Architect of the Cold War

The annals of the international crisis between Russia and the US will reserve a position of honor for Bill Browder, a former Putin ally who is now one of his bitterest enemies.

WILLIAM F. BROWDER speaks at the 2011 annual meeting of the World Economic Forum in Davos, Switzerland. (photo credit: COURTESY WORLD ECONOMIC FORUM)
WILLIAM F. BROWDER speaks at the 2011 annual meeting of the World Economic Forum in Davos, Switzerland.
One of US President Barak Obama’s earliest promises was to open a new page in US-Russia relations, following the mutual animosity of the Bush administration.
However, recent events in the Ukraine have completely changed the picture – and the two countries seem to be facing each other once again in a new “cold war.”
President Vladimir Putin shares responsibility for the crisis. It was Putin who never concealed his intention to renew and reinforce Moscow’s influence in regions of the former Soviet Union, releasing the snowball that led to the uprising in the Ukraine, followed by the annexation of Crimea and the violent revolt in the east – events that resulted in scathing sanctions imposed by the US and EU.
But when history is written on the 21st century’s greatest crises, a place of honor will be reserved for William “Bill” Browder, a successful businessman currently residing in London, who until 10 years ago was one of Putin’s closest cronies but is now one of his bitterest enemies, wanted by the Moscow authorities.
BROWDER IS CONTROVERSIAL. On the one hand, he appears to be leading a crusade against corruption in Russia’s economy and regime. On the other, he is said to head a personal vendetta against Putin, while himself being responsible for corrupt – if not worse – behavior.
Yet ultimately – publicly or behind the scenes – available documents reveal that Browder, who is neither an American nor Russian citizen, is behind the toughest law ever passed by the US against Russia, which contributed considerably to the rift in US/Russians relations.
The 50-year-old Browder is the grandson of Earl Browder, the former leader of the US Communist Party and twice its presidential candidate. After claiming that communism and capitalism can survive side by side, he was expelled from the party by Soviet leader Joseph Stalin.
Browder’s father was noted mathematician Felix Browder, who after years of being shunned by American academia due to his family’s communist affiliations settled in the University of Chicago’s mathematics department; the young Browder was born and raised in the city.
Despite the communist atmosphere that prevailed in his home, Bill chose the capitalist way, studying economics at the University of Chicago and earning an MBA from Stanford Business School. In 1989 he moved to London, where he worked for the Eastern European practice of the Boston Consulting Group and managed the Russian proprietary investments desk at Salomon Brothers. According to various sources, Browder was also an analyst with Britain’s foreign intelligence agency, MI6.
He married an English woman, renounced his American nationality (for unclear reasons) and later became a British citizen. “We came from a persecuted American family,” he said, attempting to explain the motives for his decision but reluctant to provide details.
Eastern Europe – especially Russia – opened to the West with the fall of the Berlin Wall, and Browder made full use of the chances provided. In 1996, after spending some years in Poland and studying privatization processes in formerly communist states, he founded Hermitage Capital Management for the purpose of enabling his activity in Russia, with the aid of a $25 million investment from one of the richest men on earth, Jewish banker Edmond Safra.
Success was immediate. Within a year the fund’s profits grew to $125m., and a year later an additional 200-percent profit was reported. In 1998, at the height of privatizing state assets, a severe financial crisis occurred, bringing Russia to the brink of bankruptcy and forcing the government to devaluate the ruble. Browder, however, continued to invest huge sums in government companies, including the gas giant Gazprom, while trying to expose the corruption that enabled senior employees to embezzle hundreds of millions of dollars.
Browder found an ally in Putin, a KGB agent and the last prime minister under president Boris Yeltsin before succeeding him in 2000. “Putin fought them during the same years we fought them: the oligarchs,” Browder said in a press interview. In 2003 he even praised the arrest of Mikhail Khodorkovsky, CEO of Yokos and the wealthiest man in Russia, and expressed the hope this would deter other oligarchs.
Two years later, after Hermitage had invested $4.4 billion in Russia over a single decade, Browder, too, became an enemy of the regime in Moscow. In November 2005 he was detained at the city’s airport before being permanently expelled from Russia, accused of being “a danger to national security.” Nonetheless, Browder managed to remove most of his wealth from Russia, and reinstated himself in London.
In June 2007, documents, computers and other sensitive materials were confiscated during a raid on his company’s Moscow offices. According to Browder, corrupt elements in the police and Russian tax authorities utilized the documents to establish straw companies and receive the largest tax return in Russian history – $230m.
In order to expose the affair, Browder employed Sergei Magnitsky, one of Hermitage’s lawyers in Russia.
After collecting documents to ostensibly substantiate fraudulent behavior, Magnitsky turned to the authorities in November 2008 to lodge an official suit against a senior police officer, but was instead himself arrested and charged with the very tax evasion he had uncovered.
According to documents presented by the Russian authorities, Browder – with Magnitsky’s help – founded two companies in Russia’s Kalmykia region to evade $17m. in taxes in 2001. The prosecution claimed that Browder and Magnitsky exploited a law that allows 50% tax breaks for companies with a workforce of 50% handicapped employees, and claimed that one of the companies employed three people – Browder and two handicapped workers, whose labor cards were forged.
Magnitsky died on November 16, 2009, after 11 months of pretrial detention, only a week before the end of the period he could be held without trial. The circumstances of the 36-year-old lawyer’s death remain undetermined.
Putin and the prison authorities claim it was cardiac arrest but according to the Kremlin committee, the man had been tortured and refused medical attention. Still, no inquiry has yet been held against those involved.
Browder, who compared Magnitsky’s death to a “knife to the heart,” accepted full responsibility for his employee’s death; at the same time, he also decided to wage a personal war against Putin, who he holds responsible for the corruption raging in Russia.
Several months after Magnitsky’s death, Browder met with his friend Jonathan Winer, formerly a US State Department senior official, who advised him of the possibility of using Presidential Order 7750, which allows the body to bar senior foreign officials from entering the country. The State Department objected, however.
Browder then appealed to Sen. Benjamin Cardin (D-Maryland), who demanded that then-secretary of state Hillary Clinton immediately cancel the entry visas of 60 senior Russian civil servants allegedly involved in Magnitsky’s death. The lack of response from the State Department forced him to push for legislation of a law to establish a blacklist.
In March 2011, Browder appeared before the congressional Foreign Affairs Committee to encourage the delegates to support the law. “It is obviously impossible to obtain justice in Russia, so his [Magnitsky’s] family and I decided to seek justice outside of Russia,” Browder said in his version of the matter. “It is heartbreaking for Sergei’s family and for myself, but in Russia it is the tip of a vast iceberg. This story reveals the face of Russia today.”
The White House was reserved in its response to the law, fearing that such proceedings would hinder rapprochement with Russia. But documents illustrate how Browder managed to influence the White House to eventually approve the legislation.
To this end, Browder’s Hermitage Foundation hired the Ashcroft Group, established by former US attorney- general John Ashcroft. The case was handled by political counselor and lobbyist Juleanna Glover, who worked with Republican presidential candidate John McCain in 2008.
Glover, so it emerges from information received by this reporter, arranged a meeting with Steven Moylner, an employee of Carol Bruner, who represented the White House in the struggle over climate change. Glover and Moylner were joined by George Abar, a senior Democratic activist who worked for the chairman of the Senate Foreign Relations Committee – and current Secretary of State - John Kerry. Similarly, Glover met twice with David Zikusoka, staff assistant to the vice president and national security adviser. These meetings provided Browder with de facto access to the White House Browder and the Ashcroft Group’s vigorous activity – not only vis-à-vis the White House but also the US Treasury, Department of Justice and Department of Commerce, as appears in the company’s report for the second quarter of 2010 – helped achieve change in the Obama administration. On December 14, 2012, after the proposal was approved in both houses of Congress, the president signed the “Magnitsky Act.”
Four months later, the Treasury published the names of 18 senior Russians in the police, prison services, Finance Ministry and interrogation agencies, all of whom had allegedly tampered with the investigation against Magnitsky and were involved in his death. They were banned from entering the US, and their bank accounts were frozen.
Moscow was furious and, in response, passed a law forbidding American couples from adopting Russian children.
A list of 18 Americans was published, accusing them of involvement in torturing terror suspects in the Guantanamo Bay detention camp and the imprisonment of Russian citizens, and banning them from entering Russia.
Browder has even been accused of murdering Magnitsky, since the lawyer was about to reveal the truth about the businessman’s conduct. “This tragic death has not given anything to anyone except Browder,” businessman Dmitry Klokov told a Russian newspaper.
In July 2013, a Russian judge sentenced Browder to nine years in prison for tax evasion (the charges against Magnitsky were dropped). Russia even asked Interpol to exercise an international writ of extradition against Browder, but the agency denied them twice.
MEANWHILE, IN the absence of an extradition agreement with Russia, Browder continues to sit securely in the UK, calling for the West to impose firm measures against Russia, and promoting the Magnitsky Act in other Western countries.
Still, his motives are unclear. Is he really a knight in shining armor who wants to cleanse Russia of corruption and settle scores with Magnitsky’s killers, or is this a personal vendetta against the Russian authorities for halting his flourishing enterprise? There is no answer as of yet, but questions have been piling up over the last month, as Browder has continuously avoided the order to appear in a New York court in connection with a trial conducted by an American company against the Russian Parvazon Holdings. The suspicion is that assets purchased in the city actually constituted part of a scam to launder $230m., stolen from the Russian exchequer.
The case is based on documents belonging to Browder, and defense lawyer Mark Cymrot demands he take the witness stand and “answer some difficult questions regarding his own tax evasions in Russia and additional aspects of his activity, to show his unreliability and prove he doesn’t need to be a witness or even a source on which the prosecution can base its case.” The judge has granted Browder’s lawyers an extension until September 12, but the assumption is he will not turn up, and doubts will continue to intensify.
The Magnitsky Act was a huge victory for Browder, and a rare case – maybe even precedential – of a non-American citizen successfully influencing the decision-makers into legislating so far-reaching a law in the international arena. Since its passage, no significant ties have existed between Russia and the US, especially between Putin and Obama – this at a time when there should be a hotline between Washington and Moscow, to relax the tension in the Ukraine and other burning arenas such as Syria and Iraq.
Translated by Ora Cummings.