares, creating an incentive for would-be foreign investors to devise ways and means to acquire "local" shares at "local" prices, using loopholes in the legislation, in particular by holding Gazprom shares through holding companies incorporated in Russia. 43. Another Presidential decree in 1997 on Gazprom share ownership required that Russian companies holding Gazprom shares could only be less than 50% foreign-owned. In reaction to this, the holding structures for so-called "grey market" Gazprom shares held for the benefit of foreign investors were further refined, with the depositary accounts assistance provided by Gazprom Bank, the officially designated "registrar" of Gazprom shares. According to Mr Browder, all market intermediaries developed structures for foreign investors to hold "local" Gazprom shares, including for example Gazprom Bank itself, United Financial Group/Deutsche Bank and Ruhrgas. The holding structure set up by Hermitage Capital in 1999 for a large U.S. client included a Cypriot (i.e. "foreign") holding company (Zhoda Ltd. And its predecessor (Peninsular Heights Ltd.) owning 49% of the capital of each of two Russian companies (Kameya LLC and Baikal-M LLC), which in turn owned 51% of each other's capital, with Kameya holding the coveted "local" Gazprom shares. According to Mr Browder, who showed me copies of the relevant documents, Hermitage Capital fully disclosed this structure, including the foreign ownership element, to Gazprombank (Gazprom's shares registrar), to the Russian Federal Tax Service and to the Russian "Unified Registry for Legal Entities" (i.e. the central companies registry). The Federal Tax Service, in a tax audit of Kameya LLC dated 2 November 2005, acknowledged Kameya's (partial) foreign ownership and confirmed that the structure complied with the 1997 decree. Gazprom Bank and the Unified Registrar for Legal Entities also acknowledged Kameya's ownership structure and did not raise any objections. 44. In August 2004, a member of the Russian State Duma, Mr Yuri Saveliev, requested the law enforcement authorities to investigate the illegal acquisition of Gazprom shares by non-residents through the "grey market" structures set up by UFG/Deutsche Bank. But on 18 October 2004, the General Prosecutor's office publicly confirmed the legality of UFG's Gazprom structures. Finally, by Presidential decree no. 1519 of 23 December 2005, all restrictions on foreign ownership of Gazprom shares were abolished. It should be noted that the only sanction foreseen in the 1997 decree for a breach of the prohibition on foreign ownership of Gazprom shares was the obligation to sell such shares within 3 months (when the Russian ownership of the company holding the shares fell below 50%, for example due to restructuring) or that the acquisition of shares was "null and void in the territory of the Russian Federation" (for example, when the company acquiring the shares did not meet the Russian ownership requirement in the first place). The decree foresees no other sanctions, let alone penal ones. 45. Consequently, the retrospective prosecution of the Hermitage executives for any violation of this decree would appear to violate the principle of "nullum crimen, nulla poena sine legem" enshrined in Article 7 ECHR, even if the holding structure used by Hermitage (and many other market intermediaries) violated the decree. Whilst these "grey market" structures were clearly designed to help foreign investors circumvent the temporary "ring-fence" built around Gazprom by the 1993 and 1997 decrees (and abolished by the 2005 decree), they were obviously tolerated by the authorities, whatever their reasons might have been. In my view, the authorities cannot now change their minds retroactively, in addition solely to the detriment of one of the "grey market" participants and not the others: this would be a case of selective justice, which in the practice of the Assembly is often seen as an indication for the "political" motivation of criminal prosecutions.
  17. ↑ "Police Set to Charge Browder for Buying Gazprom Stock". The Moscow Time. Associated Press. Retrieved 17 March 2013.
  18. ↑ "Russia alleges $70m fraud against Browder" by Charles Clover. Financial times, 5 March 2013.
  19. ↑ "Magnitsky case: Russia accuses Browder over Gazprom". BBC News Europe. 5 March 2013. Retrieved 23 March 2013. He said he had bought Gazprom shares in order to invest in the Russian economy and influence the Gazprom management because "we noticed that there was huge fraud going on at the company". Mr Browder insists that the way he bought the shares - through Russian-registered subsidiaries entitled to tax advantages - was legal and used by other foreign investors at the time.
  20. ↑ Clover, Charles; Courtney Weaver (February 17, 2013). "Dead lawyer to go on trial in Russia". The Financial Times. Retrieved 26 February 2013.
  21. ↑ Taylor, Jerome (February 17, 2013). "Russia set for posthumous Magnitsky trial". The Independent (London: The Independent). Retrieved 4 March 2013.
  22. ↑ Russia finds Magnitsky posthumously guilty of fraud BBC, 11 July 2013.
  23. ↑ Суд приговорил Браудера к девяти годам, а дело признанного виновным Магнитского прекратил NEWSru, 11 July 2013.
  24. ↑ Россия объявила в международный розыск Уильяма Браудера
  25. ↑ http://www.interpol.int/News-and-media/News/2013/N20130726
  26. ↑ http://www.nytimes.com/2015/02/02/arts/bill-browders-red-notice-about-his-russian-misadventures.html?_r=1

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