Bill Browder Seeks Justice from Russian Corruption in New Memoir

Feb 4 2015 | 8:29am ET

Bill Browder, founder and CEO of Hermitage Capital Management, was Russia’s largest foreign investor until 2005. Today, he wishes he had never stepped foot in the country.

"I now understand how completely naive I was to think that as a foreigner I was somehow immune to the barbarity of the Russian system," Browder said.

In his new memoir, “Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice,” Browder outlines his misadventures in Russia as a high-risk-taking activist investor, one who found himself muddled by corruption and ultimately blacklisted from entering the country.

Browder began investing in Russia in 1996, fresh out of Stanford Business School.

Having hit it big on several investments in the post-Cold-War Europe, he established himself as a heavyweight investor from his office in Moscow. However, his shareholder activism strategy pitted him against corrupt, powerful oligarchs.

His story turned tragic after his friend and colleague Sergei Magnitsky found evidence that Russian tax officials embezzled $230 million. In retaliation, these same officials arrested Magnitsky on tax evasion charges. Following 11 months of pretrial detention, Magnitsky was beaten to death by Russian authorities, charges Browder. 

Since then, the hedge-fund founder has sought justice for his friend. 

"I would never have gone to Russia in the first place,” Browder writes. “I would gladly trade all of my business success for Sergei's life.”

Though he hasn’t been back to Russia since being deemed a threat to national security, he is still paying close attention from an investor perspective as well.

As Russia faces its worst economic crisis since 1998, many value investors see low price-to-earnings ratios as a potential contrarian opportunity. But Browder says that investing in Russia is a “value trap” due to his expectations that president Vladimir Putin will nationalize industries across the country or the likelihood of increased fraudulent activity.

“It’s a value trap right now. Low price-to-earnings ratio only helps you if you get those earnings in the end,” Browder told CNBC. “None of that money is going to come to you. You’re either going to lose it from capital controls, from expropriation, or from fraud.”

Browder's book has been published by Simon & Schuster.

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