The Cost Of Activism In Putin's Russia (w/ William Browder) | Interview | Real Vision™

Bill Browder, CEO and Founder of Hermitage Capital, welcome. Thank you. I'm so glad we finally got to do this in a neutral jurisdiction in London, so that we can sit and have a chat. Now you'll be familiar to a lot of our audience. But there will be some people that don't know who you are, so perhaps we could kind of kick things off with your background. I'm an American originally. I am grew up in Chicago, but I come from an unusual American family. My grandfather was the head of the American Co

mmunist Party for 13 years, from 1932 to 1945, ran for president on the communist ticket, was persecuted under McCarthy. In my family, I was the rebel. And my form of rebellion was to put on a suit and tie and become a capitalist. I became a capitalist. I went to Stanford Business School. I graduated in 1989, which is the year the Berlin Wall came down. And as I was looking to see what to do next, I said if my grandfather was the biggest communist in America and the Berlin Wall has come down, I'

m going to try to become the biggest capitalist in Eastern Europe. And that's what I set out to do. I ended up in Russia at the beginning of the privatization program. I had a company called Hermitage Capital, which invested in Russia. It grew from zero to becoming the largest hedge fund in Russia. And in the process, I had huge successes and spectacular failures and a terrible, terrible story that followed. Well, but we'll get into all of that, because it is a fascinating story. So let let's go

back to your entry point into Russia, which was an incredible time-- not just for Russia but for the wider world. What was it like back then? It was one of these situations where to go from communism to capitalism, which was the objective of Boris Yeltsin after the breakup of the Soviet Union, he said, we need-- we can't just declare ourselves capitalists. We have to make people capitalists. So how do we do that? Well, we're going to basically give away all-- the state owns everything. We're go

ing to give away all the property to the people. Everyone will own property, and they'll therefore become capitalists. And then we'll be a capitalist country instead of a communist country. So they gave everything away. But what they didn't anticipate or they didn't think about in advance of this is that it's kind of like building a house but without putting in the plumbing or electricity. They gave everything away, without setting up laws, property rights, institutions et cetera. And so you bas

ically show up out there. There's no information about what anything is. There is no rules about what's going on. And everything was trading at 1/1,000 of the price of the comparable companies in the west. And so, you know, an oil company that should be a $10 billion oil company is a $30 million dollar oil company. And so you didn't have to be a genius investor when you showed up out there to spot the opportunity. It was obvious that these things were trading at such a great discount. The basic

issue was were they going to let you keep the ownership of what was there. And so it was one of these things where either you were going to lose all of your money, or you were going to make 10, 20, 30 times your money. Well those isometric payoffs are what attract investors to places like Russia. But still, you have to be a brave man to go in there at that point. Because as you said, nobody knows anything. So a normal person, you know, from a regular place with just all risks and rewards placed

in front of them, wouldn't have gone to Russia. Because it was completely unknown. It was seemingly dangerous, and it was totally chaotic. I didn't go there as sort of quote "normal" person. I went there as this grandson of the communist. And I went there with this weird axe to grind from my family history. And had I-- it's kind of like the people who got into software were not the people who were looking at the risk and rewards of software-- Bill Gates wasn't looking at the risks and rewards of

software. He was saying, I'm interested in programming. And he became Microsoft. I went there for reasons effectively not economic. I spotted the economic opportunity. But I went there for these strange sort of personal family reasons. And I was there, you know, years before the economic migrants showed up. So when you when you first set foot in Russia, you've got your agenda that you're looking to kind of further, when you get there. But it is a very personal one. How do you kind of inveigle y

our way into this world, which must have been-- although it's up for grabs, it's still a very isolated place. And being a foreigner makes that tricky. You know, I'm one of these people who-- I made a list of the 40 people I thought knew something about what was going on out there. I cold called all 40 of them and set up meetings and took my notebook and asked a lot of questions, wrote down a lot of notes. And after-- and I do this in everything I do in life. You know, you go into a new area, and

you make a list of people you think could help you. And then you ask them a bunch of questions and have a bunch of meetings. And then things start to crystallize. And not everything was clear. But it was a lot less murky than everybody on the outside thought. Because I mean, how did you invest out there? There was a few local stockbrokers who you could buy shares from. There was a few dodgy custodians that you could keep your shares with. There was very little information. And in fact, one of m

y greatest advantages at the time was that to the extent that anyone invested in Russia, they did so from London or from New York. And in doing so from London and New York, they had to rely entirely on stockbrokers in Moscow to send them research reports. And the stockbrokers in Moscow would only send them research reports on the stocks that were most liquid, because that was where they got their commissions from. And so if there was a stock, let's say, with a huge free float, like Lukoil at the

time, they would do a research report on Lukoil. And then there was another stock at the time, Yukos, which had no research reports and no liquidity. And Yukos traded at like a 90% discount to Lukoil within Russia, just because-- and the guys in the west, the guys sitting in London and Geneva and New York, couldn't buy Yukos because they couldn't present it to their boss and say, look, I've done my homework. Whereas I could go and have a meeting in the Ministry of Fuel and Energy, I'd go meet Y

ukos itself. I could go meet their competitors. I could put together my spreadsheets. And so by being on the ground out there, there's an expression-- in the land of the blind, the one-eyed man is king. Right. And there this was not genius. This was just pure information asymmetry. I had the information because I was there. And the people who were too scared to show up in Russia to live there didn't. And that gave me a huge advantage. I was in London at this time. And I was trading Yukos warrant

s and Lukoil warrants and Gazprom and all these kind of weird and wonderful companies. And to your point, I mean, the information flow was sporadic. And the price moves were wild. Because some information would become available, you'd see the stocks move ahead of it becoming publicly available. And you'd get these-- I mean, it was the wild west of trade from London, so I can't even imagine what it must have been like on the ground. Well, it was great on the ground. Because I could literally be t

he pioneer first investor into a certain stock because I did the work and no one else had done the work. So it was almost like private equity, in the sense that I was a private investor in these companies. And what I would do is once I took my position, then I would share my analysis with the brokers and other investors. And they'd say well, that looks pretty interesting. 90% discount, I'll have some of that as well. And then the discount would start to narrow. It's funny when you talk about get

ting in there and making a list of these 40 people and asking for help. A friend of mine in Hong Kong once said this to me. He said the biggest lesson he ever learned in life was to ask people for help. He said, people are predisposed to help you out. And if you ask them for help, if they can help you, that's the way we're hard-wired, for the most part. The 40 people that you went on that list, are these the guys who turned into the oligarchs? Or were these lower level guys that just knew people

and had networks. They definitely weren't the oligarchs. The oligarchs were not sharing information at all. But even at that time, when it was all kind of a bunfight, were they more accessible then, those guys? The oligarchs have always been accessible. They're even accessible now. I mean, they're not inaccessible people, if you have any desire to access them, which I don't. But you know, the great thing about Russia at that time is that nobody had any more experience than anybody else at doing

anything. And so you know, at the time I was in my late 20s. It wasn't as if there was like an establishment of 55-year-old guys who were ruling the world, and I was some junior nobody. Everybody was sort of on equal footing in terms of knowledge, experience, et cetera. In fact, the older people there, were also steeped in communist traditions, where they couldn't even have these conversations. So everybody was in their 20s, 30s, and 40s who were sort of beginning to sort of operate the economy

. So when you when you get into that world, you get into that kind of the middle of that crowd, all trying to carve out their own little piece of it. I mean, that's-- people have very sharp elbows at those dining tables. If they knew what they needed sharp elbows for. In other words, most people had no idea. It was just a total chaotic free-for-all. There was like 15,000 companies being privatized. Nobody knew what was what and what was good and what was bad. And it was all there, and it was all

trading in such a deep discount. The oligarchs were taking the big pieces of meat off the table. But the crumbs were all falling, and there was there was no competition for the crumbs. And you know, for people like me, we could just-- I could operate without any interference. And in fact, people were pretty cooperative, because if someone did me a favor and told me some helpful economic information, I might do them a favor and share some of the results of my analysis. Was it hard to come by tha

t information, certainly, in a form that you felt comfortable with? Because I'm sure there's all kinds of rumors and whispered conversations. But you then have to work out what's real and what's not. Yeah, so I never relied on anyone's recommendation. I never relied on any anecdotes. I never relied on any word of mouth. What we would do is go and find the raw information. And in Russia at the time-- Russia is an incredibly bureaucratic country. It was during the Soviet times. It was after the So

viet times. And it is now. And so if you go to the bathroom, you've got to like sign a form saying you're going to the bathroom. And then that form gets filed in the Ministry of Health or something like that. And everyone knows who's gone to which bathrooms. Yeah. Well every activity that goes on in the country is logged into some ministry. It's incredibly cumbersome to do anything in Russia. But if you're looking for data, that information is in the basement of some ministry. And if you have th

e persistence to go and find it and get it- - and it's not secret, it's all effectively public information-- then you can make some incredible economic discoveries, just by looking at the information. I interviewed a guy called John Hempton down in Australia last year. And John essentially said the same thing. There was a goldmine-- I forget what the company was now. My mind's gone blank. But he basically paid a Romanian student who spoke Russian to go into the Communist Party archives and dig u

p all the information on this goldmine, to work out whether it was fraud or not. He said it was all there. And he found her on Facebook, I think. It was some bizarre way of doing this. I think it's true. In all of the world, most people are pretty lazy. They sit at their desks, they look at their Bloomberg screens, they surf the internet, and they hope that they can have some insight. The trouble is that everyone else is doing the same thing, and it's not all that helpful. But the moment you sor

t of leave your office and go and have conversations with people and go and ask for information and go and search for data, all of a sudden, insights come. Right. I think the world is a lot different now than it was 25 years ago, in terms of what's available to everybody, and what requires a little bit more effort to sort of-- what requires actually physically showing up to get. And I don't think that my sort of intrepid approach towards doing things would be as successful today as it was 25 yea

rs ago. Because information has become so much more efficient. But back then, it was just complete wild west goldmine. You know, you could just show up and you know, stocks were-- it was one of these things where literally I couldn't leave Moscow for any length, any day or two, because a stock could double in the next two days, if you-- you'd have to be there. You mentioned when you run through your background some of these successes and failures that you went through. So talk a little about som

e of them. Let's do the successes first, because they're always a good way to start. And then the failures are often more instructive. Right, I started the fund, Hermitage Fund, in 1996, with $25 million, which came from a famous investor named Edmond Safra who was the owner of Republic National Bank of New York. He's long passed away, but he was my first investor, my anchor investor, and probably one of the first seed investors in any hedge funds. And so we started with this $25 million. And he

was actually kind of reluctant to allow anyone else to invest with us, because he thought this was a big sort of flyer. I get out to Moscow. And the first month, the fund was up 35%. And so some of his friends started to bang on the door and say, Edmond, can we come invest in your fund? And he's like no, no, I don't know this guy that well. It's in Russia, things could go really badly wrong. I don't want to have responsibility for anyone else's money. And they said, Edmond, you're already up 35

%. And he said you know seriously, we're going to audit this guy, we're going to do everything to make sure that everything is completely kosher before we let outside investors in. The next month the fund was up 40%. And all these guys were saying, Edmond, we're going to take our money out of Republic National Bank, because obviously you're just keeping this for yourself. And it has nothing to do with-- and so after the second month, we ended up taking outside investors. And at the end of the fi

rst year, we had about $125 million under management. And 18 months after we started, we were up 835%, and we had more than a billion dollars under management. And I was the best performing fund in the world in 1997. I was featured in Time Magazine, Businessweek, New York Times. And my clients were sending their private jets to entertain me on their yachts, to toast my financial genius. All my investor presentations were standing room only. And I was all of 31 years old. So how does that-- talk

a little bit about how that feels for a 31-year-old guy. First, what you've done well to get Edmond Safra as an investor at that time in your life-- as you say, you're unproven-- is a remarkable thing to do. I guess he saw an opportunity. But how does your mindset change when you've-- it must be a daily battle not to let yourself get caught up in what's happening? Well, you know, I actually had no opportunity to reflect on it, whatsoever. It was happening all so quickly. It was just like riding

a dirt bike on a rough road. You know, I was just holding on for dear life. I was just trying to make sure that everything is going as it should be. And so there was no-- I was never particularly proud or arrogant or anything. I was just sort of scared that it would all get messed up at some point and constantly trying to keep the whole thing running properly. But even still, suddenly you're in a world of private jets and yachts and as you said, Time Magazine and being feted by everybody. And yo

u've still got to somehow keep your eye on the ball and maintain that discipline. It's a hard thing to do. The big mistake I made was not stepping away from myself and looking at this guy, this 31-year-old guy, who had had this remarkable success in two years. And by the way, back then a billion dollars was real money. Sure. And if you put all this stuff together-- 31, Time Magazine, yachts, best performing fund in the world-- that's the biggest sell signal there ever was. But I if I could have

stepped away and seen that, then it would have been very helpful. Because the next thing that happened was my first big failure, which was that about two years after I started-- a little more than two years after I started, in August 1998-- the Russian government defaulted on their domestic debt. They devalued the currency by 75%. And my billion dollar portfolio went down $900 million to $100 million. So I lost 90% of my client's money. Yes, so again, let's talk about that. Because I remember at

that time, I was interviewing for a job at Credit Suisse. And the guy that ran the trading desk was frantic, because they had this big exposure to Russia. And I walked in, and he was clearly stressed out about all this stuff. And he said to me, so what do you think about Credit Suisse's losses in Russia. I said, well, I don't really think anything about it. I mean, I guess your opinion about this is far more important than mine. I don't have a position. And being inside Credit Suisse at that ti

me, the noise around that was extraordinary. But compared to what you're talking about here, Credit Suisse didn't lose 90% of their money. They took a nasty hit and moved on. So what was going on there, when you're losing that kind of money? Well, first of all, no one's inviting me to their yachts anymore. Right. It was a spectacular failure, financial failure. But for me, the really hard part was the fact that I had effectively attracted all these people to come and invest with me. And I had ea

rnestly and sort of enthusiastically told them to put their money in Russia. And so all of a sudden, people who had trusted me with their money had lost in some cases 90% of their money. And that was really a hugely, terrible feeling to have, to have the responsibility. I don't mind losing my own money. But losing other people's money is just the worst possible thing. And it really weighed heavily, heavily on me. And I was way, way, way below the high water mark, 90% down. And everybody else who

was in my shoes in Moscow packed up and left. But I was so mortified about what I had done to all these people by getting them into Russia and losing the money that I was I had this sort of chip on my shoulder that I was going to have to-- I wasn't going leave. And I was going to get their money back and whatever it took. And I was going to get them back to par. And so instead of leaving, I stayed. It was kind of like being at the airport at the baggage carousel, and you're waiting for your lug

gage to come off, and everyone else has gotten their bags. And you're standing there by yourself, and there's no bag coming off. And that's kind of how I felt sitting in Moscow. I used to play poker with a group of financial types-- Russians and Americans-- pre-crash. And there was like 14 guys in the poker group. And eight would show up on any given Thursday night. And after the crash, there was nobody left. Every single person in my poker group had left Russia. Really. Yeah. Because how do you

go about doing that? Because you know what you want to do. OK, I need to make this money back. Suddenly your network is decimated. Everything's completely opaque now. You don't really know what's going on. How do you physically-- day one of your reclamation project, how do you start? Is it just picking through the wreckage? What do you do? Well, first of all, everything was completely and absolutely illiquid. Yeah. So the liquidity had dried up to zero. Market volumes went from like $4 billion

a day to $40 million a day. You couldn't buy or sell anything. But the main thing I did was just a simple analysis. I said, OK, what do I own. I own a bunch of oil companies and metals companies for the most part. Oil companies sell their oil in dollars, and the oil price hasn't gone down. However the costs of the oil company are in rubles, which had just gone down by 75%. So revenues stay the same, costs go down by 75%. What does that do to profits? Pushes them up, huge. And so I'm looking at t

his, and I'm saying in theory, just sitting tight and holding, the increase in profits should bring about a very nice recovery. So I was sitting there thinking, OK, we're just going to sort of see how much of a recovery we can get from that. And maybe afterwards, we can trade our way out of this situation and be smart again and get up to par. What I didn't anticipate was that there was a second new factor to prevent me from making the money back, which was the oligarchs, the oligarchs of Russia.

At the time, there was 22 oligarchs, major oligarchs, who owned 40% of the GDP of Russia. And they owned a majority share of most of the companies I was a minority shareholder in. And the oligarchs up until 1998, they had been getting visits from fancy guys at Morgan Stanley and Goldman Sachs who said to them, we can get you access to some free money on Wall Street. Oligarchs said, oh, great, we love money. And then the guys with their Hermes ties said, but there's one condition, which is you c

an't scandalize investors with any nonsense. And the oligarchs were thinking, him, that's a tough one. They kind of want to scandalize people and steal some stuff. But you know, let's be long-term greedy. Let's get the free money from Wall Street first, and then we can scandalize everybody afterwards. And so up until 1998, they had kind of behaved themselves-- you know, there were a few minor scandals but not too many major scandals. But after 1998 and the crash and the default and the devaluati

on, the capital markets completely closed in Russia. And as a result, it didn't matter whether you were a well-behaved oligarch or a badly behaved oligarch. There was no incentive to behave any more. Right. And so the oligarchs were saying, OK, there's no incentive-- the free money is gone. The guys from Morgan Stanley and Goldman Sachs were no longer answering their calls. Who? Put the phone down. And at the same time, there's no disincentive in Russia to misbehave. There's no laws and punishme

nts. And so if you're a amoral or immoral oligarch, and you're trying to maximize money, profits, for yourself, and there's no longer an incentive-- no disincentive-- then the logical thing for a dishonest oligarch to do is just to steal everything in sight. And so the oligarchs embarked on an orgy of stealing, which has been unprecedented in the history of business. They were doing asset stripping and transfer pricing and embezzlement and dilutions. And they were doing it to a huge-- to fine ar

t. Well, and in broad daylight. I mean, this stuff wasn't difficult to spot. I mean, it's not like the world didn't see this happening. But there was no consequence, so they could do it. And so there I was, sitting there with the last $0.10 on the dollar. And they were going to try to steal the last $0.10 on the dollar. And so I had to either accept that I was going to be completely wiped out-- and I was so motivated to try to win back my client's money that I was just not going to let them do t

his to me. And so that was the point at which I changed from just being a regular investor financial analyst to being a anti-corruption fighter or a shareholder activist. But that's-- did you understand the magnitude of that decision as you were making it? I had a huge problem, which was I'd lost people 90% of their money. And I was so mortified about that, that I was really very ready to do what it took to get them their money back. And so I wasn't really thinking about it broadly. The same way

as I wasn't looking at myself, you know, I didn't take a step back. I just was in the day-to-day of the whole thing. And I saw these scandals going on, in front of my face. And I said to myself, I just can't let this happen. And so we started fighting with Russian oligarchs and amazingly surviving. Nobody tried to kill me. And the more I did it and the more nobody tried to kill me, the more emboldened I got to carry on doing it. So I became by far the biggest activist in Russia. And for some pe

riod of time, that was an extremely successful business model. As I hear these words coming out of my mouth, it's potentially the most bizarre question I've ever asked in one of these interviews. But why do you think nobody did try to kill you? Because it seems, looking back, like a strange thing to not happen, which is weird. Well, so Russia is a country of conspiracy theories. Nothing in Russia happens as it seems. Everybody in Russia knows that. Most people visiting Russia know that. And so h

ere are the Russians, what do they see? The Russians saw a guy from Chicago going after the biggest and meanest oligarchs in the country. And at the same time-- and I should point out, by the way, that my campaigns against the oligarchs had one great ally for some period of time, and that was Vladimir Putin. Right. So when I started this whole thing, Vladimir Putin had just come to power. And he was fighting with the same guys I was fighting with. They were stealing money from me, and they were

stealing power from him. He basically was president in title but not in power. Because the oligarchs controlled people in the ministry, they had their members of the parliament, and they could basically determine the affairs of the state. And Putin didn't want that to happen. And so Putin was looking for any angle he could get to get a leg up on the oligarchs. And so one of the many angles that he saw was this weird guy, Bill Browder from Chicago. And so as I was attacking them and exposing thei

r stuff, Putin was regularly stepping in, either directly or through his government, on our side. So coming back to why I wasn't killed. So everybody has a conspiracy theory, and they're looking at it. And here's this guy from Chicago, and every time he exposes some kind of scandal, Putin steps in. And they're saying to themselves, there's no way that this guy from Chicago would have the guts to go and do this. There's just no way. It just makes no sense. So there must be something behind it. An

d then they're saying, well, it's pretty obvious. You know, this must be some kind of Putin project, a clever Putin project, to get this weird foreigner to be doing this heavy lifting for him. And so nobody wanted to go against Putin. And so they were all assuming that this was like a Putin project. And so for a number of years, I was protected by this false impression that I was somehow just like a proxy for the president. And I would never correct that misimpression, because it kept me safe. B

ut-- Of course. But did you realize this at the time, that that's what it was? Yeah. Yeah? Yeah. And I didn't dissuade people from whispering that rumor. Right, but it's such a, as you say, a place where rumor and gossip and everything spreads. You still know that you're one word in the wrong ear from someone saying, oh, no, no. Putin's got nothing to do with this guy. And then it's kind of it's open season. Well, eventually that happened, not because of somebody whispering in someone's ear. It

ended up happening because after doing this for a while, my alliance-- and I should point out, I had never spoken to Vladimir Putin, never met the guy, had anything to do with him. This is just purely, you know, sort of coincidence, an alignment of coincidental interests. But in late 2003, he finally won his war with the oligarchs. He arrested Mikhail Khodorkovsky, who was the owner of Yukos. He arrested him on his jet in Siberia, brought him back to Moscow, stuck him in a prison cell. And then

in 2004, in the summer of 2004, put him on trial. In Russia, when you go on trial, there's no presumption of innocence. There's a 99.7% conviction rate. And so they put you in a cage, because they're assuming that you're going to ultimately be convicted. So they put Khodorkovsky into this cage. And they allowed the television cameras to film the richest man in Russia sitting in a cage. And imagine that you're the 17th richest man in Russia. You're on your yacht in the south of France, parked off

the Hotel du Cap at Antibes. And you probably just finished up with your mistress in the bedroom, and you've gone out to the living room and you click on CNN. And there before your eyes is a guy far smarter, far better, far richer, far more powerful than you, sitting in a cage. And you know, at that moment in time, the only the only thought going through this person's mind is I don't want to sit in that cage. And so they all went back to Putin and said, Vladimir Vladimirovich, what do we have t

o do to make sure we don't sit in that cage? And Putin said 50%. This is not 50% for the Russian government or 50% for the presidential administration of Russia. This is 50% for Vladimir Putin. He became the richest man in the world in 2004, because he had a piece of everyone's action. And at this point, my interests were no longer aligned. And no one had to whisper anything in his ear. He saw for himself. And I carried on with my attacks on all big companies. And I was now attacking his persona

l economic interests, no longer the enemies he was trying to weaken. And so that led very quickly to-- I was flying back to Russia on November 13, 2005. I landed in Moscow Sheremetyevo 2 Airport. I went to the VIP lounge, where I'd been 250 times before. But this time when I came into the lounge, I sat there, and then four uniformed guards came in, grabbed me, frogmarched me down to the basement of the airport, locked me up in their detention center, kept me there for 15 hours, and then deported

me back to London and subsequently declared me a threat to national security. There were no letters from lawyers, there was nothing. It was just you're in, you're out, and that's it. Yep. So how do you deal with that from-- because you've still got your investments there, you've still got everything on the ground. I should have said, at this point I had $4 and 1/2 billion under management in Russia. I had gone from $100 million up 45 times to $4 and 1/2 billion. I was the largest foreign invest

or in the country. I had a team of people. I looked at the situation, and I said to myself there's three things they could have done to me. They could have killed me, they could have imprisoned me, but instead they kicked me out. That's a pretty big gift. Yeah. But I said to myself, these guys-- when the Russians turn on you, they don't tend to do so mildly. They tend to do so with extreme prejudice. And I knew that this was not the end of my troubles, this was just the beginning. And where did

I have exposure? I had people on the ground that could be arrested. And I had assets in the country, which could be expropriated. And so on an emergency basis, I evacuated my team. And then we quickly and quietly sold every last security we had in Russia, and we got all the money out. Got the people out, got the money out. I'm going to come back to this in a minute. But I want to get back, because I know people are going to be sitting there. As we've walked through the personal timeline, the bus

iness timeline, we went from a billion dollars to $100 million. And then during the personal story, we're back to $4 and 1/2 billion again. So let's just go back to the financial side and talk about how you turned that $100 million back into $4 and 1/2 billion again. Well, we were trying to stop the stealing. And the most famous case of stealing was Gazprom. Gazprom in 1999 was treating at a 99.7% discount per barrel of hydrocarbon reserves to Exxon or BP. Why was it trading so cheaply? Because

everybody thought every last cubic meter of gas had been stolen out of the company. So in the case of Gazprom, we didn't really know what had been stolen. And again, it was one of these things, do you listen to rumors or do you do your analysis. And so we said, we should do analysis and do a stealing analysis. Right. So how do you do a stealing analysis of a Russian company? You can't go to the management of Gazprom and say, excuse me, sir, can you tell me how much are you stealing. Because that

's not going to help. And you can't go to the sell side analysts and say, could you tell me how much is being stolen from Gazprom. Because those guys are so busy trying to get up the backside of Gazprom management, to get some business. So I did what I did when I first got to Russia, which is I made a list of the 40 people who knew about the stealing. And I went to them. And I asked them to have breakfast, lunch, dinner, tea, coffee, dessert and tell me about the stealing. And the first meeting,

I was amazed that the guy just started talking and talking. And it turned out that we had discovered a huge cultural anomaly in Russia, which is that during the Soviet times, the richest person in Russia was maybe six times richer than the poorest person. Maybe they had a slightly bigger apartment, dacha, car and a driver. By 1999, the richest person in Russia was 250,000 times richer than the poorest person in Russia. And this had happened over a 10-year period. And so as a result, everybody i

n the whole country-- other than the people who had stolen all the money-- were furious. And so every person we sat down with-- and we weren't sitting down with the oligarchs, we were sitting down with competitors and customers and suppliers and ex-employees et cetera. Every person we sat down with had something to say. And they were furious, and they were spilling their guts to us. And the first meeting, I was writing down the notes. And the guy could have kept on talking all afternoon. I had t

o stop him, because I had to get back to the office. And the next meeting was the same, and the same after that. And so we accumulated this whole big collection of stories, anecdotes. But as I said before, we don't really rely on hearsay, we have to somehow prove it. And so what do we do with all this stuff? It seemed so outrageous, all the stories. But we couldn't go and announce some story I've heard over lunch. I'm sure some of it was true, some of it was exaggeration, et cetera. And so we we

re kind of stuck, until one day we had this unbelievable, lucky break. My head of research, a Russian PhD named Vadim, was in his car. And he was driving to the office, and he was stuck in a traffic jam at Pushkin Square, which is a place where traffic just snarls up. And he was sitting in his car. And these street urchins have this sort of outdoor market, selling to stranded motorists in the car in the traffic jam. And so kids are coming around, selling stuff-- underwear and newspapers and porn

ographic DVDs and all this kind of stuff. And some kid comes and knocks on his window. He rolls it down, and he says, what do you have. And he says, I've got databases. And he said, what do you mean you've got databases? He has this down parka. He opens it up, and there is translucent folders of all these disks. And he said, what's that one, right there? He points to one of the disks. And he said, this is the Moscow Registration Chamber database, which is the database of beneficial ownership of

all Moscow reserved companies and something we've been looking for, because that would have helped us. Yes. And he said, how much? $5. And so-- Please tell me he haggled. He didn't. He bought it for about $5. Anyway, so he comes to the office, and he's laughing. He's holding up the database. Some kid claims he just sold me the Moscow Registration Chamber database for $5. And this was back before the days of computer viruses. And so we just put it into the computer to see what it was. And sure en

ough, it was all bells and whistles, Moscow Registration Chamber database. And we were just amazed, because that was something that we could use to determine if any of these stories were true or false. But the best part about it was on the front of the disk, there was a phone number to call to get other databases. And indeed, Vadim was ripped off, because the other databases cost $1. You know, there's a 500% markup out in the traffic jam. But through all those databases, we were able to then cro

ss-reference it against the information we had been given in the-- The other conversations. The other conversations. And we were able to-- we came up with the most unbelievable economic discovery that I've ever seen in my life, which was that between 1996 and 1999, nine members of Gazprom's management had stolen oil and gas reserves equal to the size of Kuwait out of the company. That's extraordinary. And as we know, there was a war fought over oil and gas reserves the size of Kuwait. And so tha

t was the first most compelling statistic I've ever seen in my life. The second most compelling statistic was that oil and gas reserves the size of Kuwait only represented 9.65% of Gazprom's total reserves. So in other words, more than 90% is still there. So here we were in the situation where the market has discounted Gazprom by 99.7%, assuming everything had been stolen. And we've just discovered that the market is completely and absolutely wrong, that more than 90% is still there. And we coul

d prove it with evidence. And so in a situation like that, what do you do? We had some Gazprom in our portfolio before this whole exercise. And we then made Gazprom our single largest investment. And then after that, I took the information that we had. And I broke it into seven chapters, and I gave the first chapter to the New York Times. I gave the next chapter to the Wall Street Journal, the next chapter to the Financial Times, et cetera. And they loved me, because we had saved them six months

of research on a spectacular story. And they all wrote big stories. So those stories were then followed-- the Russian press then picked up on the story and wrote stories on the back of their stories. Then the Parliament began debates about whether it was a good thing or a bad thing for the assets to have been stripped out of Gazprom by the management. And then more stories. And then the management went out and hired PricewaterhouseCoopers to do a report to say it was a good thing to steal these

assets, more stories. In the end, there were more than 500 stories written about this whole thing. And then amazingly and unexpectedly, at the annual general meeting in 2001 of Gazprom, Vladimir Putin stepped in-- and the government owned the majority. And he stepped in, and using his government's majority position, he fired the CEO who had been doing the stealing and replaced him with a new CEO, a friend of his, whose job it was not to steal "assets." That was the-- Right. They could steal oth

er stuff, just not assets. And when he made that announcement, the share price jumped 138%. And then it subsequently doubled again. And it doubled again after that, doubled again after that, and doubled again after that and then again and again and again. In the end, between 1999 and 2005, the share price of Gazprom went up 100 times. And this was my single largest investment. But still, that must have been such a weird feeling, riding something like that, knowing what it was built around. And e

ven though that's helping you get that money back and more, that your customers lost, the conflict between what's happening and why it's happening must have been-- Well, no, I actually felt really good. There was no conflict at all. In fact, so there was two things going on. One is we were making money. And the second thing is we were getting the bad guys, making Russia a better place. And there is nothing more gratifying. In fact, we would probably all have done it for free, because it was just

so great to get the bad guys. It was just-- there was no-- when we hit them hard and we got them, it was just great. But you get those bad guys. There's still an awful lot of bad guys out there. Well in fact, we said, well there's another opportunity to get more bad guys. So let's go after the bad guys at the National Savings Bank and the bad guys at the electricity company, at the oil pipeline company. We were emboldened and excited and happy to just go after all the bad guys. Right, but in th

e moment when you're excited because you've had that big victory, it must seem like a great idea to go and do this. With the benefit of hindsight now, was that a smart thing to do, do you think? Or was that a dangerous thing to do? We'll take right or wrong out of the question, because that's an easy one to answer. Well, you know, it's kind of an impossible thing for me not to do, based on my own sort of personal characteristics. I just couldn't sit back and just watch all this stuff happening.

I'm not a person who can do that. And so I really didn't have any-- you know, once I entered into this path of being in Russia and dealing with the circumstances as they play themselves out. I mean the only real question is-- we haven't gotten to the real tragedy of the story-- but the only real question is should I have gone to Russia in the first place. And I'll answer that at the end of the story. But once you're involved in this kind of stuff, I wasn't going to sit back and just allow this s

ort of pernicious stealing to be happening in the companies that I was investing in. OK, so we're jumping around. Now we need to get back to the story. So you evacuated your team, you sold your assets. I sold my assets, I gave everyone their money. And my clients had made huge amounts of money. Even the ones who lost money made money, everyone made money. It was just a big success. And when you make people money, they tend to like you. And so I said listen I can't do Russia anymore. But I'm goin

g to try to do this stuff in other parts of the world. And so I set up a global investment fund to do other countries and start investing and sort of put Russia into the rear-view mirror. I kept my office in Moscow, a little office and one secretary, in case one day the whole thing blew over. But I was focused on my new business. People had invested good money in it. And it was all getting started out well. And then 18 months after I was expelled, on June 4th, 2007, I got a call from my secretar

y in Moscow. And she said there's 25 police officers here, raiding the office. And I said, my god, what am I going to do. So I called my lawyer in Moscow, American guy, James and Firestone. And I say, Jamie, my office is being raided right now. What should I do? And he said, my office is being raided right now as well, they're looking for your stuff. And another 25 officers there. And they were looking specifically for the stamps and seals and certificates for our investment companies, through w

hich we had invested our money in Russia. And we kept all that stuff at a law firm. And the companies were empty at this point, we had taken all the money out. They didn't know that. So they take all these stamps, seals, and certificates away. And the next thing we know, we no longer own our empty investment holding companies. Using the documents seized by the police, they had been fraudulently re-registered out of our name, into the name of a man who had been convicted of murder and let out of

jail early by the police. What was that guy’s connection-- he's obviously a connected man somewhere-- or was he just a front? Well, he was part of the criminal group. Sure. Which had consisted of police officers. So I had no economic stake in the matter anymore, because our money was all out. But if the police were opening criminal cases, searching our offices, et cetera, I didn't want to be stopped at some airport some day on a Russian arrest warrant. And so I went out and hired the smartest la

wyer I knew in Russia, which was a guy named Sergei Magnitsky. He was 35 at the time. And he's one of these people that could do 10 things in the time it took others to do one, just a really smart guy. And I hired Sergei to say, let's figure out what's going on here and stop it. Because this was 18 months-- just out of the blue, 18 months after anything had kind of really wound down. Yeah. So Sergei goes out, and he investigates. And he spends a long time investigating, and he effectively comes

up with two conclusions. The first was that the attempt was-- or the objective of this raid was to steal all of our assets. But they couldn't, because our assets were gone. There was a second objective which he discovered, which he described as the most cynical thing he's ever seen in his professional life-- and he was in Russia, so he had seen a lot of cynical things. And the second objective was the following. When we were liquidating our portfolio a year and a half earlier, we declared a huge

profit for that year. It was a billion dollar profit. And we paid $230 million in Russian capital gains tax to the Russian government. What Sergei had discovered was that using the documents seized by the police-- this group of criminals and police officers and other officials from the government-- stole our companies and then went to the tax authorities and applied for a $230 million tax refund. They applied for it on the 23rd of December, 2007, two days before Christmas. And it was approved a

nd paid out the next day. It was the largest tax refund in the history of Russia. And this was shocking to me, it was shocking to Sergei. And it just-- and, you know, we could understand that Putin might have allowed people to steal our stuff, because that's perfectly acceptable. But to steal their own government's tax money seemed like he wouldn't have allowed that. He's a nationalist, right? That's what everyone thinks. And so we figured if we just complained about it to the right people, far

and wide, then this rogue operation would get shut down, and the good guys would get the bad guys. And so we filed criminal complaints with every different law enforcement agency in Russia. We went to the newspapers and radio stations, et cetera. And then Sergei gave sworn testimony to the Russian State Investigative Committee, which is their equivalent of the FBI. And we waited for the good guys to get the bad guys. Turned out that in Putin's Russia, there's no good guys, just bad guys. And ins

tead of going after the people who stole the money, about a month after he testified, some of the same officers Sergei testified against came to his home on the 24th of November, 2008, arrested him, put him in pretrial detention, where he was then tortured to get him to withdraw his testimony. And they put him in cells with 14 inmates in eight beds and left lights on 24 hours a day, to impose sleep deprivation. They put him in cells with no heat and no window panes, 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. And the purpose of all this was to get him to withdraw his testimony against the police officers and to get him to sign a false confession, to say that he stole the $230 million, and he did so on my instruction. And nobody really knows how they would behave in this type of duress. But what Sergei-- and I thi

nk if you'd asked Sergei in advance what he would have done, he wouldn't have known. If you asked me what I would do now, I don't know. But when Sergei was faced with the idea of perjuring himself and bearing false witness, for him the moral pain of doing that was greater than the physical pain they were putting him under. Extraordinary. And he just refused to do that. And they had never seen this before. The Russian-- everybody buckles. Everybody buckles in these Russian torture situations. And

he didn't. And they just kept on increasing and increasing and increasing the pressure and the pain and the suffering, hoping that he would. And eventually got to the point where his health broke down. He ended up losing 20 kilos. He got terrible, terrible, pains in his stomach. He was diagnosed as having pancreatitis and gallstones, needing an operation. He had an operation scheduled for the 1st of August, 2009. And then about a week before his operation was due, they came to him again, again

asked him to sign a false confession. Again he refused. And they abruptly moved him from- - the prison had a medical facility to a maximum security prison called Butyrka, which is considered to be one of the worst in Russia. And at Butyrka, his health completely broke down. There was no medical facilities there. He went into constant, agonizing, untreated pain in his stomach. He and his lawyers desperately wrote requests to every different branch of the criminal justice system for medical attent

ion. They wrote 20 different letters. All 20 of their letters were either ignored or in some cases denied in writing. And his body could no longer take it. And on the night of November 16th, 2009, he went into critical condition. On that night, he ended up-- the Butyrka authorities didn't want to have responsibility for him anymore, so they put him in an ambulance, sent him to a prison with a medical facility across town. When he got there, instead of putting him in the emergency room they, put

him in an isolation cell. They chained him to a bed. And then eight riot guards with rubber batons beat him, until he died, an hour and 18 minutes later. He was 37 years old. He left a wife and two children. I mean does this kind of stuff-- people are going to be watching this, just assuming it's out of a novel. This is this is the kind of stuff that people dream up. They don't think it really happens in real life. For you, for someone who's been trying to do the right thing all the way through

the story, and here's a guy that you've asked to come and help you do this, who's ended up dying for all this. How are you dealing with this at the time? Because it must have been extraordinarily painful for you. Yeah, the worst thing that could ever happen. I got the call on the 17th of November, the morning after he died, at 7:30 in the morning in London. And it was like a knife going right into my heart. I mean this was a man who was tortured in slow motion, tortured to death for being my law

yer. Yeah. He was killed because of me. And for me, when I finally got over the hysterical reaction to the whole thing and I could calm down enough to look at the whole thing, it was just so obvious to me that I had no other life choice but to for him, for his memory, for his family, and for myself to go after the people who killed him. And make sure that he didn't-- that they face justice, and that this was not going to be allowed to happen, that these people wouldn't be allowed to get away wit

h it. And so for the last seven years, I've effectively put aside my investment business. I no longer manage anyone's money. And I'm a full time activist, where I'm going after the people who killed him. And a lot of people ask me, how do you know all this stuff? How do you know what they did to him in prison? And this is where the story gets very unusual, in that Sergei, in his own-- he probably had a premonition that this was coming, and so he wrote everything down. He wrote everything down in

the form of 450 criminal complaints against the authorities for his mistreatment during his 358 days in detention. So he wrote down all these complaints, documenting who did what to him, where, how, when, and why. And because- - and once a month, he would hand a stack of these complaints to his lawyer. His lawyer would then file them. They would be ignored and denied. But we've got copies of them. And as a result, we have the most granular, well-documented human rights abuse story that's come o

ut of Russia in the last 35 years. And we expected, based on the details and documentation and evidence, that no matter how corrupt the Putin regime was-- this had now turned into an international scandal-- that they would have to at least throw some mid-level guys under the bus. That's what we expected. But they did nothing of the sort. Putin circled the wagons. He exonerated-- personally exonerated-- everybody involved. They gave promotions and state honors to some of the people who were most

complicit. And it became obvious to us that there was no possibility of getting justice inside of Russia. And so we said if we can't get justice inside of Russia, then let's try to get justice outside of Russia. I started to look around and say, how do you get justice outside of Russia for a murder that took place in Russia? And there are no rules that exist to do that. International criminal court exists for genocide. If they kill 100,000 people, then you might be able to get justice, but not f

or one person. And there used to be laws-- or there still exist laws, called universal jurisdiction. But those laws are unenforceable effectively in the west. And so the best you can do is you can go to the State Department or the Foreign Office in Britain and get them to issue a statement saying we're deeply disappointed that the perpetrators haven't been brought to death. And they put in some report, and that's your justice. And I was totally unwilling to accept that as my justice. And so I sa

id to myself, if the rules don't exist, then let's make some new rules. And I looked at this whole thing. And I said this crime was committed, Sergei Magnitsky was murdered, because he had exposed the theft of $230 million by a bunch of corrupt Russian officials. We all know, we all see it everywhere in the world, that those Russians-- we see these mysterious Russians spending money like it's going out of style in the south of France, in London, in New York and Miami. We see them traveling with

their families and their girlfriends and so on, sending their kids to boarding school, buying houses. That's where they're exposed. So I went to Washington, and I told the same story that I've just shared with you, with Democratic senator from Maryland named Benjamin Cardin and a Republican senator from Arizona that everyone knows, John McCain. And I said, why don't we make a law to freeze assets and ban visas in America for the people who killed Sergei Magnitsky? And they both said yes, let's d

o that. And so they proposed in October of 2010 the Sergei Magnitsky Act. And the moment that they put it onto the books, people started coming out of the woodwork from Russia, saying you found the Achilles heel of the Putin regime. This is what they care about. They commit their crimes in Russia, and they keep their money in the west. Can you add the people who killed my father to your law? Can you add the people who killed my brother, my mother, my aunt. And after about a dozen of these calls,

these guys realize they're onto something much bigger than just Sergei Magnitsky. They're onto a new technology for dealing with this. So they added 65 words to the law, which allows the US government to sanction all Russian human rights violators. They put it back onto the books. And then all of a sudden, the thing went viral. And we ended up with 39 senate cosponsors, before it went for a vote. It went for a vote in November of 2012, and it passed the Senate 92 to 4. Went for a vote in the Ho

use of Representatives, passed 89%. And on the 14th of December of 2012, President Obama signed it into law. There are now 45 people on the Magnitsky list. And their names are next to al-Qaeda terrorists and Colombian drug cartel bosses. And in addition to having their assets frozen in America, when you're on the US Treasury sanctions list, you can't open a bank account anywhere in the world. And so they're effectively financial pariahs because of their involvement in this thing. And so I'm now

working on a similar law in Canada, similar laws in the UK. There's now a global Magnitsky Act in America, which takes the whole concept and applies it towards bad guys everywhere in the world. And we'll never be able to bring Sergei Magnitsky back. But at least his name is on a law, which will punish bad guys everywhere, perhaps disincentivize bad guys to do bad things and save a few lives in the process. That's an incredibly bittersweet victory of sorts for you to achieve that. I mean, my head

is now thinking who the four that didn't vote for that? I struggle to understand that, but we'll put that aside. When you when you go through something like that, and then you see what we've seen in the last 8 to 12 months, in terms of the US's relationship with Russia and the strains on that, the outcry in the media, everything being blamed on Russian hacking. You've seen Trump's rapprochement towards Putin. What do you make of these cross-currents, in the light of what you've done? Because th

e real power behind the throne is money in Russia. I think we all understand that. Well, if Trump decides to capitulate and give away-- give Russia what they want in this world, it's a very, very bad thing for everybody. What do you think that-- what do they want? Because there's a lot of confusion around that. What does Russia want? It's very simple. Russia wants to destroy NATO, destroy the EU, and not have America chide them for their illegal activities, in their part of the world. Putin is a

kleptocrat. As I mentioned, he's probably worth at this point $200 billion. He's got a financial interest in everything going on in Russia. He'd like to expand his kleptocracy to neighboring countries, and he doesn't want anyone standing in his way. He wants to be able to murder as many Sergei Magnitskys as there are standing in his way. And he wants to basically be king of the former Soviet area. And he can't do that if the EU exists, because the EU has power. He doesn't like big organizations

or big groupings of people. He likes to be able to pick people off one by one. And he wants sanctions to be lifted. And he wants to be able to go and do what he wants to do. And there are indications that Trump will give him that. Do you think that's likely? Because it seems to me that's-- he's got to struggle to get that. The anti-Russian sentiment in the US is extraordinarily high. Well, it's true. And we'll see. I know a lot of-- you know, as I said, 92 senators voted to sanction Russia for

human rights violations, at a time when Obama wanted to make nice with Russia. And so I think that the Senate will be pretty firmly on side to box Trump in. But it's, you know, the president has very, very free rein to do what he wants in foreign policy, so we'll see. Now there's one reaction to this whole thing, which is a positive reaction. I have been trying to internationalize the Magnitsky sanctions campaign. And I've run into this weird problem, where historically everyone has sort of said

, well, America is doing it, not really our business, et cetera, et cetera. But now the rest of the world understands that they have to sort of stand up to Putin themselves, because they can't just sort of stand behind America. And so we have legislation, which is I believe accelerating because of the Trump phenomenon, not the other way around. So how's your life changed through all this? Because you've been in the middle of what at the time when you started, it seemed to you like some crazy gam

e. But you didn't really sense any personal danger, necessarily, because you understood the motivations of the people around you. But now, clearly you are in direct opposition to those motivations. I mean that has to change your life significantly. Or do you hope to reach or have reached a level where you're kind of so high profile now that you're kind of almost above that? And it's people an and around that that are the weak points and not you anymore. There's no such thing as being so high pro

file you're above it. Boris Nemtsov, who was the leader of the Russian opposition, was murdered right in front of the Kremlin. So, I am in the cross-hairs of Vladimir Putin. I've been threatened with death, with illegal rendition, with extradition, Interpol red notices, with libel suits, with other law suits. They've come after me with everything they possibly can and continue to. My life is a life where I'm campaigning for justice for Sergei. But I'm also, you know, very much trying to trying t

o find ways of staying alive. Sure. But how do you deal with that? Because you went from being a 31-year-old financier, who's started a hedge fund and having great success and being invited to yachts and planes and parties, to then find yourself in a position where on a daily basis, you have to consider threats to your life. How do you do it? It takes an extraordinary strength of purpose and will to be able to make that adjustment and not just say I need to just go somewhere and hide. If you can

hide. Well, I'm not the guy who goes places and hides. I mean, I've been dealing with this for eight years. You kind of get used to it after a while. That's perhaps the most remarkable thing you've said so far. You know, everything-- you know, you can get used to anything in life. I've gotten used to this. I mean, I live a different life than everybody else I know. Do I spent a lot of time-- first of all, I'm not going to be intimidated not to do what I'm doing. I'm going to carry on doing what

I'm doing. I take precautions where I can. I try to protect myself and everybody around me, as best as I can. And I believe that a life-- you know, I'd rather die standing up than live a life on my knees. I mean, it's-- you know, I hope that I can live a long life. But I'm not going to be intimidated by this. So what's next? Where do you go from here? I mean, obviously there's the Magnitsky Act and trying to globalize that. But is there a point in this where you feel, OK, that's my end. If I ca

n get to this point, I'll have done what I set out to do. So I used to spend my life fighting about money. Now I'm spending my life fighting about justice. And I'm glad I spent my life fighting about money, because I have money to finance my fight for justice. But it's infinitely more meaningful fighting for right and wrong than doing what I was doing before, to me. And so I don't believe that I could ever go back to what I did before. Because I've now-- the terrible things that I've seen in the

world, not just with my own story but people come to me with all sorts of stories. I have a duty and responsibility to help other people. And I feel like I have the ability to help people that I should use for that purpose. Bill, this has been an extraordinary, inspirational hour for me, so I thank you, personally. And I'm sure the viewers are going to feel the same way. Thank you so much for sharing this with us. It's been a joy to listen to. And it has moved me in ways I can't even describe,

so thank you. Thank you.