“Freezing Order” – Bill Browder


Dear Partners in Thought,

Bill Browder’s new book “Freezing Order – A True Story of Russian Money Laundering, Murder and Surviving Vladimir Putin’s Wrath” is a great thriller (as noted even by Stephen Fry), except that it is sadly not a work of fiction. It is also especially timely and more potent as the true nature of Putin’s Russia is more transparent to the world (even if some countries would debate the point on their own strategic and tactical grounds).

As Moscow is the focus of the Western world today, it was all the more important to stress the kleptocratic nature of this autocracy. Bill Browder is one of the Western investment professionals who started operating in Russia in the post-Soviet Yeltsin 1990s through Hermitage Capital, his pioneering platform. He did not know Russia, did not speak the language and had not managed an investment fund. Nevertheless, he established what was to be a leading investment company with assets under management once valued at USD 4.5bn, in what was literally a new market. Browder was smart in using strong local talent to identify undervalued companies in Yeltsin’s Russia, when the country was open for the first time to Western-like investment activities. He was supportive of Putin’s fight to control the Yeltsin oligarchs, though in doing so he did not focus as much on weak governance and legislative and enforcement processes. His story then was one of great business success, until the latter became too blatant and he was faced with an increasingly authoritarian Russia that led him to stop his operations and leave the country for his personal safety in 2005. The Browder story is particularly telling for me as when he was starting to invest In Russia, I was leaving SG Warburg, the leading City of London investment bank to join the European Bank for Reconstruction and Development (EBRD) which had been established in 1991 to facilitate the market transition in the former Soviet empire, thus combining my interest in finance and international affairs. On a related personal note, as I was joining the EBRD in early 1993, I crossed paths with Mike Calvey, who was about to leave the multilateral bank to start Baring Vostok, another one of the most successful private equity firms in the then-new Russia. Like Browder, although later on, he would run into serious legal wrangles with the Russian authorities – as if success was possible, but only if strictly obedient and “flexible” enough.

“Freezing order” is about the process and travails of tracing and seeking to freeze laundered money from Russia, and is a follow-up to “Red Notice” published in 2015 that went into how Browder built Hermitage Capital and then lost it. It is much centered on Browder as stressed by himself, and may be seen by some readers as less independent that it could have been, while at times going through events that were not directly related to him – like the assassination of opposition politician Boris Nemtsov in 2015 (even if the liberal politician was an ally of Browder in relation to what became the well-known Magnistky case that defined Browder post-Hermitage Capital.) This is definitely a story of dogged persistence and personal courage in dealing with the Russia which the West sees more clearly today. It is also a very personal story involving the theft of USD1bn from Hermitage Capital combined with Kafka-like punitive Russian legal action, misappropriation and laundering of funds and murders along the way. As Browder withdrew from Russia, his main lawyer, Sergei Magnitsky, who stayed behind as he wanted to fight the misappropriation of funds, was eventually murdered in jail. This tragedy, which the perpetrators thought would stay local and low-key, led to the money laundering-focused Magnitsky Act in the US in December 2012 and later its extension, the human rights-focused US Global Magnitsky Act of December 2016, with an impact on 33 other countries that passed similar legislation, including eventually the EU. Browder had attended many conferences involving security and money-laundering experts at Cambridge University, Monte Carlo and other places across the Western world while participating in shows with leading TV stations worldwide, trying to successfully generate support for his case. Meanwhile Russia was fighting back, trying to criminalize him as if he were the culprit and they the victim. Russia pursued Browder in Russian and US courts, using the latter system to their advantage, including Interpol to issue local arrest warrants like in Spain in 2018 when such warrants had been deemed illegal. While he would eventually succeed in US courts, Browder eventually received two sentences in the Russian courts totaling 18 years, which put him at great risk of being extradited or “forcibly taken” there by Russian agents abroad.

Russia initially wanted to stop Browder from investigating some fraud involving a theft of USD 230m linked to Hermitage Capital – engineered by criminals with the support of security officers and the Russian government – a matter that had some New York connections as some of the money had been used by Prevezon Holding, a Cyprus company controlled by a Russian close to the Kremlin, to purchase real estate in Manhattan, and would thus involve US jurisdiction. Eventually, and due to the Magnitsky Act that put much of the wealth of the Russian oligarchs at risk, this as a ten-year prelude to the Ukraine war sanctions, Browder became the main target of Putin himself (Putin’s wealth was likely one of the highest, if the not the highest in Russia, well beyond his USD 300,000 annual salary). In a meeting with Trump in Helsinki in 2018 Putin, who appeared much in command, floated the idea that Russia and the US could both extradite in what was deemed a fair deal some indicted individuals to the US and Russia, while mentioning the name of Browder and former Ambassador to Russia McFaul (Trump did not seem to object then and after the Helsinki meeting which created a furor back in America with a Senate vote of 98-0 to condemn such a crazy and baseless path).

The book is also an amazing story of how Russian interests in the Prevezon Holding case used the US legal system, hiring a top US law firm, Baker Hostetler, to fight Bill Browder and make him appear as if “he” had stolen the USD 230m from the Russian Treasury – all while the law firm was conflicted as they had represented Hermitage Capital a few years earlier (they had conveniently, though irrationally, argued that there was no conflict as now they were going against Browder himself and not Hermitage Capital, their former client and then plaintiff, even if broadly dealing with highly similar money laundering matters). A top US law firm was by then acting indirectly on behalf of the Russian Treasury – that was de facto the offending party in a money laundering case against the owner of a former corporate client whom they had advised on a similar case and had access to confidential information from – which was to a great extent rather unbelievably reversing the previous roles of plaintiff and defendant. The case took years to be dismissed as Baker Hostetler and the top lawyer (the aptly-named John Moscow), a former US District Attorney, who had personally advised Browder when he started his Russian money laundering-focused Magnitsky case lobbying, were finally disqualified in court (the process to reach that outcome being a story in itself).

At the same time, that same law firm had hired a Washington DC investigative firm, Fusion GPS, to find “dirt” on Browder and his associates and help serve subpoenas in remote locations so they would appear in US courts. The same firm, that was de facto working for the Russians in Browder’s case, was also broadly at the same time famously involved (via an ex-MI6 agent, Christopher Steele) in conducting opposition research on Trump in 2016 (on a funny note the “Steele Dossier” was later seen by some, but not all, as a way to create such a gross and salacious case that it would not be credible, which might have been the astute end game of the mandate, while actually helping hide some close Trump links to the Kremlin). The review of these activities performed by many high profile and highly paid American firms stressed a modus operandi that was well-known in places like London – or indeed “Londongrad” – where many Western enablers from real estate agents, accountants to bankers (without forgetting high end prostitutes) were working for a large array of Russian oligarchs and their families and friends who had elected the English capital city, and especially Mayfair, as their second, if not first home (the book is sadly a bit too silent on that London post-Soviet feature that one could hope was not due to Browder’s often forgotten British citizenship and many links there). Browder had a few easy but well-known jokes about oligarch enablers and especially lawyers stressing that for many the words “lawyers” and “ethics” were mutually exclusive and why won’t sharks attack lawyers? Professional courtesy. As for some well-known investigative or “strategic intelligence” firms, fees are often the main if not sole drivers and the only advice in terms of probity check for potential clients should be to closely review their board and especially advisory boards where the quality of their members should naturally speak for itself and separate the good from the potentially less so.

The Browder story is not just about court battles, and direct oligarch and indirect Western Kremlin enablers, but also involve very dire developments involving murder and murder attempts – like with the principled Browder lawyer, Sergei Magnitsky and a few others. As the Putin regime gradually evolved, such murders of dissidents or “defectors” carried out by Russian agents like that of Alexander Litvinenko in 2006 had become commonplace in central London (as also seen with oligarch Boris Berezovky in 2013), Canterbury or across Europe like Germany, even if these would happen also in Russia like with the high-profile unsolved assassinations of Central Bank Deputy Chairman Andrei Kozlov, journalist Anna Politovskaya and politician Boris Nemtsov in Moscow in 2006, 2007 (the first two marking a turn in Russian affairs) and 2015 respectively. It is actually amazing that after escaping a poisoning attempt, leading opposition figure Alexei Navalny, having courageously but strangely, not following Browder’s approach, returned to Russia to continue his fight, was arrested and now serving a combined 11-and-a-half-year sentence on what the West would call dubious charges (CNN released a recent “Navalny Documentary” that received two key awards at the Sundance Film Festival, in which he had participated just before returning to Russia post-poisoning in January 2021). A few aides of Browder in his fight against Russia also ended up being poisoned or even killed as the book tells in great detail, while some Russian security services and surprisingly known mafia leaders were at the forefront of the actions taken against Browder and his friends, some very openly like at conferences which Browder was attending in his lobbying efforts. It is actually a miracle that Browder or his family members survived unscathed while being harassed at many border crossings, like we read at Geneva airport in 2018, through the powerful reach of Russian operatives, again taking advantage of Western rules and regulations to carry out their missions.

In one last feature of Browder’s story (which will never know any ending until Putin and his system eventually lose power in Russia – indeed a timely topic with the multi-layered Ukraine developments), he discovers via an audit of Danske Bank, another Russian money laundering fraud of a USD 234bn magnitude. While this number is staggering, Browder estimates that the amount of Kremlin-backed and oligarch-laundered money would stand at or beyond USD 1tn (1,000 bn) since Vladimir Putin came to power around 2000, not a small chunk to be his, if not in name. While an estimate, and knowing too many vested interests including in the West are involved to make it smaller or simply not quantify it, the statement is clear.

Browder’s book reflects, through a highly-personal account, the gradual slide experienced by Russia in relation to the rule of law and business ethics that the Ukraine invasion finally made impossible for the West to ignore. At the forefront of this reckoning is the Western business community and its many companies across sectors that for years developed a presence in Russia and brought the local population a vivid example of globalization away from the Faulknerian “sound and the fury” of 20th century history. A great majority of these Western companies have now decided to withdraw from Russia, which for some has been heavily loss-making while not easy in terms of speed and ways (some had to sell quickly their Russian operations on the cheap to local oligarchs like Société Générale to Vladimir Potanin or Renault its controlling stake in Lada-maker Avtovaz for a token 2 roubles) as they also try to stay in Eastern Europe, this leading to many strategic reviews ahead of relocations and business redeployments throughout the region, also making an eventually post-war Ukraine market another focus as the country would go through its reconstruction phase.

“Freezing Order” is another detailed example of what Putin’s Russia always was while the West was sleeping and never wanted to see it that way on the altar of hopefully ensuring a mutually-beneficial and peaceful relationship. Today Russia, through its insane invasion of Ukraine, stresses how blind the West (and the world even if partly ambiguous today) was but now the curtain has fallen. Bill Browder, not himself a saint, and initially driven by sheer money-making, helped us see Russia for what it was for years, and successfully contributed in a small but impactful extent to a saner world, via meaningful anti-money laundering and human rights-focused legislations and their applications in many countries across the world.

Warmest regards,