My Dinner with Putin’s #1 Enemy

Last night, I attended a dinner in London with Bill Browder, the CEO of Russian investment fund Hermitage Capital Management.

Having dinner with Bill Browder is an odd experience. You see, Bill doesn’t touch his food or drink.

It’s not that Bill worries about his weight. It’s just that he doesn’t eat food served to him in public places, even though the event was hosted by Jeremy Bradshaw’s well-respected Britain Club.

That’s because Bill lives his life in the crosshairs of Vladimir Putin and the Russian agents bent on destroying his life. London is also well-known for Russian oligarchs and rogue KGB agents dying under mysterious circumstances.

How Bill Browder Took on Vladimir Putin

As it happens, I have known Bill Browder for over 25 years. Back in the early 1990s, our paths crossed in Eastern Europe. As a young lawyer, I worked on a couple of investments he made for the “bouncing Czech” Robert Maxwell’s investment fund in the region.

Bill’s work in Eastern Europe was a tiny footnote in his career. After Maxwell’s demise, Bill quickly moved on to Salomon Brothers in London. There Bill made a fortune for the storied investment bank by buying Russian stocks.

When Bill started, the entire Russian stock market was worth $10 billion. That’s the equivalent a single U.S. mid-cap stock. Bill called it the single best investment opportunity in the history of finance.

Bill quickly set out on his own. When I had lunch with him in London in April 1995, he had raised his first $5 million for Hermitage. Bill soon raised another $25 million from the late Edmond Safra.

From this modest beginning, Hermitage became Russia’s biggest foreign investor.

Hermitage was wildly successful in the first Russian stock boom, doubling in value within a matter of weeks. Suddenly, the likes of George Soros and Julian Robertson sought out the 31-year-old Browder for his investment insights. Bill became a minor celebrity, earning profiles in Business Week, The Financial Times and elsewhere.

Bill’s best investment? Buying Gazprom shares at a 99.7% discount to Exxon. Hermitage made 100 times on that investment.

As always, every boom is followed by a bust.

After the Russian market crash of 1998, Bill lost 95% of his investors’ money.

In 1999, while the rest of the world focused on the dot-com boom, Bill took a second run in the Russian market.

This time, Bill reinvented himself as a shareholder activist. He deftly leaked stories to the media to reveal the extent of corruption in Russia. Harvard Business School students studied Browder’s activism in their cases.

That was when Bill first butted heads with Vladimir Putin.

In 2003, Putin began to make his claim on the assets of Russian companies to build his fortune.

As a first salvo, Putin put Mikhail Khodorkovsky, the CEO of oil giant Yukos, on trial. Russia’s wealthiest man ended up in Siberian jail for 10 years.

The images of Khodorkovsky sitting in a cage in a Moscow courtroom were a message to the other Russian oligarchs. They would have to pay tribute to Putin. Otherwise, they would suffer the same fate as Khodorkovsky.

The size of the tribute? 50% of each business.

Overnight, Putin became the richest man in the world. Today, Bill estimates Putin is worth $200 billion.

That’s over 50 times President Donald Trump’s fortune.

Hermitage’s activist investing came in direct conflict with Putin’s asset grab.

So Putin’s cronies developed a scheme to put Hermitage out of business. To start, Putin banned Bill from entering Russia in November 2005. The Russians also tried, unsuccessfully, to grab all of Hermitage’s assets.

Browder fought back. His lawyer, 36-year-old Sergei Magnitsky, uncovered a $330 million tax fraud. Shockingly, Magnitsky was arrested, tortured and eventually killed by Russian officials. And in a bizarre twist worthy of a Franz Kafka short story, the Russian government put Magnitsky on trial three years after his death.

No prizes for guessing the verdict.

Since his lawyer’s death, Bill has committed his life to passing the Magnitsky Act, which punishes Russian officials involved in the scandal. President Obama signed it into law in 2012.

Browder has been a thorn in the side of the Russian leader over the last dozen years. He recently testified in front of the U.S. Senate about a Russian lawyer meeting with Trump representatives to repeal the Magnitsky act.

On Being Bill Browder

I asked Bill how he handles the psychological pressure of knowing that the Russian government is out to destroy him. I told him I found his mental stamina in the face of his circumstances astonishing.

Bill shrugged his shoulders and said it wasn’t that hard. You just have to accept you may die tomorrow.

This, of course, applies to all of us.

Bill’s circumstances only make him more acutely aware of his fate.

We chatted about our families, the challenges of raising kids and aging parents. I told him I last saw his oldest son in a baby carriage in 1998 in Hampstead. Joshua is now a junior at our alma mater, Stanford University. An entrepreneur like his Dad, Joshua has venture capitalists crawling all over him to invest in his companies. Bill proudly says he expects Joshua to be a billionaire by the time he’s 27.

Bill tells his story in a highly entertaining memoir: Red Notice: How I Became Putin’s #1 Enemy. The book’s short, punchy chapters read like a spy novel, with a cast of compelling characters, and mysterious, unexplained deaths. You can also watch a video produced by Hermitage in 2010 here.

If Bill’s life seems like a movie, it’s because it will soon be one.

Although Red Notice was a bestseller, Bill complains that no one reads anymore.

So Bill already has scriptwriters working on a movie based on the book to get his message out to a broader audience.

Bill says the Russians are already bullying the major movie studios not to take on the project.

Russian bullying or not, I would not bet against Bill Browder.

His story is a real-life blockbuster.

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In case you missed it, I encourage you to read my e-letter from last week about mental models in investing.