The Savage Irony of William Browder

Watching the wrath of the Kremlin unfold against the harmless hedge fund manager William Browder is regrettably a familiar sight to me.


Congratulations, You’ve been Yukos-ed! William Browder, the most unlikely martyr of Russian state corporatism

When someone in government holds a personal or political vendetta against you in today’s Russia, they are not usually satisfied with just the first swipe at you – it is a complete and holistic process. The adversary is pursued ruthlessly and broadly, with little regard for the law or procedure (just ask Svetlana Bakhmina about her experience with political persecution under the Putin regime). So how did Browder, who as head of Hermitage Capital Management has always been one of Russia and Vladimir Putin’s most enthusiastic supporters, find himself the target of a new criminal investigation which appears to have all the trappings of a political invention? Last year when he was suddenly denied entry to the country (despite being the country’s largest foreign investor), most people assumed he was just being taught a lesson for having spoken out about corporate governance reform and criticizing the opacity and unwieldy management of Gazprom. But in the meantime, two visa requests have been denied, and it seems that Browder’s audacity to talk about minority shareholders rights in Russia far outweighs the value of his pro-Russia boosterism and Kremlin cheerleading. But never say the Kremlin doesn’t have a sense of humor when they invent false charges. Just like when they opened disbarment proceedings against Karinna Moskalenko for “failing to provide a proper defense” for our client Mikhail Khodorkovsky, they have really sought to embarrass Browder with savage irony: accusing him of a tax evasion scheme. “This is a serious sum of money and it would destroy the business reputation of anyone in the west,” the Russian investigators said. Just think – only a few months ago, Browder gave an interview to Ethical Corporation praising the Putin regime specifically for “creating a predictable and rational economic climate by making companies pay taxes.” Ouch! I’m sorry to be the one to let you know, Mr. Browder, but you’ve been Yukos-ed. Looking back upon my 2005 midnight visit from plainclothes FSB officers, I never would have thought that a similar treatment would await Browder (I suspect he never saw it coming either). Although as a shareholder activist, Browder has always admirably called for greater transparency and improved corporate governance, measures with which I agree wholeheartedly, it was always accompanied by a reprehensible blanket permission given to the Putin administration to break the rules. It seems to be a common misperception among Western businessmen that if you praise the Kremlin and the Russian political leadership with flattering compliments and defend them from critics that it will make you safe from their persecution and protect you from lawlessness. Hopefully Browder’s persecution will finally get the point across before too many more people end up eating their words – and sacrificing their credibility. Naturally there are a lot of theories circulating surrounding the Hermitage investigation. Some say that they are just looking to justify the repeated visa denials. Others are speculating that Browder, as an American-born UK citizen, is just one more victim of the Litvinenko extradition drama. I think that given the preposterous nature of the probe, we are dealing with just another heavy handed message from the Federation to the world of business: “YOU CAN NO LONGER TELL US TO PLAY BY YOUR RULES.” The Kremlin is now seeking to make an example out of Browder, and teach a tough lesson to anybody who thinks they can come into Russia and talk about instituting Western corporate governance, democracy, human rights, rule of law, or any other inconvenience. Browder has long been a crusader for minority shareholder rights, especially in Gazprom, but this is Russia – the Land of the Iron Law of 51%. This guiding principle of Russian state corporatism eliminates any need for practically any disclosure or reporting (thus multiplying the opportunities for graft and personal enrichment). When Putin recently called for a new architecture of international financial relations – it was just a euphemism to announce that the world will now have to tolerate the perils of the controlled economy as directed by state corporatism. With his attack on the market, he lives up to his claim as a “flawless” autocrat – securing a new dictatorship of law, a dictatorship of society, and now a dictatorship of economy. The second motivation for the Kremlin to pull the Yukos technique on Hermitage is to scare other foreign investors into line, and remind anyone who may have become complacent that there are no rules, no laws, and just one authority to pay homage to. This has been incredibly effective, and many businessmen from around the world are willingly tarnishing their ethical records and years of hard work with the slightest obsequious praise for Russia, no matter what actions it undertakes domestically and internationally. Mr. Jeroen van der Veer of Royal Dutch Shell was of course the saddest example, who publicly thanked Mr. Putin for robbing the majority stake from his company – a move which has been ridiculed by observers the world over. I wish to remind all those bullish on Russia to take a look at the supportive public statements made by Browder over the years. The message is clear: even the most ardent supporters of the regime can fall by the wayside tomorrow. Such are politics in a den of thieves.