Bill Browder - Red notice

What should an investor do in a situation like this? I’ll tell you what: you buy the shit out of that stock.

In a world where people fight tooth and nail to make 20 percent, we’d just found something that might generate 1,000 percent, or even 5,000 percent. It was so obvious, that the fund increased its investment in Gazprom right up to the 20 percent limit, the largest percentage for a single stock that the fund allowed.

For most investment professionals, this is where you would stop. You do your analysis, make your investment, and then wait for others to discover what you’ve learned. But I couldn’t do that. Our discoveries about Gazprom were too great. I had to share them with the world.

I then did something very unusual in my profession. I divided the Gazprom dossier into six sections and gave each one to a major Western news outlet. The reporters and editors at these outlets immediately saw the impact this story would have, and our research was so exhaustive that they couldn’t resist. We’d saved them months of investigative work, and it didn’t take long for them to turn our research into a slew of staggering articles.

The first appeared in the Wall Street Journal on October 24, 2000, entitled «Gas Guzzler?» It described how the stolen gas fields had enough natural gas «to keep all of Europe going for five years». The next day, the Financial Times came out with its story, «Gazprom Directors to Meet over Governance». This article detailed all of the «friends and family» transactions at Gazprom. On October 28, the New York Times published «Directors Act on Asset Sales at Gazprom» in its international-business section. Less than a month later, on November 20, BusinessWeek published «Gazprom on the Grill». And on December 24, the Washington Post published «Asset Transfers May Provide Challenge to Putin».

The public in Russia and abroad was shocked by the level of corruption at Gazprom. Over the next six months, there were more than 500 articles in Russian and 275 in English, all reporting what we had exposed at Gazprom.

This coverage had a noticeable effect in Russia. Russians accepted the concept of corruption and graft in the abstract, but when they were given concrete examples of who was getting money and how much they were getting, they were furious. So furious, the Russian Parliament called for debates in January 2001 about the situation at Gazprom. These led to a recommendation for the Audit Chamber, Russia’s equivalent to the US General Accounting Office, to conduct its own investigation of Gazprom.

Responding to the Audit Chamber’s investigation, Gazprom’s board of directors commissioned PricewaterhouseCoopers, the big American accounting firm, to conduct an independent review.

After several weeks, the Audit Chamber announced the results of its investigation. Perhaps not too surprisingly, it said that they hadn’t found anything wrong with the conduct of Gazprom’s management. It justified the asset transfers by saying, «Gazprom was capital constrained and needed the outside capital».

All that was left was the PwC report. This accounting firm was making millions of dollars off Gazprom as its auditor, so any indictment of Gazprom would have been an indictment of itself. Sure enough, it also exonerated Gazprom’s actions. It came up with obtuse and irrational arguments to explain why all the things that we’d exposed were reasonable and legal.

While these were not completely unexpected outcomes, I was so fed up with everything that I didn’t want to be anywhere near Moscow when Gazprom held its annual general meeting on June 30, 2001. I knew that in spite of all we’d exposed, the management would strut around like proud peacocks, telling the world how well managed the company was.

I wanted to avoid the whole spectacle, so I asked Elena if she wanted to get away from Moscow for a long weekend. She had just finished a big project at work and agreed, so I booked two tickets to Istanbul, one of the few desirable places we could go without Elena’s having to get a visa.

We flew on the day of Gazprom’s annual meeting, and after arriving at Atatürk Airport we took a taxi to the Ciragan Palace Hotel, a former sultan’s palace on the European side of the Bosporus. It was a beautiful summer day. We went to the veranda next to the pool and ate lunch under a huge white umbrella, with the sun beating down. Ships of all sizes slowly passed below as they made their way in and out of the Sea of Marmara. It had only been a three-hour flight, but the exotic sights and sounds of Turkey, combined with Elena’s soothing presence, made me feel a million miles away from the dirty dishonesty of Russia.

As we ordered mint tea and dessert, my mobile phone rang. I didn’t want to answer, but it was Vadim, so I did.

And he had the most amazing news.

Gazprom’s management wasn’t strutting around their annual general meeting at all. Rem Vyakhirev had just been fired as CEO by none other than President Vladimir Putin.

Putin replaced Vyakhirev with a virtually unknown man named Alexey Miller. No sooner had Miller taken office than he announced that he would secure the remaining assets on Gazprom’s balance sheet and recover what had been stolen. In response to that, the stock price went up 134 percent in one day.

In the following two years, it doubled again. Then, it doubled again… and again . By 2005, Gazprom was up a hundred times from the price at which the Hermitage Fund had purchased its first shares. Not 100 percent — one hundred times. Our little campaign had gotten rid of one of the country’s dirtiest oligarchs. It was, without question, the single best investment I have ever been involved with in my life.

Aside from work and spending time with Elena, one of the things I most enjoyed in Moscow was playing tennis, which I did often.

One cold Saturday in February 2002, I was running late for a game with a broker friend. Alexei was driving fast, and Elena and I sat in the backseat of the Blazer holding hands. As the car approached the final stretch of road that led to the tennis bubble, I saw a large, dark object in the middle of the street. Cars were swerving left and right to avoid it. I thought it was a canvas bag that had fallen off a truck, but as we got closer, I saw that it was not a bag at all, but a man.

«Alexei, stop», I shouted.

He didn’t say anything or show any indication of slowing down.

«Goddammit, stop!» I insisted, and he reluctantly pulled the car next to the man. I opened my door and jumped out. Elena followed, and when Alexei saw there was no way out of this situation, he got out too. I knelt next to the man, cars zipping by and horns honking. He wasn’t bleeding but was unconscious, and I noticed that he was twitching and foam was bubbling from his mouth. I didn’t know what had happened, but at least he was alive.

I bent down and looped my arm under one of his shoulders. Alexei took his other shoulder, and Elena grabbed his feet. Together we moved him to the side of the road.

Once we were on the sidewalk, we found a soft bank of snow and gently laid him down. He started to come around. «Epilepsia», we heard him mumble. «Epilepsia».

«You’re going to be O'kay», Elena told him in Russian, patting his arm.

Somebody must have called an emergency number because just then three police cars arrived. Shockingly, the officers paid no attention to the man and started thumping across the sidewalk looking for someone to blame. After hearing me speak in English and concluding I was a foreigner, they moved on to the Russians in the crowd who’d gathered around. The cops then converged on Alexei, whom they accused of hitting the man with our car. The injured man, who was at this point completely conscious, tried to explain that he hadn’t been hit and that Alexei was trying to help, but the police ignored him. They demanded Alexei’s documents and forced him to puff into a Breathalyzer. They then had a heated argument with Alexei that lasted fifteen minutes. Finally, when they were satisfied that nothing was wrong, they got back in their squad cars and drove off. The man thanked us and got into an ambulance that had arrived while Alexei was speaking with the police, and we piled back into the Blazer.