Red Notice

  “What do you have in mind?”

  “As you probably know, Russia is hosting the G8 summit in Saint Petersburg on the fifteenth of July. We were thinking of putting your case on the prime minister’s agenda to discuss directly with Putin.”

  “Really. . . . That would be amazing, Simon.”

  “Don’t get your hopes up too much. It’s not a done deal, Bill, but we are working on it.”

  We hung up and I stared out the window. How could I not get my hopes up? Just as easily as my visa refusal had ruined my business, a visa reinstatement could restore it.

  As the G8 drew nearer, I was a bundle of nerves. A positive outcome from Prime Minister Tony Blair’s intervention would be life-changing. However, as the days and weeks passed, I began to have my doubts. I hadn’t been able to get in touch with Smith. I tried to keep a cool head, but I couldn’t figure out why he had been so encouraging before and then suddenly gone quiet.

  When I couldn’t stand it any longer, I called Sir Roderic Lyne, the former British ambassador to Russia who advised HSBC, to see if he had any insights. He was surprised that Smith had even suggested putting my issue on the prime minister’s agenda and encouraged me to keep my expectations low. Based on his experience, issues always emerged at summits that trumped the carefully crafted agendas.

  I tried to take his advice, but six days before the summit, Elena and I went to have lunch at Richoux, a restaurant on Circus Road in St. John’s Wood. As we sat at our table, she casually picked up the Sunday Observer and flipped through it. Her eyes lit up as she said, “Bill, look at this headline: ‘Blair to Raise Fund Manager’s Case with Putin’!” I grabbed the paper from her and started reading. It was a total confirmation of what Smith had discussed with me. The most salient sentence was to the point: “The prime minister will use the G8 summit in Saint Petersburg next weekend to ask Russia’s president to lift all restrictions on Browder.”

  Elena looked at me in shock. “This is amazing,” she said.

  The Observer article also surprised my clients, and some started to postpone their redemption decisions until after the G8.

  My spirits were as high as they could be, but then, three days before the summit, Vadim pulled me aside. “Bill, you need to see this.” He pointed to a Bloomberg headline on his computer screen. I leaned forward and scanned a story about Hezbollah militants in Lebanon who’d fired antitank missiles into Israel. Three Israeli soldiers were dead, and five others had been kidnapped and taken into Lebanon.

  “What does this have to do with us?” I asked incredulously.

  “I’m not sure, but this looks like a war’s starting in the Middle East. That may distract Blair from bringing up your visa discussion at the G8.”

  Sure enough, the following day Israel launched air strikes on targets in Lebanon, including the Beirut airport, resulting in forty-four civilian deaths. Russia, France, Britain, and Italy immediately criticized Israel for a “disproportionate” use of force, and the United States publicly condemned the Hezbollah militants. Vadim was right. The G8 summit might well disintegrate into a frantic Middle East peace summit, with Blair’s intended agenda jettisoned.

  As the summit began on Saturday, I didn’t know what was going to happen, and I couldn’t reach anyone in the British government over the weekend. The summit dragged on, but all the news reports were about Israel and Lebanon—nothing about my visa.

  As the summit wrapped up, Putin was scheduled to give the concluding press conference. The room was packed. Hundreds of journalists from across the globe were all hoping for their chance to ask Putin a question.

  After about twenty minutes of softball questions, Putin called on Catherine Belton, a pretty, diminutive, thirty-three-year-old British journalist at the Moscow Times. She took the microphone and tentatively addressed Putin. “Bill Browder was recently denied a Russian entry visa. Many investors and Western diplomats are concerned about this and don’t understand why this happened. Can you explain why he was denied an entry visa without any explanation?” She then sat, held her notebook on her knees, and awaited his answer.

  The room went quiet. Everyone knew that Putin had been caught off guard. He let a couple seconds pass before uttering, “Please say it again. Who exactly was denied a visa?”

  Catherine stood back up. “Bill Browder. He is CEO of the Hermitage Fund, which is the biggest investor in the Russian stock market. And I believe the prime minister of the United Kingdom might have discussed this with you today.”

  Putin frowned and replied tartly, “Well, to be honest I don’t know for what reasons any particular individual may be denied entry into the Russian Federation. I imagine that man may have violated our country’s laws.”

  That was it. When I saw this, I knew Blair hadn’t brought up my case, and that my visa wasn’t going to be reinstated. More importantly, if I translated this from Putin-speak into plain English, what he was saying was crystal clear: “We never mention enemies by name, and that includes Bill Browder. I am now instructing my law enforcement agencies to open up as many criminal cases against him as possible.”

  If you think this interpretation is paranoid or an exaggeration, it wasn’t. If anything, I wasn’t being paranoid enough.

  22

  The Raids

  After Putin’s remarks, my clients had their answer. Nothing good was going to happen in Russia. The next redemption date was August 25, and this time another 215 clients withdrew more than 30 percent of the assets from the fund. In my business this is what’s called a run on the fund, and like a run on a bank, once it starts it’s almost impossible to stop. Unless I could somehow pull a rabbit out of a hat, the Hermitage Fund was quickly going to be forced out of business.

  I’d handled hundreds of ups and downs throughout my career. Stocks rise and fall often for no reason, and I’d had to develop a thick skin to absorb bad news and not lose confidence. I hadn’t lost confidence after the fund lost 90 percent of its value in 1998, and I was rewarded for sticking it out when the fund fully recovered.

  But this time was different.

  My whole professional life had been geared toward being an investor in Russia. I’d never thought about anything else. But now, since I could no longer operate in Russia, I had to think about something else. What were my options? I couldn’t imagine returning to America to compete against thousands of people just like me. Nor could I imagine setting up in a new place such as China, only to spend a decade trying to establish myself.

  And I certainly wasn’t going to retire. I was forty-two years old and had fire in my belly. None of my options seemed attractive, and the more I thought about my situation, the more hopeless it seemed.

  The fact that Hermitage was probably going out of business was even more upsetting for the people who worked for me. After all the excitement and impact from our activities in Russia, no one on our team wanted to disband and be forced to return to regular jobs at investment banks or brokerage firms.

  As I pondered our strengths, it was obvious that we were good at finding undervalued investments. We were also experienced at protecting those investments from crooked managers. It seemed to me that we could take those two skills and apply them to other emerging markets.

  I decided to put Vadim and four other analysts on planes to Brazil, the United Arab Emirates, Kuwait, Turkey, and Thailand to see if they could come up with interesting investing ideas. They met with representatives from the twenty cheapest companies in each country. They went to a hundred meetings, did serious analyses on ten companies, and ultimately identified three solid opportunities.

  One was a phone company in Brazil that had a valuation of three times its previous year’s earnings, the lowest in the world for a telephone company; the second was a Turkish oil refiner that traded at a 72 percent discount to the asset price of other refineries; and the third was a UAE-based real estate company that traded at a 60 percent discount to its net asset value.

  I began investing the firm’s money in these s
tocks and shared the analysis with my friend Jean Karoubi. I could always rely on him to be a good sounding board, and he had a much more positive reaction than I expected: “Bill, I like these ideas a lot. I think this is the type of business you should be developing more broadly.”

  He was right. My skills were as an investor, and they could be applied anywhere, particularly in countries that faced issues similar to Russia’s. I didn’t need to be in Russia to succeed.

  As I shared these investment ideas with other clients, most had the same reaction as Jean. By the fall of 2006, my confidence had grown so much that I started drafting a prospectus for a new fund called Hermitage Global.

  The plan was to have this prospectus ready in time for the World Economic Forum in Davos at the end of January 2007. There is no better place in the world to raise capital than Davos.

  My fortunes had changed since my first foray there in 1996. I no longer had to sleep on the floor or linger in hotel lobbies hoping to meet important people. Since 2000 I had been a proper member of the forum and had been going every year since.

  This time, I decided to bring Elena with me. She was in the first trimester of her second pregnancy, and I thought the interesting lectures and receptions of Davos would be a welcome break from looking after our one-year-old at home. We flew to Zurich and took the train to Davos, just as Marc Holtzman and I had done so many years back, and checked into the Derby Hotel. I began taking meetings almost as soon as we arrived.

  As Jean predicted, investors were very receptive to Hermitage Global. On the second day, after going through the presentation with one of my old clients, he said, “Hey, Bill, are you going to the Russian dinner tomorrow night?”

  “What Russian dinner?” I knew a large contingent of Russians were in Davos, but so many things were going on that I hadn’t heard about this event.

  “It’s a big deal. All the main Russian officials will be there.”

  “I doubt they’d allow me anywhere near it,” I said with a smile.

  “That’s the beauty of it, Bill. It’s not the Russians who decide who goes, it’s the World Economic Forum. You can just sign up.”

  This was an intriguing idea. After our meeting, I headed straight for the computer bank where you can sign up for events. I logged on and, with several clicks of the mouse, registered Elena and myself for the dinner.

  The following evening we arrived ten minutes early, only to find that nearly every table was full. We scoured the room and took the last two empty seats that were together. Each table was hosted by a Russian VIP, and as I looked around, I was appalled to discover that our table host was the CEO of Gazprom’s export division. I could not have found a more awkward place for us to sit. Hermitage’s anticorruption work at Gazprom was probably the catalyst that had led to my Russian expulsion, and here I was getting ready to have an elegant meal of veal escalope, rösti, and carrot cake with one of the company’s most senior officials.

  The Gazprom executive and I spent the meal avoiding eye contact, and as dinner progressed, Russian officials and oligarchs took turns giving speeches. Each speech was more insipid, ingratiating, and full of platitudes than the last. The Russians have great skill in talking without saying anything, and this was on full display that evening.

  Toward the end of the event, as silverware clinked and waiters came and went, there was a big commotion near the entrance as twenty tough-looking security men walked into the room, forming a mobile cordon around a small man. I couldn’t tell who it was until he reached his table—but it was none other than Dmitri Medvedev, the first deputy prime minister of Russia. Medvedev was running for president to replace Putin, whose second term would end in June 2008, and Davos was Medvedev’s first chance to present himself to the international community.

  After the main course was cleared, Medvedev rose and took the microphone at the front of the room. He spoke for several minutes in Russian (I listened to the translation on an earpiece), and his speech was even more tedious and devoid of substance than the others. I couldn’t wait for it all to be over.

  As soon as Medvedev finished, waiters glided across the room delivering plates of carrot cake and cups of coffee and tea. As I drank my tea and picked the icing off the cake, Elena tugged my jacket and whispered, “Bill, I’ve just had a great idea. Why don’t you ask Medvedev to help with your visa?”

  I gave her a sideways glance. “Don’t be ridiculous.” I’d exhausted every possibility of getting my visa back, right up to Putin. After the G8, I considered that chapter in my life to be well and truly over. Moreover, I couldn’t imagine anything more humiliating than walking up to Medvedev to beg for my visa.

  I tried to tell Elena this but she wouldn’t listen. She was insistent. “Seriously, look. No one’s talking to him. Let’s just do it.”

  She stood and stared at me intently. Defying Elena was more frightening than having an unpleasant encounter with Medvedev, so I stood too. I reluctantly followed her across the room, and when we reached Medvedev, I stuck out my hand and said, “Hello, Mr. Deputy Prime Minister. I’m Bill Browder. Maybe you remember me?”

  Elena translated. Medvedev stood and shook my hand. There was a general bustle as other people in the room took notice. If I could talk to Medvedev, then they could too. People started to stand and move in our direction.

  “Yes, of course I remember you. How are you, Mr. Browder?”

  “I’m fine, but as you probably know, I haven’t been allowed into Russia for more than a year. I was wondering if you could help me get my visa back?”

  As I said this, a group of people, including a reporter from Bloomberg and another from the New York Times, pressed in on us. If Davos was Medvedev’s international debut, then this conversation was going to be one of the most interesting moments of the whole conference.

  Medvedev glanced at the people gathering around him and had to make a snap decision. He could reject my request, which would be interesting and newsworthy, or he could be helpful, which would be less so. He paused for a moment before saying, “Gladly, Mr. Browder. If you give me a copy of your visa application, then I’ll submit it to the Federal Border Service with my recommendation to approve it.”

  That was it. The reporters pressed in on Medvedev, and as Elena and I slid away from the crowd, she squeezed my hand. “You see? I was right.”

  We went straight back to the hotel and got on the phone to London. Normally it takes three or four days to gather all the documents needed for a Russian visa application, but the team stayed up all night working on it, and by 8:00 a.m. the fax machine at the hotel spewed out the paperwork.

  I had back-to-back meetings with investors that morning, so Elena went to a room at the conference center where Medvedev was due to give a speech and stood near the podium. With all the security, it was unlikely that she would be able to make direct contact with Medvedev, but she spotted Arkady Dvorkovich, Putin’s adviser who had tried to help me before. She asked if he would deliver the application. Dvorkovich took it and promised he would.

  The forum ended the next day, and Elena and I returned to London, proud of our fortuitous high-level intervention.

  The results took a few weeks, but on February 19 I received a message from Moscow about my visa. Only it wasn’t from the Federal Border Service. It was from a Lieutenant Colonel Artem Kuznetsov at the Moscow branch of the Interior Ministry. This was odd. The Interior Ministry dealt with criminal investigations, not visas. Since I didn’t speak Russian, I asked Vadim to return Kuznetsov’s call.

  After Vadim explained that he worked for me, Kuznetsov said, “Okay. I’ll explain to you what the situation is.”

  “Great.”

  “As far as I understand, Mr. Browder sent in an application requesting permission to enter the territory of the Russian Federation.”

  “Yes, yes, we sent those documents.”

  “I just wanted to drop by and discuss it, if that’s possible,” Kuznetsov said casually.

  “You see, the thing is,
I’m not in Moscow right now,” Vadim responded. “So if you could send me the questions, then we could try to answer them for you.”

  “I can’t just send them over, I’d prefer to discuss them in person,” Kuznetsov said testily.

  This wasn’t a normal inquiry. In a legitimate investigation, Russian officials always sent their questions in writing. What had become apparent to me from my decade in Russia was that when an official asks to meet informally, it means only one thing: they want a bribe. In the many instances where officials had tried to shake me down, I’d uniformly ignored them and they always went away.

  Kuznetsov finished the conversation by saying, “The sooner you answer these questions, the sooner your problems will disappear.”

  As with similar requests in the past, I decided to ignore it.

  This phone call might have upset me more if the launch of Hermitage Global wasn’t going so well, and I quickly forgot about it. One by one, my old clients and a number of new ones started subscribing to the fund. By the end of April 2007 I had raised $625 million. This didn’t replace the amount of money withdrawn from the Russian fund, but it meant that I had stopped the bleeding and that my company would stay in business.

  On June 4, 2007, I was scheduled to present the results of the launch of Hermitage Global to our board of directors at the Westin Hotel in Paris. After all the bad news in the previous two years, it was the first time since I had been expelled from Russia that I had some good news to share with the board.

  Ivan and I arrived on the evening of the third to get prepared. I got up at six the next morning, went to the gym, showered, and ate a light breakfast. By 8:00 a.m. I was on the phone arguing with my trader over a Dubai stock he was supposed to have sold several days earlier. There’d been a technical problem at the Dubai exchange that had held up the sale. Now the share price was plummeting, and I was furious that he hadn’t been able to sell it before we started losing money. He was making excuses and I was growing more and more agitated.