Episode 784: Meeting The Russians

Jul 14, 2017

In 1996, Bill Browder went to Russia to try to make a fortune. He made his money, but he also found himself in a fight with Russian oligarchs over money and power. And he lost. It cost him not just his companies, but the life of friend.

His crusade to punish the people responsible led to Congress freezing the assets of dozens of powerful Russians. In retaliation, Russia banned Americans from adopting Russian kids. Which is why Natalia Veselnitskya scheduled a meeting with Donald Jr. to talk about "adoptions." Browder knows her; he calls her his "arch-enemy." Really, Browder says, she wanted to talk about unfreezing those Russian assets.

Today on the show, we call up Bill Browder and have him walk us through his years in Russia. Once, he and Putin were allies. But before Browder knew it, border guards were dragging him out of a VIP lounge, and eventually out of Russia. Now, even in exile, he doesn't eat in the same restaurant twice.

The story of Browder and his late friend helps explain what the Russian government--Vladimir Putin--wants from the President of the United States. And how far he'll go to get it.

Music: "Seize the Day" and "Lonely on the Weekend." Find us: Twitter/ Facebook.

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Copyright 2017 NPR. To see more, visit http://www.npr.org/.

ROBERT SMITH, HOST:

For those of you out there who are collecting the Donald Trump-Russia scandal trading cards - I know you are - there emerged a new name this week to add to the pack, Natalia Veselnitskaya.

AILSA CHANG, HOST:

Natalia Veselnitskaya - you've been seeing the news this week. She's a Russian lawyer who met with Donald Trump Jr. during last year's presidential campaign. Trump Jr. wanted to get some dirt on Hillary Clinton.

SMITH: But what did Natalia want out of this meeting? What did Russia want out of this meeting? Most people had never heard of her before this week. But a man named Bill Browder had.

BILL BROWDER: Natalia has been sort of my archenemy for the last three and a half years.

CHANG: Now, Bill Browder used to be one of the biggest foreign investors in Russia. He owned gas and oil companies and metal companies.

SMITH: And we say used to because the Russian government kicked Bill Browder out of the country, took away his companies, threatened his life, went after his lawyer.

CHANG: So Bill Browder got Congress to pass a law punishing the Russians involved. And this law was what led to that Trump meeting we're all talking about.

BROWDER: This woman, Natalia Veselnitskaya, went to Donald Trump Jr. to talk about one thing and one thing only, which was the repeal of the Magnitsky Act, which is a piece of legislation which imposes visa sanctions and asset freezes on Russian torturers and murderers, including those torturers and murderers who murdered Sergei Magnitsky, who was my lawyer in Russia.

(SOUNDBITE OF MICHAEL BODDY AND SUSAN HOOTI'S "LONELY ON THE WEEKEND")

SMITH: Hello, and welcome to PLANET MONEY. I'm Robert Smith.

CHANG: And I'm Ailsa Chang. Today on the show, we will show you how Russian investing, tax fraud and murder form a web of events that may have led to a secret meeting with the president's son and closest advisers. Bill Browder went to Russia to make a fortune, but he found himself in a fight with Russian oligarchs over money and power. And he lost not just his companies, but it cost him the life of a friend.

SMITH: Browder's story explains a lot about what the Russian government - what, really, Vladimir Putin wants from the president of the United States and how far he'll go to get it.

(SOUNDBITE OF MICHAEL BODDY AND SUSAN HOOTI'S "LONELY ON THE WEEKEND")

CHANG: Bill Browder was brought up to challenge authority. His grandfather was a labor union organizer, ran for president of the United States on the Communist Party ticket. His Russian grandmother was threatened with deportation during the McCarthy era. Browder himself was always looking for a rule to break.

BROWDER: So I was going through my teenage rebellion back in the 1970s, and I was trying to figure out a great way to rebel from this family of communists. So I grew my hair long. That didn't upset my parents. I followed the Grateful Dead. That didn't have any impact. But one day, I came up with the perfect rebellion from my family, which was to put on a suit and tie and become a capitalist. And there was nothing I could do to piss off my family more than that.

SMITH: Browder got an economics degree from the University of Chicago, an MBA from Stanford. And by the time he graduated, he had found the perfect place to be a cowboy capitalist, the place his grandparents loved, Russia.

CHANG: It's 1996, after the fall of the Berlin Wall. And Russia wants to ditch communism overnight. They have all these old state-owned companies they want to make private.

BROWDER: It was a complete, Wild-West, gold-rush type of situation. The Russian government had basically - in their own efforts to go from communism to capitalism, they basically gave all the state assets away for free.

SMITH: So could you walk in and buy a factory?

BROWDER: You could do anything. You walk in, buy an oil company. You could walk in, buy a timber mill. You could walk in and do anything. This wasn't rocket science. You basically could buy an oil company at a 99.9 percent discount to the same type of oil company in the West. And so the real trade was, you know, are you going to lose all your money if they take it away from you, or is Russia going to go from total chaos to a little bit less chaos? Because if it goes from total chaos to a little less chaos, you'll make 10, 20, 30 times your money.

SMITH: That was the capitalist dream. So Browder started an investment fund, a fund that would eventually be the largest one in Russia with assets worth billions of dollars. And what he found out was that just by investing in Russia, he was suddenly thrust into this whole power struggle because you couldn't just buy stock in a company and walk away. You had to go inside each business, get your hands dirty, figure out how a Russian business worked.

BROWDER: Well, what I discovered was that there was pretty good reason for why these companies were so cheap because even if you owned a share of the company, you didn't really own a share of anything because the people who controlled these companies, the Russian oligarchs, were basically stealing money from the companies hand over fist.

And so as a matter of necessity, I became an anti-corruption activist to try to protect my investments. And so...

SMITH: Weren't they just like you - I mean, someone trying to make money off of a country going through transition?

BROWDER: They were. But there's two ways that people were thinking about making money. You could either own a company and own the shares and manage it honestly and have the value of the company rise. That was my way. Their way, the oligarchs' way, was to own a company and just suck out all the cash into their pockets and not worry about the value of the shares but just worry about the cash going into their pockets.

CHANG: Browder had a strategy. Every time he would discover corruption at one of these companies he was investing in, he'd expose it in the Russian media. And for a while, an interesting thing happened. Each time he did it, a man named Vladimir Putin would step in and make a big show of holding these high-level oligarchs accountable.

SMITH: At the time, Putin was not the all-powerful leader of Russia that we know now. He was a new president with pretty weak authority. But Putin was making a big show of fighting corruption. That's how he was gaining popularity. And he especially liked to target corruption among his political rivals.

BROWDER: We had a confluence of interest. The oligarchs were stealing power from him and they were stealing money from me.

SMITH: Now, Bill Browder did not know Vladimir Putin. But this confluence of interest lasted for years. The arrangement worked. The Russian economy boomed, Putin amassed an incredible amount of power and Browder got rich.

CHANG: But at some point, Browder stopped being useful to Putin. Once Putin had the power he needed, he didn't need to crush the remaining oligarchs. A foreigner like Browder was just starting to get in the way.

SMITH: In November 2005, Bill Browder was at the Moscow airport. He was in the VIP lounge, of course.

BROWDER: And then into this room stormed four heavily armed border guards, who grabbed me, frog-marched me down to the basement of the airport to the detention center. And this is not very nice. I'm thinking, well, what the heck? What's going on here? My heart's pumping, adrenaline's flowing through my veins. What have I done? Am I being arrested?

Where - why are they taking me? Why are they doing this? And they wouldn't tell me anything.

SMITH: He's locked up overnight. And then the next morning, the guards reappear and say, you have been declared a threat to national security. You're out of here. You're out of Russia. We are deporting you on the next flight.

BROWDER: They grabbed me, walked me right up to the airplane, stick me in a middle seat on the Aeroflot flight. And that was the last time I was in Russia.

CHANG: I love how they stick you in a middle seat.

BROWDER: Believe me, I was very happy to be on that airplane. They could have put me in the toilet and I would have been happy.

SMITH: Bill Browder had no more allies in Russia. And he knew the clock was ticking. He moved to London. He told all of his employees to leave Russia as quickly as possible. And he started to quietly sell his investments to anyone who would buy them.

CHANG: And it worked. He got his money out. Browder's gamble on Russia paid off. And he might have never given a thought to Russia again. But more than a year later, he gets this panicked call from the last employee left in his Moscow office.

BROWDER: I got a phone call from the secretary saying, there's 25 officers here. What should I do? And I said, I don't know. Let me call my lawyer. I called up my lawyer, an American guy named Jamison. I said, Jamison, my office is being raided. What should I do? And he said, I don't know. My offices are being raided as well. They're looking for your stuff.

SMITH: And remember, there was no money left in the office. There was no real business being done there. There were just a few documents. And that's what the police walked out with.

CHANG: Obviously, this all seemed really suspicious. Browder wanted to figure out what they were up to, so he found a tax lawyer named Sergei Magnitsky.

BROWDER: Sergei was the smartest lawyer in Moscow, objectively. He was one of these people that could do 10 things in the time it took others to do one. He just ran circles around everybody else. He was 35 years old, this incredibly smart but most importantly honest and earnest man. And we hired him to help us figure out what was going on.

CHANG: Sergei tracks the documents the police stole. And he finds something out that's kind of amazing. While the police had these documents, these documents were somehow used to transfer ownership of the company away from Bill Browder to some Russian dude. And that guy clearly had a plan.

SMITH: You know how in the United States someone can get a hold of your social security number and apply for a tax refund in your name to the government. It is a pretty common scam here. Well, apparently, the same thing was happening with Browder's company. Whoever took control of these documents of the company applied for a tax refund from the Russian government, a massive tax refund - $230 million.

BROWDER: It was the largest tax refund in the history of Russia. And it was approved and paid out the next day with no questions asked.

SMITH: I'm not sure there's any government in the world who would give you a $230 million tax refund the next day. I mean, it just seems insane. And it certainly seemed insane to a tax lawyer like Sergei Magnitsky. And he thinks, you know, this has to be a criminal plot. It has to involve the rogue police officers who took the documents. It probably includes tax officials. So Sergei goes to the Russian government. He tells them what happened. He testifies. He takes it all the way to the top, telling them that this could very well be the largest tax scam in Russian history.

BROWDER: And then we sat back and waited for the good guys to get the bad guys. It just turned out that in Putin's Russia, there are no good guys.

SMITH: Somebody clearly wanted this story to go away. And the easiest way to make the scandal go away was to make Sergei go away.

CHANG: November 24, 2008 - police officers showed up at Sergei's door with an arrest warrant.

BROWDER: His wife was in a total state of panic. And he tried to calm her down. He said, don't worry. I'll be back tomorrow.

CHANG: He gets thrown in prison. Pretrial detention is what they called it. But it becomes clear pretty quickly that what they really wanted was to blame someone for that giant tax fraud. They kept telling him to confess. And Sergei, being the good lawyer that he was, documented what happened to him every single day.

BROWDER: They put him in cells with 14 inmates in eight beds and left lights on 24 hours a day. They put him in cells with no heat and no windowpanes in December in Moscow. So he nearly froze to death. They put him in cells with no toilet, just a hole in the floor where the sewage would bubble up. They'd move him from cell to cell to cell in the middle of the night. I think they moved him 28 different times in his 358 days in detention.

SMITH: And all through that, Sergei Magnitsky is filing legal complaints about his treatment. He filed 450 formal complaints over a year. He continued to believe that a judge somewhere would stop what was happening to him.

BROWDER: Sergei had this strange idealistic view of the law. He was, like, a lawyer's lawyer, and he really believed that the law would ultimately overcome everything. He knew there's a lot of human frailty in the system, in the government and the police, et cetera. But he also believed that, ultimately, the law was the law.

CHANG: And while all of this is going on, Browder is reading each of these excruciating updates that Sergei's writing. He's learning about Sergei's awful conditions, but he's powerless to do anything. No one ever answered any of Sergei Magnitsky's complaints. And he eventually got sick, critically sick.

BROWDER: Instead of putting him in the emergency room, they put him into an isolation cell. They chained him to a bed. And then eight ride guards with rubber batons beat him until he died. He was 37 years old. He left a wife and two children. That was November 16, 2009, seven and a half years ago.

SMITH: Bill Browder found out what happened to Sergei the next day. And he was stunned.

BROWDER: What happened? How? No. It can't be. And when I finally was able to calm down enough to look at the situation objectively, you know, it was clear that I had only one choice, which was to put aside everything else I was doing and devote all of my time, energy and resources to going after the people that killed him and make sure they face justice.

CHANG: Bill Browder cannot travel to Russia. He cannot sue the people he thinks are responsible. But since he's a finance guy, Browder knows how to hit them where it hurts - in the bank accounts. There was already concern in the financial world about corruption in Russia. And Sergei Magnitsky's dramatic story becomes this symbol of just how bad things have gotten there.

SMITH: Browder tells his story again and again and again. And he says, if you want to fight corruption in Russia, if you want to get justice for Sergei Magnitsky, then let's freeze the money of the people responsible. Let's freeze their bank accounts. And after years of lobbying, Browder gets a U.S. senator on board. They draft a bill with the name of his friend, the Magnitsky Act of 2012. And it passes the U.S. Congress with huge bipartisan support.

CHANG: This act includes a list of Russian names of people suspected to have a role in Sergei's death. And the law bans these people from entering the U.S. and freezes their assets here. There are now 44 names on the Magnitsky list. And some of them are the most powerful people in Russia.

BROWDER: You know, we now have the head of the Russian state investigative committee, their FBI. Alexander Bastrykin's on the list. The deputy prosecutor of Russia, Viktor Grin, is on the list. The deputy interior minister, Alexei Anichin, is on the list. Judges and the police officers, the ones who did the raid, the ones who had custody of the documents, the jailers - all these people were on the list.

SMITH: You know who was not on the list? Vladimir Putin. But, reportedly, he was majorly pissed off by the mere existence of this list because this was the U.S., the world really taking aim at members of his government.

CHANG: These were the people closest to him.

SMITH: Yeah. And the law made it impossible for them to do business in the United States, to do business with U.S. banks, which pretty much means business anywhere in the world.

CHANG: Now, the Russian government says it had nothing to do with Sergei Magnitsky's death - that he died of natural causes? And if there's anybody involved who committed fraud, it's Sergei Magnitsky and Bill Browder. So Putin retaliated. And he retaliated within days. And this is how he did it. If you remember back then, thousands of Americans were adopting Russian children from orphanages out there.

SMITH: It was a big thing in the '90s, yeah.

CHANG: Right. And Putin decides to ban U.S. citizens from adopting Russian kids.

SMITH: Never mind that this move hurt children, babies - hurt families. Putin wanted U.S. citizens to be outraged. He wanted us to hate this because he wanted to send a message that the U.S. Congress should unfreeze his friends' assets.

CHANG: OK. So now let's bring the story back to this week. Natalia Veselnitskaya, the Russian lawyer that Trump Jr. met with, has spent the last few years trying to pressure the U.S. to repeal the Magnitsky Act. She has lobbied U.S. officials. She has tried to discredit Bill Browder. And that's why she wanted to meet with Trump Jr. so badly.

SMITH: And when they said afterwards, oh, we we just talked about adoption, what they were really saying is that they talked about the Magnitsky Act. Russia wants to know whether Donald Trump would be willing to negotiate, to talk about this issue of Russian bank accounts, to talk about this issue of the Magnitsky Act.

CHANG: Browder says he is not at all surprised that Sergei's story would come up again in the news this week. Russia has never given up this fight. Russian officials have called Browder a liar and issued arrest warrants against him. They've made comments that suggest his life is in danger, too. And he is well aware that people who have fallen out of favor with the Kremlin have wound up dead.

BROWDER: I've got to be - live a completely different type of life than the average person, which is to think very carefully about everything I do and what risks I take by doing it. I never go to the same restaurant twice.

SMITH: Really?

CHANG: Oh. You can't go back to a favorite restaurant?

BROWDER: Nope.

SMITH: Browder went to Russia because it was the Wild West, because there were no rules. And so it seemed like an easy place to make a ton of money. And now, you know, talking to him, he just blames himself for ever wanting to set foot on Russian soil.

BROWDER: The lesson that I've learned is that laws matter, that the rule of law matters, that integrity matters and that if you don't have that in a system, in a society, then pretty much everything is worthless.

SMITH: Something to keep in mind the next time a Russian lawyer calls you up for a secret meeting.

(SOUNDBITE OF MICHAEL DOMINIE WYZGOWSKI AND MICHAEL JOHN BODDY'S "SEIZE THE DAY")

CHANG: Today's show was produced by Elizabeth Kulas and Sally Helm. Our editor is Bryant Urstadt. PLANET MONEY's senior producer is Alex Goldmark.

SMITH: And if you'd like to hear more about this story, Bill Browder wrote a book about his experience in Russia. It's called "Red Notice: The True Story Of High Finance, Murder, And One Man's Fight For Justice."

CHANG: If you're looking for something else to listen to, check out Hidden Brain.

SMITH: Where is it?

CHANG: (Laughter) Robert, that was so funny, I didn't get it. Each week, they try to get at why we do what we do. Like, why are some people really great at recognizing faces? Or why do some people lie more than others? That's Hidden Brain. You can find it on the NPR One app or wherever you get your podcasts. I'm Ailsa Chang.

SMITH: And I'm Robert Smith. Thanks for listening. Transcript provided by NPR, Copyright NPR.