Spring/Summer 2015
Number 28

Book Review - The High Cost of Doing Business in Russia

Samuel Bendett

William Browder, Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice (Simon & Schuster, 2015), 416pp. $28.00.

An ambitious young American businessman seeks to make his fortune on the newly open financial markets of the Russian Federation following the Soviet collapse. He doesn’t know much about the country he wants to invest in, but—guided by his tenacious personality and top-notch experience in some of the best financial institutions around the world—he decides to go all in. Along the way, he acquires a talented and dedicated staff of Russian nationals who help guide him through the bureaucratic uncertainties and byzantine rules and processes that helped privatize the majority of Russian economy in the early 1990s.

Bill Browder, who grew up in a family of devout American communists, prides himself of choosing a capitalist path in a country that just shed its communist past. So starts Red Notice, which reads as part biography, part political thriller, and part case study of what happens when American optimism and respect for the rule of law meets the Russian version of the “free market.”

Mr. Browder’s insistence that the country he knows very little about start acting according to the principles that he best understands, rather than the shady, rough and tumble ways of Russia’s new capitalism, predictably ends in a tragedy. First, he finds himself barred from entering Russia after carrying out successful campaigns publicizing corrupt Russian oligarchs and the crooked way in which they did business. Then, one of his lawyers, a gentle man by the name of Sergei Magnitsky, uncovers massive tax fraud to the tune of $230 million, for which Browder’s company is ultimately blamed. As he decides to take this case public in the Russian and then international press, Russian authorities make Magnitsky the scapegoat, arresting and torturing him before finally becoming complicit in his murder in November 2009.

Red Notice is broadly divided into two parts. The first reads like a step-by-step instruction manual of how an American businessman with no experience in post-Communist Russia can make a fortune, provided he happens to be in the right place at the right time. Browder’s tenacity, commitment and work ethic helped him to surmount numerous obstacles (including lack of information, the lack of a Western-style financial system, the lack of financial experts, and so on). His gamble paid off. He bet big, and won—becoming one of the very first major foreign investors in the new Russia.

But, over time, Browder became a crusader. He saw firsthand how Russia’s massive, uncontrolled privatization resulted in the enrichment of a small cadre of Russian officials, who became what is commonly known today as oligarchs. He decided to fight back against the crooked business that typified the age, and—using the tool of media exposure unfamiliar to most Russians at that time—took these companies to task, making his investors rich in the process. He proceeded despite growing warnings that his meddling could have consequences, not quite believing that he would suffer the consequences. In the end, it was Sergei Magnitsky—and not Bill Browder—that ended up paying the ultimate price.

Of course, Browder cannot be blamed for Magnitsky’s death. It was the crooked Russian state that proverbially ate one of its best children. But Browder feels personally responsible for Sergei’s ordeal, and the second half of Red Notice is devoted to chronicling the campaign to first free Magnitsky and then, following his death, to punish the Russian government. One cannot help but be impressed with Browder’s dedication to ensure that Magnitsky doesn’t become yet another unfortunate Russian statistic. He utilizes his vast network of American and European investors, influencers, well-wishers and politicians to push through a piece of legislation in the U.S. Congress that comes to be known as the “Magnitsky Act”: a measure imposing sanctions on a select number of Russian officials connected to Sergei’s death.

That the act was passed is in and of itself a major accomplishment, as Browder acknowledges. What remains to be seen is whether or not it had its desired effect on the crooked Russian politicians that it sought to punish. Red Notice is silent on that score, and—while the Magnitsky Act is indeed a significant achievement—the reader is left wondering if this story has truly drawn to a close. Indeed, today, in light of Russia’s policy toward Ukraine, the question of whether such measures can truly impact the Russian state’s ability to impose its will on those who dare challenge it is as relevant as ever.

Ultimately, Red Notice is nothing if not a cautionary tale. Browder engaged in the very type of “cowboy capitalism” that many Russians grew to resent in the 1990s and downright despise today. It was therefore inevitable that his quest for wealth would ruffle some feathers among Russia’s powerful—and ruthless—leadership. It is thus required reading for anyone aspiring to become an investment capitalist in societies in transition, or those that operate at the intersection of business, nationalism and politics.

But his book is also much more. It is the story of a crusade against just one incident of egregious injustice, and an effort to bring to heel the larger, unaccountable authoritarian system that made it possible. That is a tale worth telling.

Samuel Bendett is an Assistant Research Fellow at the National Defense University, Department of Defense. The views expressed here are his own and do not reflect those of NDU or DoD.