US-born financier Bill Browder is trying to expand his campaign to expose Russian fraudsters and freeze their assets to Europe and Canada, while authorities in Moscow work to thwart his efforts by holding a bilateral plutonium-disposal deal with Washington hostage.
Browder, whose Hermitage Capital hedge fund once managed $4.5bn in Russia, became a prominent anti-corruption campaigner after his lawyer Sergei Magnitsky died in 2009 at the age of 37 in a Moscow prison cell amid allegations he had suffered beatings and was denied medical treatment. Magnitsky had helped uncover a $230mn tax fraud and testified about the complicity of Russian officials in the fraud.
After his death, Magnitsky was put on trial, with an empty dock in the courtroom, and convicted of the very tax fraud he had been investigating. The procedure was widely condemned as a farce by critics of President Vladimir Putin's administration.
In 2012, the US adopted the Magnitsky Act, which freezes assets and bans visas for Russians who violate human rights. In late October, amid rising tensions with the US over Syria, Putin suspended an agreement with the US on the disposal of redundant weapons-grade plutonium. Moscow’s terms under which the deal can be resumed include cancellation of the Magnitsky Act.
Browder is now eschewing his investments and is on a crusade to extend the act to Canada and countries throughout the European Union. His team at Hermitage has identified numerous beneficiaries around the world who received funds while investigations into the laundering of proceeds of the $230mn fraud have been opened in multiple countries, including the US, France, and Switzerland.
“We’re looking at Canada, the EU and now Britain as a country not planning on being in the EU,” Browder told bne IntelliNews.
Hermitage said on October 29 that some $14mn of suspected illicit proceeds connected to the $230mn have been traced to Canada. Some of the funds were transferred there from two Cyprus accounts connected to Dmitry Klyuev, the head of the Klyuev organised crime group, who is sanctioned under the US Magnitsky Act.
“Based on the present information, it is clear that Canada has a role to play in investigating the crime uncovered by Sergei Magnitsky,” Browder said.
However, the government in Canada is reluctant to take on the Kremlin despite support from the country’s opposition. Foreign Affairs Minister Stephane Dion has said Canada’s current laws are sufficient and that harming relations with Moscow would be pointless.
Meanwhile, a panel of judges in the US barred attorney John W. Moscow and his firm BakerHostetler from representing defendants in a civil Magnitsky-related case. A second ruling said lawyer Moscow had sensationally switched sides by appearing for the defendants in the money-laundering case after having previously advised Browder’s Hermitage Capital.
“I wasn’t surprised because we knew all along that John Moscow’s conflict of interest was so egregious all it would take was a judge ready to listen to the facts,” Browder told bne IntelliNews.
The panel of judges said they feared that confidences Moscow had learned in his initial representation of Hermitage might provide ammunition for Russia’s campaign of retaliation against Browder. “If crime victims fear that the attorneys they hire may turn against them,” wrote Judge Rosemary S. Pooler, “they may be less likely to assist the government in its investigations”.
Stonewalled in UK
In the UK, where he took citizenship, Browder has called out the authorities for “turning a blind eye” to the laundering of dirty Russian money.
He told a House of Commons committee in May that he had lodged six complaints relating to £20mn of stolen funds but law enforcement agencies had always found excuses not to investigate further.
Browder has called for the US and EU sanctions lists to be greatly expanded to over “10,000 people who’ve stolen all the money”.
Another step that should be contemplated is cutting Russia off from Swift, the international banking payment system, according to Browder. Iranian lenders were disconnected in 2012 – a move that may have pushed Tehran to negotiate over its nuclear programme.
Browder was a great fan of Putin until his visas was revoked and he was sensationally expelled from Russia in 2005. His firm made a huge amount of money buying stocks in then badly-run state-controlled companies like Gazprom and Sberbank and using shareholder activism to make those companies more efficient and transparent.
The Russian authorities are still coming after Browder and the Prosecutor General's office initiated talks in April this year with Interpol about the resumption of an international search. The Kremlin first tried to get Interpol to put Browder under surveillance in 2013 on charges that he stole gas from Gazprom 15 years ago. Browder has dismissed these claims as “politically motivated”.