928 THE ADVOCATE
VOL. 76 PART 6 NOVEMBER 2018
cases removing the offending company executives and appointing new management
who secured the assets. In the wake of the corporate cleansing,
share prices soared, and Browder’s Hermitage Fund prospered. Between
2001 and 2005, Gazprom’s stock rose by over 100 times the purchase price.
During this time Hermitage made hundreds of millions of dollars in profit.
By late 2005 Browder was managing close to $4.5 billion in assets.
A fascinating part of Red Notice is Browder’s admission of naïveté during
this time. While he did not know Putin personally, it appeared to Browder
that their interests were aligned. Not only was Hermitage profiting, but
Browder believed that the Putin government’s clean up represented a genuine
interest in improving corporate governance in Russia. This proved
The story of the Hermitage Fund is, in itself, an astounding read. But
events take a surprising and dark turn in the second part of the book. Browder
realizes in retrospect that Putin was using the exposure of oligarch corruption
as a path to consolidating personal power. As the power of the
oligarchs weakened, Putin and others within his regime began to brazenly
shake down corporate Russia, accumulating massive personal wealth in the
process. Browder and Hermitage were not immune to the shake-down
efforts. In November 2005, while returning to Moscow from a weekend trip
to his home in London, Browder was detained at the airport and then
expelled from the country without any explanation or notice.
Browder and his team of Moscow-based lawyers came to realize that his
expulsion from Russia was just the beginning of trouble. A group of Russian
FSB (formerly the KGB) officers and Interior Ministry officials raided the
Moscow offices of Browder’s corporate lawyers and stole the originating
documents and official seals of Browder’s companies. The companies were
then transferred to associates involved in organized crime. Browder and his
legal team, including Magnitsky, began investigating the theft and the
bizarre events that followed. Strangely, judgments for various debts were
taken against the companies in remote regional courts within Russia. Browder
and his team discovered not only that the judgment amounts were
exactly equivalent to the companies’ recorded profits, but also that the companies
were then granted a $230 million tax refund from government officials
within the Russian tax service. Browder and Magnitsky realized that
$230 million happened to be the exact amount these companies paid in
Russian taxes in 2006.
Browder’s team, and in particular Magnitsky, approached Russian
authorities with hard evidence of the fraud, expecting an investigation and
ultimately charges against the perpetrators. But in true Orwellian style, the