Published: October 15, 2008
When I step out of the lift to go into the office of Hermitage Capital in Soho, London, two burly security guards rise to block my way. For a second, I wonder if I have accidentally ambled into a gangster film, and that Hermitage has been forced to “go to the mattresses”, as they say in Mafia movies.
It’s not actually that far from the truth. Hermitage, once the biggest portfolio investor in Russia with US$6bn under management, has been at the centre of an outrageous attempt by Russian corporate raiders to steal US$230mn from the company, and from the Russian state itself.
What makes it worse, as Browder himself tells me when the security guards finally let me through, is that the raiders work for the Russian state themselves.
“We’ve been basically targeted by gangsters, whose ring-leaders are senior figures in the interior ministry and the FSB [the successor to the KGB]”, he says. “Over the last 18 months, our offices, and the offices of our lawyers and custodians, have been raided by police, the homes of employees and associates have been burgled, and our lawyer was beaten up by police and hospitalised for two weeks. They’ve seized control of our Russian companies, and are now claiming these companies are owed US$230mn in tax rebates from the state.”
Corporate raiding is nothing new in Russia, but Hermitage’s problems also involve the highest levels of the Russian government. In 2006, without any warning, Browder was refused entry to Russia. He was, the interior ministry claimed, a threat to national security.
Browder tried to take up the issue with both President Medvedev and Prime Minister Putin, but he has never been allowed back in. Putin said he hadn’t even heard of him.
As a result, Hermitage has had to relocate to the UK, and the company now has no assets in Russia. The corporate raid has even followed Browder here, with some of the raiders posting incriminating evidence from the UK to Russia, to try and frame the company. Hence the security guards outside the door.
Browder never found out who was behind his expulsion from Russia: “I have three sources in the presidential administration, and I got a different theory from each of them.”
Once the biggest and most bullish cheerleader for Russian stocks, he has become bitterly disillusioned. “It’s the biggest kleptocracy in the world,” he says. “It’s run by gangsters, who destroyed the company I had built up for a decade. I was the go-to guy for Russia. But now I want to be the go-to guy for the world.”
And for my next trick…
Now, Browder is washing his hands of Russia, and instead targeting the Gulf Co-operation Council (GCC) states. He says: “We now manage US$3bn, including a US$1.8bn global fund, which is mainly invested in the GCC. We travelled to 28 countries all over the world last year, but we kept on coming back to the Gulf.”
The investment strategy is simple: 85mn barrels of oil are being sold every day, at around US$100 a barrel, which means every year around US$3.1tn is being transferred from oil-consuming to oil-producing countries.
A lot of that money is flowing to the Gulf. However, unlike in Russia, there are not many energy stocks in which to invest. There aren’t many consumer or banking stocks either. Where Browder sees the value is in infrastructure.
He says: “The GCC is set to spend US$2.5tn on infrastructure over the next 10 years. So all you need to do is find out which companies will be active in that space, and start buying.” Browder is coy over which stocks in particular he likes, but he has said at conferences that he thinks Aldar Properties is “the cheapest real estate company in the world”, as well as “one of the cleanest, clearest stories I have seen”.
His exuberant praise for Aldar suggests Browder is going to pursue a different strategy in the Gulf to the one he pursued in Russia: more diplomatic praise, less aggressive exposure of fraud.
He says: “Investing in Russia is like high-altitude training. Investing in the Gulf, which is much less of a volatile and corrupt emerging market, I feel like I’m running on the beach after running in the mountains.”
But will he ever be tempted to relocate to the Gulf? “No way”, he says. “My home is here in the UK now.” And with that, he retreats behind the security guards and back to the trading floor.