IF YOU think you know what the 1 percent is like, then you haven’t met Bill Browder, the founder of Hermitage Capital Management, a multi-billion dollar investment firm. His personal worth is estimated to be around $100 million. His grandfather was the head of the American Communist party, and when Russian markets opened, Browder seemed to return the favor by exporting capitalism there. Hermitage became the largest investment fund in Russia.
But his career took an unexpected turn. He’s now on a different kind of mission - to pass legislation that would deprive human-rights violators of the things they love: legitimacy, travel, Western goods, and taking their kids to Disneyland. It’s a mission that should please the US government, too.
In 2009, a Russian lawyer for Hermitage, Sergei Magnitsky, died in a Russian prison. Magnitsky was only 37, married, with two children. Browder had asked him to lead an internal assessment of Hermitage’s business dealings after its offices were raided by officials of the notoriously corrupt Russian government in 2007. All seemed in order and Hermitage, which had paid $230 million in corporate taxes, concluded that it had followed the law.
However, Magnitsky’s attention to detail unearthed systemic government corruption involving kickbacks and bribery. The $230 million had been rebated back to Hermitage subsidiaries, which had been placed under new legal ownership without Hermitage’s knowledge. Essentially, the fraud included lawyers, police, and government finance planners hiding millions in companies that they secretly owned.
The scheme was egregious, cynical, bold, and astonishing in its magnitude. Diplomatic cables disclosed by WikiLeaks confirm that Russia is essentially a Mafia state.
Magnitsky did not accept Browder’s offer to leave Russia and start, with Browder’s financial support, a new life in London. Magnitsky, Browder told me, “had an aspirational sense that Russia could only get better.’’
The same people Magnitsky accused of rampant fraud arrested him in 2008 for, ironically, tax evasion. He died 11 months later awaiting trial. The cause of death was untreated complications related to pancreatitis, for which Magnitsky had requested medical treatment over 30 times. He was allegedly tortured and beaten before dying in his cell.
I met Browder, who was born in the United States but is now a British citizen, in Cambridge this week. He has been banned from Russia by the Russian government, and has spent the last two years publicizing the events around Magnitsky’s death.
Browder is leading a campaign that has made Russia, and sometimes the United States, nervous. He is pushing legislation that would invoke a travel ban against human-rights violators and freeze any US assets they may have. It would publish the names of those who so want Western legitimacy. It would name and shame.
The legislation, which is spearheaded by Senator Ben Cardin of Maryland and Representative James McGovern of Massachusetts, is before the Senate Foreign Relations Committee, chaired by Senator John Kerry.
To head off growing support for the bill, the State Department took the unprecedented step of invoking an old executive order and banning 60 Russian officials implicated in Magnitsky’s death from traveling or spending their money here. Britain did the same. It may not be enough, as the Magnitsky legislation has expanded to include other perpetrators of gross abuses in Russia.
Congressional condemnation of Russia comes at a difficult time for the Obama administration’s “reset’’ strategy aimed at building a productive relationship with Russia while acknowledging the erosion of human rights and democracy there. Russia is not happy with us, but we need it to be happy in important areas related to arms control and Iranian nuclear buildup.
The reset strategy, however, should be coupled with this different kind of containment strategy. The significance of the Magnitsky legislation is that it allows the United States to engage and condemn simultaneously. Too often, human-rights legislation requires a singular and primary focus on injustices, without taking into account competing interests.
Here is a law that actually merges human-rights values with street-fighter sensibilities. The US government could punish atrocities by individuals where it hurts them the most - in their wallets, via access to Western markets - and still break bread with the Kremlin. It focuses on individuals without actually needing the US government to say anything about that nation’s culpability.
The United States could still say all the right things about Russian relations, but with our fingers crossed behind our backs as we make clear our disdain for those who act with impunity. It’s a kind of disingenuousness, but the kind that Russia would understand.