Russia’s invasion of Ukraine, its impact on the global economy, and the horrifying images on the evening news of violence against ordinary citizens in Ukraine led to this month’s selection of “Red Notice: A True Story of High Finance, Murder and One Man’s Fight for Justice” for the Sales Tax Institute Book Club.
The bestselling 2015 book by financier and Hermitage Capital co-founder Bill Browder serves as something of a prequel to the current Crisis in Ukraine, providing an opportunity for a better understanding of the history behind the tools available to the United States and Western countries in sanctioning Russia, its leaders, and oligarchs.
Red Notice begins by telling the fascinating story of how Browder, the grandson of a former American Communist Party leader, chose to chase a capitalist dream beginning as a Stanford Business School graduate, continuing into his early business career in London and Poland, and eventually leading to his co-founding of a lucrative hedge fund investing in post-Soviet Russia.
This is where his memoir takes a harrowing turn.
Even as he experienced minor misfires early in his business career in Eastern Europe, Browder recognized the potential to make money following the fall of the Berlin Wall and became determined to make his dream of running an investment fund a reality by raising seed money and moving to Russia. It quickly became clear to Browder that oligarchs were siphoning business assets out of the country, and if his investment was to be successful, he would need to figure out exactly how money was disappearing and put a stop to it.
In the 1990s, as Hermitage Capital was growing into the most lucrative hedge fund in the world, Browder saw Russian President Vladimir Putin as an ally in his fight to expose and end the underlying corruption in the country’s experiment with capitalism.
“Putin was fighting with the same guys I was fighting with,” Browder recalled in a July 18, 2017 CBS News This Morning interview. “It turned out he wasn’t trying to end the oligarch era. He just wanted to become the biggest oligarch himself.”
The success of Hermitage Capital made it a target for plunder. In 2005, Browder was declared a threat to Russian national security and deported to the United Kingdom, where he had established dual citizenship. This cleared the way for Russia to raid the company’s offices and put a tax fraud in motion that would allow officials to steal $230 million in tax rebates for taxes already paid to the government by Hermitage Capital.
“A bunch of Russian officials seized my documents, then organized an identity theft of my companies, then organized for a $230 million tax refund, taxes we paid back to those stolen companies so they could enjoy the money,” Browder told CBS News This Morning.
The man Browder enlisted to unravel the truth behind the fraud was Sergei Magnitsky, a Ukranian-born tax advisor from Firestone Duncan. He was “the best tax lawyer I know,” Browder wrote, and he possessed an “encyclopedic knowledge of Russian tax laws.
The $230 million was the largest tax refund in Russian history, and the fraud was “so big and so brazen, that we were sure we had them,” Browder writes. “This had to be a rogue operation (within the Russian government), and we now had the evidence to expose it and bring these guys to justice. Which was exactly what we intended to do.”
What Browder and Magnitsky didn’t realize was that the highest-ranking officials in the Russian government were in on the crime, and Putin had been hiding in plain sight as the villain pulling the strings from behind the scenes.
Just as Browder had been naïve to Putin representing himself as reformer, Magnitsky had faith that its country’s new laws would provide him protection as he prepared to testify before the Russian State Investigative committee. That wasn’t the case. Magnitsky was so thorough in his testimony that he became a threat to Russian officials. Within five weeks of testifying, Magnitsky was thrown into a freezing prison where he was tortured and denied medical treatment, according to Browder. Even with his life in danger, Magnitsky refused to withdraw his testimony. Our Sales Tax Institute team was so struck by Magnitsky’s resolve to stick to his morals, tell the truth, and not give into corruption.
In 2009, Magnitsky, a 37-year-old father of two young sons, died after being beaten in an isolation cell in Moscow’s Matrosskaya Tishina Prison. It is the book’s tragic turning point. Thanks to Browder, it would also signal a change in the future of United States-Russia relations.
Browder dedicated the rest of his life to fighting back against the Russian Federation. The book follows his testimony before Congress and his lobbying of U.S politicians, including John McCain, who co-sponsored a bill that would become the Magnitsky Act of 2012. The Act, which was signed into law by Barack Obama, provided the United States with options to sanction 18 Russians identified as responsible for Magnitsky’s murder, blocking their access to U.S. banks and entrance to the United States.
To this day, Putin denies allegations that Magnitsky was beaten to death in an isolation cell, instead insisting he died of natural causes. Putin’s response to the passage of the Magnitsky Act has been to retaliate in a cruel way – banning U.S. adoptions of Russian children. This action is hurting innocent Russian children in need of loving homes.
It is impossible to avoid seeing how the misdeeds of Putin and Russian leaders, as told in Red Notice, are reflected in the events of today.
Putin continues to habitually deny alarming allegations even in the face of incontrovertible evidence. He claims to have played no role in murders and attempted poisonings of some of his biggest enemies, including opposition-party leader Alexei Navalny and former Russian spies Sergei Skripal and Alexander Litvinenko. He continues to maintain Russia’s innocence against accusations of meddling in the 2016 United States presidential election.
The suffering of private citizens like Magnitsky have been reproduced on a massive scale in the attacks on cities and villages in Ukraine since Russia’s invasion. With every strike on a school or a hospital, Putin and Russia deny the targeting of civilians as human rights organization raise accusations of apparent war crimes. Western media, meanwhile, reports on how Russia is promotes alternate reality about the war through its reporting to Russian citizens through state media.
The legacy of Magnitsky’s death is providing Ukraine’s Western allies with options to fight back. In 2016, one year after Red Notice was published, the U.S. Congress built upon the 2012 Magnitsky Act by passing the Global Magnitsky Human Rights Accountability Act, which allows the U.S. to impose sanctions “with respect to foreign persons responsible for gross violations of internationally recognized human rights, and for other purposes.”
Putin showed just how high Browder remains on his enemies list during a press conference following the infamous 2018 Russia-United States summit in 2018 when he offered to swap 12 indicted Russian military intelligence officers if Donald Trump would turn over Browder for trial. A “Red Notice” arrest warrant initiated by Russia through Interpol, which was later ruled to be invalid due to political motivation, nearly led to Browder’s kidnapping in Spain that same year.
Browder’s work and the adoption of Magnitsky-inspired acts in other nations, continue to expand options to sanction Russia as stories of war atrocities grow. The proposed strengthening of the Global Magnitsky Human Rights Accountability Act in Congress would allow the United States to move faster in its own response.
Browder’s story also continues with the follow-up to Red Notice, “Freezing Order: A True Story of Money Laundering, Murder, and Surviving Vladimir Putin,” published in April 2022.
If you’ve read Red Notice and have thoughts or insights, we’d love to hear! Email us here.
Next, the Sales Tax Institute will read The Violence Inside Us: A Brief History of an Ongoing American Tragedy by Chris Murphy to help us contextualize the recent string of horrific gun violence events in our country.
We’d love to have you join us in our next reading assignment. We encourage you to support your independent local bookstores. Our neighborhood bookstore is Sandmeyer’s Bookstore in historic Printer’s Row Chicago. Join us and support your own favorite local store!