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The IBA’s response to the situation in Ukraine
Bill Browder, CEO of Hermitage Capital Management, on Russian corruption, sanctions and seeking justice for Sergei Magnitsky. May 2018. See topics and timings; transcript
01.11-01.55 Russia’s investment climate and background on the Sergei Magnitsky case
01.56-02.50 Magnitsky's arrest and the corruption scandal he exposed
02.52-04.09 Risks of investing in Russia
04.10-09.15 The ripple effect of the Magnitsky Act
09.16-13.40 Sergei Skripal attack and Alexander Perepilichnyy
13.42-19.56 Russia and the US
20.24-22.00 Whistleblower protection
22.01-24.18 Russia today
24.19-26.48 Sanctions lists and the EU response
Ruth Green (RG): [00:00:00] I'm Ruth Green and I'm here with Bill Browder, the CEO and founder of Hermitage Capital Management, which at one time was one of the biggest investment companies in Russia. He's also been a tireless campaigner for Sergei Magnitsky, a Russian lawyer who died in pre-trial detention in November 2009. Thank you very much for joining me today.
Bill Browder (BB): [00:00:19] Great to be here.
RG: [00:00:20] So you obviously took advantage of the fire sale of assets in the 1990s in Russia at a time when very few people were working in that area. Today, you tend to advise people not to go into this area. Maybe you could tell me a bit about why that is.
BB: [00:00:37] Well I was originally attracted to Russia for almost non-economic reasons, because my grandfather was the head of the American Communist Party, and so in my rebellion I said I'm going to become a capitalist, and then the Berlin Wall came down and I said I'm going to become a capitalist in Russia. And when I looked into what was going on over there, they were doing this massive fire sale of assets, which basically, anybody could participate in, and everything was being sold at such a low price that effectively, if they didn't take it away from you, you were bound to make a lot of money. We're now in a completely different world where in Russia things are no longer at a fire sale price and you have effectively a criminal government in which every asset that you own there could be taken away from you and terrible things can happen, including false arrest, torture and death in prison. And I have got a lot of experience with that because exactly that happened to my lawyer Sergei Magnitsky who was arrested after uncovering a massive corruption scheme, tortured for 358 days in prison, and murdered at the age of 37 in 2009.
RG: [00:01:59] Why do you think that the Russian government arrested him?
BB: [00:02:00] Sergei Magnitsky had been working for me in Russia. I'd become very much out of favour with the Russian government because I had uncovered and exposed corruption in the companies I was investing in. Sergei... I was expelled from Russia. Sergei came in as my lawyer after I was expelled. When my offices were raided by the police, he discovered that there was a massive fraud taking place by Russian government officials using documents seized by the police, in which they stole $230 million of taxes that we paid to the Russian government, and Sergei exposed that. In retaliation he was arrested, tortured and killed. And so he basically became sort of a big problem for the Russian government.
RG: [00:02:52] And nowadays really there seems a lot more awareness of the corruption situation in Russia, partly because of people like yourself who have drawn attention to it. Do you think, looking back, do you feel that you were at all naive going into Russia? Do you think that there were other people as well who should have been more savvy, or thought more carefully about the investments they were doing there not to get involved in any of these corrupt dealings?
BB: [00:03:15] Well so everybody who was there when I first got there was there on the assumption that it was going to get better. It was total chaos and it did start getting better…there was a trajectory of it getting better. The problem was that it reached a plateau and then it started getting dramatically worse. And so it was not as if, I mean I was definitely naive in assuming that Russia was going to become like you know Poland or something like that. That was idealistic and optimistic, a way too optimistic hope. But it was impossible to really know whether it was going to go off the rails like it did or whether it was going to continue to just sort of lurch towards normalcy and I was hoping towards the lurching towards normalcy scenario.
RG: [00:04:10] And obviously since then, since Sergei died in pre-trial custody, you’ve worked really hard to bring some legislation around the world to try and bring those culpable to account. This worked very well in the US and Canada. There’s been a little bit more of a delay over here in the UK and Europe. Do you think the legislation in the US, that was signed into law in December 2012 by President Obama, do you think it has had any impact and that it’s helped encourage other countries to bring forward this kind of legislation?
BB:[00:04:39] Yeah. So the Magnitsky Act, as it was named in 2012 after my lawyer Sergei Magnitsky, imposes asset freezes, visa bans and publicly names the names of people involved in gross human rights abuse and corruption. And this has had a dramatic effect on a lot of different things. First of all, it has led to six other countries doing Magnitsky acts. You mentioned some of them – Canada, Britain, Estonia, Latvia, Lithuania and even the island of Gibraltar now have Magnitsky acts. It also did something else which was really important, which is that I spent two years solidly meeting with members of Congress; meeting with journalists in Washington; going to presentations at think tanks; participating in debates. Where I was slowly able to take this concept of, this policy of targeted visa sanctions and asset freezes and slowly sort of weave it into the conventional wisdom of Washington. And so by the time the law passed it passed 92-4 in the Senate and 89 per cent of the House of Representatives. By the time the law passed, it was a full consensus in Washington that this is the new tool for dealing with the bad guys in Russia. And so the moment that Putin invaded Ukraine in 2014 it took them two weeks to take the exact same thing – the Magnitsky template – and apply it to Ukraine, I mean to what Russia had done in Ukraine. Then when Russia meddled with the US elections, they took the exact same tool and did that. Then most recently they took the exact same tool and applied it to the Russian oligarchs. And so you basically…what I've done is I've set up the technology for dealing with Russia. And the reason why it works so well is that the people in Russia who do these terrible things, that are involved in human rights abuse, that are involved in invading countries, that are involved in and cheating elections. These people all steal a lot of money in Russia and keep that money in the West and by going after them in a targeted way it hits their Achilles heel. And so it's been a dramatic exercise in and creating a new policy tool to deal with Russia.
RG:[00:07:04] And why do you think it’s taken so long? People like yourself have been very involved in pushing forward these efforts, but certain countries have been more reticent to enact this kind of legislation. What’s been the problem? What’s holding them back?
BB:[00:07:16] Well, there's two reasons. One is people are afraid of Putin and people are very explicit about this and in different governments and so everybody is afraid of retaliation and so the general position that most people in foreign ministries take is just open appeasement. They just want to appease Putin, they just want to stay out of his way. They don't want to pick a fight. They just want to sort of disappear into the background or hope that somehow while their foreign minister has a problem, it doesn't rear its ugly head. That's the first reason. The second reason is, in a certain way much more sinister ,which is that there are people who financially benefit in Western Europe and other places from Russia. You know they get a lot of money. And so you have both fear and you also have corruption that led to this difficulty in getting Magnitsky laws passed
RG: [00:08:11] And obviously recently in the UK we’ve had this amendment to the new Sanctions and Anti-Money Laundering bill backed by members of parliament. What do you make of that and these developments in the UK, which has really been a bit behind the US in this regard?
BB: [00:08:26] Yeah I've been living in the UK for almost 30 years and I’m a British citizen. I have to say I'm very disappointed that it took me more than eight years to get the Magnitsky Act passed here. But we did, we got the Magnitsky Act passed as a full set of amendments to the sanctions bill. The UK has the same exact powers as the US and Canada do to go after the bad guys. Now the big question is, now the legislation is effectively in place – there are still a few technical hurdles, but nothing that material – but now that it's in place, will this country have the guts and will this country have the initiative to actually use the law. And that's an open question.
RG: [00:09:15] In terms of timing, we have an interesting climate at the moment in the UK in terms of our relationship with Russia. We’ve obviously had the Sergei Skripal attack in Surrey…sorry, in Salisbury, and we’ve had other issues as well. Do you think that has played any part in why members of parliament have been so keen to enact this legislation at this stage?
BB: [00:09:39] That’s a very interesting question. So members of parliament have always been on my side. It’s been the government that's been blocking me. And so we had this all lined up prior – all of the Magnitsky Act work had been lined up and put into play and had more or less been accepted before the Skripal poisoning. However, the devil is always in the details. And the government in these situations always tries to water down and make tough laws a little bit less tough because it makes their lives easier. And in this particular case they did…they had no political branch to stand on to water it down. There had been a Russian state-sponsored terrorist attack using chemical weapons in Salisbury. There's no way that any member of government could stand up in front of parliament and say ‘We need to loosen up this law to make it less restrictive’.
RG: [00:10:35] And I understand that there are discussions about what what’s happened in Salisbury has made some authorities or local police think about reopening the case into Alexander Perepilichny. He’s a whistleblower that you met and you knew about the information that he had uncovered. What do you make about that?
BB: [00:10:55] SoPerepilichny was a very key person in our fight for justice for Sergei Magnitsky. He had brought to the UK from Russia financial records, which proved that the people who organised the $230 million fraud that Sergei Magnitsky was killed over, that though government officials organised that, they ended up taking some of that money in Switzerland. We took his documents to the Swiss authorities. The Swiss authorities froze about $20 million in Credit Suisse and UBS, opened up criminal cases and then subsequently Perepilichny dropped dead at the age of 44 in front of his house jogging in Surrey. The police initially ruled it as non-suspicious but there's been an inquest going on. We've been involved as an interested party in the inquest and it's almost certain, at least in my own opinion, that that Perepilichny was murdered. The police continue in Surrey to insist that it's not suspicious, but because of the Skripal poisoning and because of a number of other suspicious deaths the Home Office has opened up their own independent inquiry. And hopefully that will lead to a more rational conclusion from the government and perhaps some actions based on that conclusion.
RG: [00:12:18] How do these kinds of incidents make you feel? You’ve described yourself very candidly as Putin’s number one enemy, your lawyers and other colleagues that have worked with you obviously have had problems with the law and with the law and the Russian authorities. You yourself have come into many problems. You’ve been deported from Russia. Do these kinds of incidents on UK soil, where you’re living, do they make you feel more worried about your safety?
BB: [00:12:42] Well one of the reasons that I became an interested party in the Perepilichny inquest was because I believe that he was murdered. And because the police declared that murder as not suspicious, I believe that the people who murdered him have gotten away with murder and I believe that if those people have gotten away with murder that they would have the will and the way to act again against potentially me or some of my colleagues. And so for me, these killings and attempted killings are very significant and the main way that I can protect myself is by demanding that the government creates consequences for these people and it is very real for me. It was real for me before Skripal and it’s real for me after Skripal that Russia kills its enemies abroad and particularly in the UK. And I'm an enemy and I live in the UK.
RG: [00:13:41] You mentioned earlier briefly about Russian interference in the US elections. I know that you were brought before the US Senate Judiciary Committee about the Foreign Agents Registration Act and its enforcement last year. Maybe you can tell me a little bit more about what you were asked and what you talked about.
BB: [00:14:00] So part of my story is that when I went to Washington to get the Magnitsky Act, Putin really didn't want the Magnitsky Act. He declared it his single largest foreign policy priority to repeal it. He had all sorts of different plans and objectives and operations to try to repeal it. And one of those operations was a woman named Natalia Veselnitskaya, who went to New York on 9 June 2016. She met with Donald Trump Jr, Jared Kushner and Paul Manafort, with the specific objective of repealing the Magnitsky Act. And she also, after that meeting, went to Washington with a whole team of lobbyist – a well-paid, hugely well-resourced operation – to try to repeal the Magnitsky Act in Washington. That whole effort was being done without anyone ever registering as a lobbyist. And so I wrote a criminal complaint to the US. Department of Justice in which I laid out all the facts of how these people were working on behalf of a foreign government, are trying to change US. policy and none of them had registered as foreign agents under the Foreign Agent Registration Act. And that is what ultimately led to a big scandal around this story. And it also led to me being invited to testify about what happened at the Senate Judiciary Committee last summer. It was a dramatic moment in US. history as I sat there and told the story of how Russia operates because a lot of people vaguely knew, but nobody had any idea of the how really truly horrible it was.
RG: [00:15:49] And I’m guessingyou firmly believe that there was interference in the US elections by the Russians?
BB: [00:15:54] Well I don't need to believe it or not believe it. 17 US intelligence agencies have declared it to be the case. All of the information that we have outside of that makes it pretty plain and obvious that that's the case. There was an absolute plan by Vladimir Putin, using all sorts of different operatives to try to swing the election towards Donald Trump.
RG: [00:16:17] And there have been recent reports about links between Viktor Vekselberg and Trump’s personal attorney Michael Cohen. What do you think about those?
BB: [00:16:26] Well that Michael Cohen story is quite remarkable. So here you’ve got this guy who is a pretty trashy lawyer by most by most definitions, or some people don't even call him a lawyer. And all of a sudden out of nowhere Donald Trump gets elected. Nobody had expected it. So this guy goes around passing on his business card, you know, influence peddling selling access. And everybody – it wasn't just Viktor Vekselberg – it was also Novartis. They paid him $1.2 million dollars for one meeting where nothing came from it. It was really remarkable that he was so successful in selling his access to Donald Trump.
RG: [00:17:07] And Vekselberg was also one of the oligarchs listed on Trump’s sanctions list, wasn’t he?
BB: [00:17:13] Yes. So he’s gone from a hero to zero pretty much overnight. I mean, in the past, he brokered the return of some type of bell from Harvard to Russia. He brought Fabergé eggs back to Russia. He donated some money for the restoration of a major park in San Francisco. He was sort of feted in polite society in America and all of a sudden he goes from that to being someone on the US OFAC sanctions list and somebody who's being investigated for is paying $500,000 to Trump's lawyer. It's quite remarkable how quickly everything changed.
RG: [00:17:54] Yes, exactly.And you’ve spoken out about how pleased you were to see that list that Trump had put together and you hoped that it would be replicated in other countries as well.
BB: [00:18:04] Well so what everybody has to understand – and nobody really does even in the governments that do these things – is that there are sanctions lists and there are sanctions lists. And for example when the US first started sanctioning Russians for invading Crimea they started sanctioning generals in the Russian army and people in military intelligence, which is fine, but if you really want to touch the Putin regime you sanction the people with money, because the sanctions are absolutely devastating towards those people with money. And for 10 years I've been pounding the table saying ‘Sanction the oligarchs, sanction the oligarchs!’ And so they, the US, made a list of 200 oligarchs and then a month ago they sanctioned seven of those 200 oligarchs. And the economic consequences of those sanctions are devastating. Stock prices were dropping 50, 70 per cent. Everybody who is doing business with them immediately ceased business. Everybody on their board of directors resigned from their board of directors. Microsoft cut off the licence, you can’t even access Word and Excel…complete destruction of their business. And guess what? You know, Putin is normally like getting all shrill and angry. He hasn't said a word. Because he understands that they've sanctioned seven. There's another 193 to go.
RG: [00:19:22] And do you think it’s likely that the other ones will make the list? Or do you think they picked the rights one to begin with? Who else…?
BB: [00:19:27] I think the picked…Vekselberg, Deripaska, Kerimov…these are some very, very high-value targets, extremely high-value targets. And I think that they made a point, a perfect point which is that if you're going to mess with US elections, if you're going to invade foreign countries, if you’re going to poison people, this is what's going to happen to you.
RG: [00:19.47] Absolutely. Now another linked topic is…really would you describe yourself as a whistleblower?
BB: [00:19:54] Well, whistleblower is may be not the right way to describe myself. I would describe myself as an activist, as a criminal justice activist, as a person who is exposing wrongdoing. And whistleblowers tend to be somebody inside the organisation blowing the whistle. I'm not inside any one of their organisations. I'm an outsider blowing the whistle.
RG: [00:20:14] Right.The reason I ask is I think some people have described you as a whistleblower, I wouldn’t necessarily have given you that title. You’re probably aware that there are lots of calls globally to bring greater protection for whistleblowers. Obviously, Sergei really was a whistleblower. Perepilichny was a whistleblower. So I wondered what your stance was on these calls for greater protection. And in the EU itself in the coming months we’re going to be discussing more and more on this topic.
BB: [00:20:42] Well effectively that's what the Magnitsky Act is. I mean it says word for word that the people exposing wrongdoing and corruption – and as you know it's been my life's work to create consequences for anybody who persecutes or in any way harms whistleblowers – because Sergei was a whistleblower. In doing so I think I've created a real balance or tipped the scales back towards justice, because, well. people used to be able to enjoy impunity doing this, they can't anymore.
RG: [00:21:16] Do you think that generally we do need greater protection? We’ve so many issues now. We've got the Panama Papers; we've got lots of different kinds of leaks going on. So I think there's just going to be more of these sorts of scenarios where we’ve got more people who are putting their heads above the parapet and speaking out.
BB: [00:21:31] Well also we have a world in which, you know, you can press a button and like 12 seconds later you have all this data, which you can hand over to somebody. And so we're living in a spectacular world for uncovering corruption by having that and hopefully people will continue to do that and allow some a window into that world of corruption that we never had before.
RG: [00:22:01] Putin has just been inaugurated for his fourth term as president, which is quite exceptional in many respects.Looking at Russia today, how do you think things have changed? Do you think things have improved?
BB: [00:22:15] Not at all. I think that things have highly deteriorated in Russia. First of all, I take issue with the wording “inaugurate”. “Inaugurate” suggests there is something legitimate about his presidency. He stole the election by arresting, expelling or killing his opponents and cheating the electoral system in every possible way. And so the idea that he somehow has reinserted himself in a legitimate way is just not right. He's a fake leader based on a fraud. But having said that, and because of that, he's so nervous that he's going to be found out that the way that he deals with that insecurity is by repressing people. The repressions in Russia have gotten much, much worse. Freedoms have gone much more curtailed. Violence, political and otherwise, has increased dramatically and business is terrible. And so I think that everything has sort of just deteriorated in Russia.
RG: [00:23.14] What more do you think that people like yourself or lawyers generally in the world could do to try and help the situation in Russia from the outside, because it’s difficult from the inside to as you know to really make a difference.
BB: [00:23.26] Well for me the really important thing is to have consequences for their bad actions, which is what the Magnitsky Act is all about. It's a piece of legislation that creates consequences. And for lawyers and other interested people, we now have Magnitsky acts in seven countries. And so I encourage everybody to look for situations where the people that they care about are affected and then use the Magnitsky Act, lobby the government, propose people who should be on the Magnitsky list. I'd like this to be used almost as a pedestrian tool that governments use in a lot of different cases against bad people. So that it becomes pretty well expected by somebody that if they do some terrible thing they won’t be able to travel and their money will be frozen.
RG: [00:24.17] What are the next steps for the Magnitsky Act? Where would you like to see it enacted? Or where would you like to see more sanctions list come out against these oligarchs and other people?
BB: [00:24.27] Well so we have seven countries so far and not that many people sanctioned. There's only about 50 people sanctioned in each country. And so obviously I'd like to see those lists widened to include lots of other case. We're working on seven more countries – we’re working on Denmark, Sweden, Holland, France, South Africa, Ukraine and Australia.
RG: [00:24.53] Ukraine would be interesting.
BB: [00:24.55] Ukraine is probably the furthest along.And you know that there's no love lost between the Russians and Ukrainians. But the main places that I am interested in are the civilised countries that people want to keep their money in because if you take that away from them they're not happy.
RG: [00:25.10] And in Europeobviously compared to the US things haven't moved quite as quickly. The UK will be leaving the EU next year – we know that I’m not asking you to voice an opinion on that – but do you think that the UK will be in a better position to act more independently because they won’t have to go alongside other EU members in deciding this kind of legislation? And particularly in the current climate perhaps they can have a tougher stance on these issues.
BB: [00:25.38] Well that would be good. And so the EU, as far as Magnitsky sanctions and Russia sanctions generally, is pretty weak. It’s weak because it's a consensus organization of 28 countries, which includes countries like Cyprus and the Czech Republic and Slovakia and Hungary, which are also sort of Russia leaning. It's much easier to have a robust foreign policy when you're dealing with one country than when you're dealing with a group of 28 countries. Having said that, we also have Magnitsky sanctions in three European countries – Latvia, Lithuania and Estonia. And so I'm hoping that we can eventually build a critical mass so we get new EU-wide Magnitsky sanctions, but so far that hasn't been possible.
RG: [00:26.20] And what other plans have you got? Or what other things do you think are interesting at the moment?
BB: [00:26.24] Well I'm working on a second book My first book, for those who haven't read it is Red Notice: How I Became Putin's No. 1 Enemy. I’m working on a second book, which will bring the story from 2012 up to date. And that should be very interesting when it comes out.
RG: [00:26.45] Great, thank you very much Bill.
BB: [00:26.47] Thank you