Russia: Corruption, Torture, Murder with William Browder

William Browder, founder and CEO of Hermitage Capital Management and the largest foreign investor in Russia until 2005, when he was denied entry to the country as a consequence of his campaigning against corporate corruption, addresses the 6th Annual Geneva Summit for Human Rights and Democracy – see below for full prepared remarks.

 

Full Remarks

 

William Browder: Good afternoon Felipe, thank you for that very helpful introduction, and Hillel, if you’re out there, thank you for inviting me to share my story. 

I’m going to share a story of corruption, torture and murder in Russia. As you hear me say those words, you’re probably wondering, what is this guy with the American accent talking about corruption torture murder in Russia. And so I’d like to back up and tell you a little bit about myself and how I got into this horrible situation.

I was born in America, I’m American, but I come from a very unusual American background.  My grandfather was the General Secretary of the American Communist Party in the 1930s and 1940s; [he] ran for president as a communist against Franklin Roosevelt. He was persecuted during the McCarthy era in the 1950s, and I was born in the 1960s.

I was going through my teenage rebellion in the 1970s. And when you’re a teenager, and you’re rebelling, what’s the best way of rebelling from a family of Communists? Well I decided to put on a suit and tie and become a capitalist.

I was very serious about my capitalism. I went to Stanford Business School and I graduated Stanford Business School in 1989, which was the year that the Berlin Wall came down. As I was searching my soul to figure out what I could do with my life, I came up with a great idea, which was that, [as] my grandfather was the biggest communist in America, I’m going to try to become the biggest capitalist in Eastern Europe. And I set out to do that. And without being immodest, I set out to do that very successfully.

I moved to London and then I eventually moved to Moscow and I set up an investment fund called The Hermitage fund, which started out at zero, and through a lot of hard work and a lot of good luck, it ended up becoming the largest investment fund in Russia, with four and a half billion dollars invested in the country.

Now, I had all sorts of great idealism about what Russia was going to become when I first moved there in 1996. And what I discovered, as I was managing this large pool of capital, was that every single company I was invested in was essentially corrupt; run by corrupt officials, corrupt former apparatchiks, corrupt people of all different shapes and sizes. And I decided that I couldn’t responsibly invest other people’s money unless I did something to challenge the corruption. And so I developed what’s known as shareholder activism in the West – I guess I would call it extreme sports in Russia. We started to research how they did the corruption and then exposed it through the international media, through the New York Times, The Financial Times, the Washington Post, etc.

It was a quite successful strategy for a while, until the Russian regime [reacted]. So I guess I touched too many corrupt people. And as I was flying back to Moscow after having lived there for 10 years, in 2005, I was stopped at Sheremetyevo Airport, I was detained for 15 hours and then I was deported from Russia and declared a threat to national security.

That was a big shock to me because I thought I was actually helping Russia by cleaning up the companies I was investing in; I was certainly helping them by attracting capital. But I also understood that when the Russian regime turns on you, they tend to do it with extreme prejudice.

And so, I did what I thought I could to protect my people and protect my assets, and I evacuated my entire staff; I moved everybody to London. And I took every last penny that we had invested in Russia out of the country so they couldn’t arrest my people and they couldn’t seize my assets. I thought I’d pretty much protected everybody from everything. I kept a secretary there in an office in case they ever relented and went on to try to do other things with my life. But while I was done with Russia, they weren’t done with me. 

A year and a half after I was expelled from the country, twenty five police officers from Moscow’s interior ministry raided my office in Moscow. Twenty five more officers raided the office of my American law firm where we kept all of our documents; seized everything, seized all the documents. And then the next thing I knew, the documents that were seized by the police were used to fraudulently re-register our companies. These were empty companies at this point, investment companies, out of our name, into the name of a man who had been convicted of murder and let out of jail early, to put his name on the documents. So the police were working with a convicted killer to execute a fraud. I went out to hire the best lawyer I could find in Moscow to help stop this ongoing fraud, a young man named Sergei Magnitsky. He was a 36 year old lawyer working for the American law firm, Firestone Duncan, and he was the smartest lawyer I knew in Moscow.

I asked Sergei to investigate what the purpose of this whole raid was, and what they were hoping to do and how we could stop it. Sergei went out and did some more investigations, and he discovered that there were two purposes of this raid. One was to steal our assets, which they didn’t succeed in doing. But the second purpose, which they did succeed in doing, and Sergei had discovered it, was they went to the tax authorities and they applied for a 230 million dollar tax refund of taxes that we had paid in the previous year. They applied for it on Christmas Eve 2007, and it was awarded and paid out on the same day. It was the largest tax refund in the history of Russia, paid out in one day, by corrupt officials. We were certain that this was a rogue operation because Vladimir Putin is a tough guy and he wouldn’t let people steal from his own government, would he?

So we filed criminal complaints with every different law enforcement agency in Russia, and we publicised the scandal. We expected that within days there would be SWAT teams and helicopters going after the bad guys. The only thing we were right about is that there were SWAT teams and helicopters, but they didn’t go after the bad guys. At this point we had seven lawyers working for us, including Sergei, and they went after all seven of our lawyers.

I couldn’t have imagined that our lawyers would be at risk; I thought only I would be at risk and my employees would be at risk. And so I immediately went to all the lawyers and said, “it’s time to get out of Russia. Please leave the country at my expense, come to England at my expense, stay in England until the storm passes.” Six of the seven lawyers agreed and left the country.

The only one who refused to leave was Sergei. Sergei said, “I haven’t broken any laws, I’ve done nothing wrong.” Sergei stayed and he testified against the police officers who were involved in this grand fraud. He testified in mid-october 2008, and on November 24th 2008, a little bit more than a month after his testimony, the same police officers as he testified against, came to his home and eight in the morning, in front of his wife and two children, arrested him, put him in pre-trial detention, and then started to torture him to get him to withdraw his testimony.

They put him in cells with 14 inmates and eight beds and left the lights on 24 hours a day to impose sleep deprivation, and they figured after about a week of that, [as] he was a white-collar tax lawyer, after a week of being in a cell with hardened criminals with no sleep, sleeping in shifts, that he would sign any confession they wanted him to sign. And they wanted him to sign a confession to say that he stole the 230 million dollars, and he did it at my instruction.

Now, nobody knows what kind of person you are until you’re put under duress. And I didn’t know what kind of person Sergei was, and I don’t think he knew what kind of person he was, but he was absolutely unwilling to perjure himself and to bear false witness, even though they were putting him under this pressure, and he refused. They then put him in a cell, in the dead of winter, with no heat, no window panes, in Moscow; he nearly froze to death after a week in this cell. They brought him out [and] again tried to get him to sign this false confession, [and] again he refused. They then moved him from cell-to-cell-to-cell, putting him in cells with no toilet – just a hole in the floor where the sewage would bubble up. Oftentimes refusing to give him food for up to 36 hours, taking away his water boiling implement. And after about six months of this, his health started to break down very dramatically. He ended up losing 20 kilos, developing very strong pains in his stomach, and being diagnosed as having pancreatitis and gallstones, needing an operation.

One week before his operation was due, they came to again with this proposal to sign a false confession. Again he refused, and then they moved him from a prison that had medical facilities, to a maximum security prison in Moscow, called Butyrka, which is one of the toughest prisons in Russia, and most significantly for Sergei, had no medical facilities. At Butyrka, his health completely broke-down. He went into constant, agonising, ear-piercing pain, and they refused him all medical treatment. He applied for medical attention on 20 different occasions, and all of his requests were either ignored or refused in writing. And on the night of November 16 2009, Sergei Magnitsky went into critical condition.

On that night, the prison authorities then decided to finally move him to a medical facility. They moved him to another prison called Matrosskaya Tishina, which has a medical wing. But, when he arrived at Matrosskaya Tishina, they didn’t put him in the medical wing, they put him in an isolation cell and then dispatched eight riot guards with rubber batons to beat him to death. He died that night at Matrosskaya Tishina at the age of 37, leaving a wife, two children and a dependent mother.

I learned about this the next morning, and I’ve dealt with many, many problems of money, lawsuits, issues, etc… but I’ve never dealt with a problem like this, and it was like a knife going right into my heart. And I made a vow to Sergei, to his memory, to his family and to myself, that I was not going to let the people who did this get away with it and I was going to get justice. I thought that justice would not be that hard to get because everything was documented. The one thing that Sergei did during his time in prison – and everybody has their own way of dealing with adversity – but Sergei’s way of dealing with adversity was [to] write it all down.

While he was incarcerated, he wrote 450 complaints in his 358 days in detention, documenting exactly who did what to him when, how, where and why. He wrote it all down. Afterwards, we then started to take legal action against the government where we discovered all the documents to corroborate what he had written down. And the death, the murder, of Sergei Magnitsky, has become the most well-documented human rights abuse case to come out of Russia.

We would have figured that the Russian government, no matter how corrupt, no matter how venal and how evil, would have done something to prosecute the people that killed Sergei Magnitsky. But they didn’t. What did they do? They circled the wagons and exonerated every single person who was involved, and we have a list of people who are involved, and we have evidence of people who were involved. They exonerated every single person involved, promoting some of them, and even giving some of the most complicit people special state honours. There have been only two people that have been prosecuted in this whole Sergei Magnitsky case, and that’s Sergei Magnitsky himself – they prosecuted him three years after he died, in the first and only prosecution against a dead man in the history of Russia – and they prosecuted me, as his co-defendant, and sentenced me, in absentia, to nine years in prison.

When it became obvious that there was no possibility of justice inside of Russia, we said “then we need to get some justice outside of Russia”. And I’ve gone through all the different forms of justice-seeking that one can go through. I’ve been to various governments, I’ve been to the United Nations, I’ve been to human rights organisations, and there is no effective remedy for a crime committed in one country, to do something about it in another country. Universal jurisdiction laws don’t work, nothing works.

I said to myself that we have to come up with something that works, because I just cannot live with myself unless we do something to bring justice to Sergei Magnitsky. And we came up with an idea, which was that the people who did this crime, and the people who do many crimes like it in Russia and other places, don’t do these crimes for ideology, don’t even do these crimes for religion, they do them for money. I’m not saying that all crimes, all these Human Rights crimes were done that way, because there are many we’ve heard about today [which] were for religion and ideology. But many, many crimes these days are done for money, and this one certainly was. And we said to ourselves, if the people who did this crime [did it] for money, what do they do with their money? They don’t keep it in Russia – they’re too afraid to keep it in Russia! They keep it in the West, and you can see them in the West, travelling, on vacation, they’re everywhere. And a lot of the people you see from Russia, from Kazakhstan, from Uzbekistan, from Ukraine, these are people who are spending their blood money.

And I said, if we can stop these people from travelling and spending their money in the West, that’s not real justice, but at least it’s not impunity. I went to the US Congress in April of 2010, and proposed the idea of something which has become known as the Magnitsky Act. I was able to attract a group of Senators, Senator Benjamin Cardon from Maryland, and Senator John McCain from Arizona, and various other senators. And they launched what’s become known as the Magnitsky Act. 

The Obama administration wanted nothing to do with this. They wanted to reset the relations with Russia and they tried to stop us at every single step of the way. But the beautiful thing about the American political system is that Congress can actually impose laws on the

Executive. And that’s exactly what we did. In December of 2012, there was a vote on the Magnitsky Act, and the Senate passed 92-4, and it passed eighty-nine percent of the House of Representatives, and Barack Obama was forced to sign the Magnitsky Act.

In April of 2013, the first 18 names were put on the Federal OFAC sanctions. Their names were put next to terrorists, drug dealers etc. And the Russians have absolutely reacted with fury; they reacted with fury in the most shocking way you could ever have even imagined.

They then banned the adoption of Russian children by Americans, and various other terrible things. The fact that they reacted with fury tells me something. I don’t know how many of you have ever played the game battleship but battleship is all about not seeing the other party’s side of the board, and trying to figure out where their battleship is. In this particular situation, and we tried all different things, we got a direct hit. We figured out exactly what a kleptocratic regime is afraid of; they’re afraid of having their assets seized, and their travel sanctioned. 

Now, this is a great story in terms of a tool to be used on Russia. But the really good part of the story is yet to come, which is that the same Senators that launched the Magnitsky Act, have just launched something called the Global Magnitsky Act; so it’s not just against Russia, it’s against human rights abusers everywhere. It’s always good to tell my story because I like to tell my story and I want people to know the story of Sergei Magnitsky, but actually I have a real purpose here today, which is that there’s a piece of legislation sitting in Washington right now, with four co-sponsors, called the Global Sergei Magnitsky Act. In order for a piece of legislation to pass, it requires a lot more than four Senators to sign up.

In this room, we’ve heard stories of just horrific things in other countries, and we have an opportunity now to tell those stories to the US Congress – to the Senate and to the House of Representatives – and ask Senators and Congressmen that you might know, that might be sympathetic to your cause, to sign up to this thing so that we can ban seized assets and ban visas of individual perpetrators of human rights in all of the countries that we’re hearing about today.

And so, I’m here for a call-to-action by all the human rights activists to join me in using this tool. I’ve spent three and a half years constructing a high-powered weapon and I want to help pass it out to all of you to fight back at the impunity that’s obviously plaguing everyone and certainly touching me when I hear the stories.

And so I’m here for a few more hours and I’d be happy to strategize and talk to anybody who has any thoughts about this. Thank you very much.

Speakers and Participants

William Browder

Hedge fund manager who lead successful campaign to adopt Magnitsky Act, a U.S. law sanctioning Russian oligarchs

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