Red Notice
By Bill Browder


West Maui Book Club “Red Notice” Discussion Questions

Please feel free to use them, online or off, with attribution. Aloha and mahalo for visiting our site! Any page or location numbers refer to the iPad edition of “Red Notice”.

1)     First, have you ever been to Russia? If so, what was your impression of its people, places and your experiences? Have you ever conducted business there? If so, explain your experience.

2)      Bill Browder was founder and CEO of Hermitage Capital Management, the largest foreign investor in Russia until 2005. Since then, things have changed. Discuss the below excerpt referencing Russia’s investment climate from the Moscow Times (Apr. 27, 2015) that states, “the economy has slowed…” --
     “Ninety-five percent of Russian regions are unattractive to foreign investors, a study released last week in Moscow found, in a sign that investment is likely to remain sluggish after Russia emerges from a deep recession. Only a few regions are managing to create favorable investment conditions for foreigners, according to an investment attractiveness index presented by Russian ratings agency Expert RA last week.
     The key reason for the poor investment climate was a lack of support from local authorities, the agency said.
     Investment has already fallen in 70 percent of regions," Dmitry Kabalinsky, head of the corporate ratings department at Expert RA, said at the "Regions of Russia: perspectives of development and new opportunities" conference, where the index was revealed.      According to state statistics agency Rosstat, investment fell 6.3 percent in the first three months of 2015.”

3)      Include in your discussion this graph from the Central Bank of the Russian Federation.

4)      Browder’s ride to managing over $4.5 billion in Russian investments traversed, according to him, over that country’s transition from “communism to capitalism” (Ch 6, pg 59) during the early 1990’s (specifically 1991-1992, Ch 6), although USSR stood for “Union of Soviet Socialist Republics,” not communist. (ref: Quora, Kirill Nenartovich). It was, however, governed by the Communist Party. Discuss its privatization stock program (preferred shares at 40% of profits in dividends vs. ordinary shares at 0%, Pg 98-99), how Browder capitalized on it and how the Russian government and other officials scammed it to become “billionaires almost overnight.” (Pg 2 and Pg 60).

5)     In May 1994, (PG 69) things exploded with everyone looking into buying Russian stocks. Browder’s then $25 million portfolio with Salomon transformed quickly into $125 million. He does not discuss how much money the other companies made or whether they continued as he did, but can you speculate on the amounts? Do you know of any other companies? (Morgan Stanley’s Dana F. McGinnis, ref Washington Post, Nov. 8, 1998) Who are they? (Many!!) Where you part of any of them?

6)      When the Asian financial crisis struck, Russia’s stock market crashed (Pgs 131-133) and Browder’s funds were down 50% for the year and yet, he still didn’t want out. IMF’s bailout “may have been big, but it was viewed by the Russian oligarchs not as a backstop but as a massive piggy bank that they could sue to convert their rubles into dollars in order to get that money as far away from Russia as possible.” (Pgs 133-134)
     Ref also: Washington Post, Nov. 8, 1998: “In the U.S. banking business, there is a concept known as "too big to fail." (Aside: remember our reading Andrew Ross Sorkin’s book of the same title about the Lehman Brothers? How do these two situations compare?) It applies to a handful of banks so big that most investors expect that the U.S. government would bail them out to prevent a broad financial panic even though the U.S. government has no legal obligation to come to the banks' rescue.
     A version of that philosophy applied to Russia. Investors thought it was too great a nuclear power to fail.”
     Was this a “too big to fail” situation, especially after Browder’s fund dropped 90% with a $900 million loss?

7)      What did you think of the many strengths Browder used, such as the media and other efforts, to expose corruption in Russia? For instance:” his presentation “The Armed Forces of Corporate Government Abuse (pg 144), YouTube: “Hermitage Reveals Russian Police Fraud (Pg 271), the Kuzentosov video (Pgs 312-313), the “Tax Princess” Stepanova video of Mar. 2011 (Pgs 324-325); website launch of (check it out!); detailed and reported government complaints; newspaper articles; the Senate (particularly Senators Ben Cardin of Maryland, John McCain of Arizona, Joe Lieberman of CT., and not so god Senator John Kerry); Secretary of State Hillary Clinton (Pg 299); House of Representatives (Congressman John McGovern); Kyle Parker of the US Helsinki Commission; Interpol; and other avenues…

8)     What about Browder’s luck, i.e.: when his head of research, Vadim Kleiner, happened upon the DVD disc (Pg 156-157) listing all the information about who owns all Moscow-based companies, something his firm had been struggling to get all along?

9)      Browder uses a most famous quote made by Winston Churchill on Oct. 1, 1939 (Pg 228) while discussing Russia’s prospect of joining the Second World War. It goes, “I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key. That key is Russian national interest.” Do you recall this historical quote?
     Browder continues with, ”Fast-forward to 2008. Churchill’s observations about Russia were still correct, with one big proviso. Instead of the national interest guiding Russia’s actions, they were now guided by money, specifically the criminal acquisition of money by government officials.” All of which led to Browder’s expulsion from Russia and issuance of a Red Notice (international arrest warrant) due to tax evasion of $230 million. And due to Browder’s success with the Magnitsky Act, Russia (Putin) included Browder’s crimes as being responsible for the devaluation of the ruble in 1998, stealing the $4.8 billion loan that IMF had made to Russia, killing his business partner Edmond Safra; being a British M16 agent and murdering Sergei Magnitsky himself. (The Browder List, PG 364)

10)      Now focus on and discuss Sergei Magnitsky, of Firestone Duncan, who was Browder’s representative and legal consultant in Moscow. And, …”(Owen Matthews -- January 9, 2010. "There's something rotten in the state of Russia". The Spectator.)
“According to [Magnitsky's] heartbreaking prison diary, investigators repeatedly tried to persuade him to give testimony against Hermitage and drop the accusations against the police and tax authorities. When Magnitsky refused, he was moved to more and more horrible sections of the prison, and ultimately denied the medical treatment which could have saved his life."
     Discuss Browder’s reaction and subsequent actions taken at the loss of his friend, i.e.: the Magnitsky Law: Ref: Sergei Magnitsky Rule of Law Accountability Act of 2012 (H.R. 4405).[3] The main intention of the law was to punish Russian officials who were thought to be responsible for the death of Sergei Magnitsky by prohibiting their entrance to the United States and their use of its banking system.[4] The legislation was taken up by a Senate panel the next week, sponsored by Senator Ben Cardin, and cited in a broader review of the mounting tensions in the international relationship.[5][6]
     In November 2012, provisions of the Magnitsky bill were attached to a House bill (H.R. 6156) normalizing trade with Russia (i.e. repealing theJackson–Vanik amendment) and Moldova.[7] On December 6, 2012, the U.S. Senate passed the House version of the law.[4] The law was signed by President Barack Obama on December 14, 2012.[8][9][10][11][12]

Rotarytrek - "Words, Wine, and Wonderful Women" Discussion Questions:

1. Does it seem that Mr. Browder’s character or perspective changes in any way throughout the course of the events described in the book?

2. Do you believe that the book fairly and accurately represents the facts?

3. Do you believe that there may be other, and possibly conflicting, opinions?

4. How were Mr. Browder’s purchases of vouchers different from the oligarchs’?

5. Do you think Mr. Browder was naive or intentionally ignored (at least initially) problems with Putin’s government?

6. What do you think was the intent behind the activist approach and the media campaigns?

7. Who do you think is the hero of this book?

8. Why do you think Mr. Browder wrote (or had a ghost writer write) this book?

9. Do you think there will be any repercussions from the publication of the book?

10. Would you invest in a fund run by Bill Browder?

A couple of interesting things on the internet:

HSBC Shuts Russia’s Hermitage as Browder Sued in London

WMBC Discussion questions compiled by:
Elaine Gallant, April 7, 2016
West Maui Book Club