Freezing Order: A True Story of Money Laundering, Murder, and Surviving Vladimir Putin's Wrath

On his 11th birthday, Browder received a sterling silver flute. One day, while he was on his way to school in Chicago, three teenagers confronted him and stole his flute. Browder reported the incident to the police. One month later, the police asked him to come pick the three teenagers out of a lineup. Browder did so, and despite his mother’s wishes to the contrary, testified against them in court. The three were convicted of robbery and given suspended sentences. After that, Browder became interested in law enforcement and started frequenting a diner where police officers gathered. They befriended him, and Browder ultimately joined the Chicago Junior Police Patrol. While his interest in law enforcement waned for a time, his passion for justice became “a central part” (16) of his life. However, he never got the flute back.

After graduating from Stanford Business School in 1989, Browder worked at a US investment bank in London. In 1996, he established the Hermitage Fund, a hedge fund, in Moscow. At the time, extensive financial opportunities were available in East Europe and Russia. Problematically, however, Russian oligarchs and corrupt officials were stealing from the companies in which the Hermitage Fund invested. Browder’s sense of justice drove him “to fight back” (16). His team investigated how the money was stolen, filed lawsuits, and engaged in “naming-and-shaming” (17) using the international media. Consequently, the Hermitage Fund was highly successful. However, Browder’s tactics angered Putin, Russia’s authoritarian leader. In November 2005, Putin expelled Browder from Russia, declaring him a threat to national security. The Hermitage Fund was liquidated, and Browder’s family and colleagues left the country.

Eighteen months later, the Russian Interior Ministry, led by Artem Kuznetsov, raided the offices of both the Hermitage Fund and its lawyers. They seized seals and certificates, which they gave to Pavel Karpov, also of the Interior Ministry. Karpov, in turn, used them illegally to reassign ownership of the holding companies to criminals. The Ministry opened a bogus criminal case against one of Browder’s colleagues in London. Despite his location, Browder hired a Russian lawyer to defend this colleague. The lawyer discovered that the criminals who stole the holding companies had “forged documents to claim those companies owed $1 billion to three empty shell companies” and sued the stolen companies for that amount (19). In December 2007, Browder filed criminal complaints in Russia identifying Kuznetsov and Karpov as corrupt officials. Instead of investigating these complaints, however, the Russian government filed a criminal case against Browder and appointed Karpov as the investigator.

One of Browder’s attorneys, Sergei Magnitsky, then found that the criminals had used the stolen companies to apply for a $230 million tax refund—the amount of taxes that Browder’s Fund paid when it was liquidated. The Russians planned to frame Browder and his company for the theft of this amount. Two of Browder’s attorneys fled Russia at this point, but Magnitsky stayed behind. To help in this fight, Browder enlisted the services of John Moscow, known as an “attack lawyer” (21) and a former lead prosecutor from New York. Browder provided all the details of the fraudulent scheme to him and noted that Magnitsky was willing to testify.

When the Russian Interior Ministry opened bogus criminal cases against Browder’s two lawyers who fled to London, Magnitsky decided to report the $230 million theft to the Russian authorities. He’d also discovered that the same group that stole that money had also stolen $107 million in Russian taxes using similar methods the year before. Based on Magnitsky’s information, a journalist exposed this earlier theft in Business Week. Just 16 days later, Russian officials arrested Magnitsky.

To win Magnitsky’s release, Browder’s lawyer Moscow advised him to determine the recipient of the $230 million. Moscow explained that because the sum was in dollars, it had briefly touched a US clearing bank and would therefore leave a record. Soon thereafter, though, Moscow stopped taking Browder’s calls, as he became involved in settling a major legal scandal. Meanwhile, there was news that Magnitsky was being tortured. The Russians wanted him to claim that he’d stolen the $230 million and to drop his allegations against Kuznetsov and Karpov. Magnitsky refused. On November 16, 2009, Russian riot guards beat him to death. It was the 358th day of his captivity, and the Russians would have had to release or try him after 365 days. They couldn’t risk a trial (29).

Devastated by the news of Magnitsky’s murder, Browder was determined to get justice for him. The Russians were covering up his murder with lies. According to an investigative journalist, Russian police had received $6 million to arrest Magnitsky and cover up the $230 million fraud. Given Magnitsky’s death, US banks became more cooperative in handing over data. Vadim Kleiner, Browder’s colleague at the hedge fund and a friend, became a skilled forensic financial investigator, sorting through the American information and obtaining data from Russia, where transactions are recorded and bureaucrats are willing to sell information.

Kleiner showed that Kuznetsov and Karpov went on an extravagant spending spree after the $230 million was stolen. They documented this extravagance in a YouTube video that went viral and enraged most Russians. It caught the attention of a whistleblower, Alexander Perepilichnyy, a Russian financial advisor. He had evidence that $11 of the $230 million went to Vladen Stepanov, the husband of the Russian tax official who approved the refund. Hoping to remove the Stepanovs from power, Perepilichnyy provided the beginnings of a roadmap tracing the money from the Russian treasury.

To prevent money launderers from profiting from their crimes, Browder advocated for the Magnitsky Act. This law “would ban visas and freeze assets of Russian human rights violators” (38), such as those who murdered its namesake. The idea attracted immediate and bipartisan support in the US, but it was needed in the European Union (EU) too, which was where many Russians spent their money. That was a harder sell. However, Browder got himself invited to Finrosforum, a conference in Finland that included the Russian opposition and human rights community. There, he told Magnitsky’s story and won support from Russians, including legendary opposition leader Boris Nemtsov. Such Russian support was critical for Browder in making his case for this law in Europe.

While it took years to get Magnitsky Acts passed, Browder wanted to immediately freeze the millions of dollars in Stepanov’s Swiss account. Because these were the proceeds of a crime, current laws allowed for the seizure of the assets. To win Swiss support, Browder attended the Cambridge Crime Conference, where a Swiss federal prosecutor who specialized in money laundering was speaking. However, he had no luck making a connection with this prosecutor, who told him to file a complaint. The conference wasn’t without benefit, though, because Browder ran into John Moscow, who introduced him to a US Attorney from New York, Adam Kaufmann. Interested in the Magnitsky case, Kaufmann told Browder that if he found connected money in New York accounts or if the proceeds were used to buy property in New York, he could act.

In 2007 and 2008, three Russians, all with links to Dmitry Klyuev, died under mysterious circumstances. Klyuev, the owner of Universal Savings Bank, is a “big mafia boss” (53) with ties to the Russian government, specifically the Interior Ministry. Karpov had assisted Klyuev before in committing and covering up crimes. In this case, the three dead Russians, who couldn’t defend themselves, were accused of stealing the $230 million from the tax fund. Kleiner’s source in Russia, called Aslan, claimed that “just talking” about Klyuev was dangerous (53).

Browder met with a Swiss criminologist, Mark Pieth, and showed him the money trail related to Stepanov’s crimes. Pieth was impressed with the work of Browder’s team and promised to file a criminal complaint. Meeting with a journalist, Browder hoped to get the sordid tale out to turn up the pressure. However, he asked the journalist to hold off, fearing that such an action could anger the Swiss and prevent them from acting. Then, Russian authorities charged a new person, one alive and in prison, with the theft of the $230 million. This person was, of course, found guilty in Russia. Angered, Browder gave the green light to the journalist to publish the story. One week later, Swiss authorities announced that they’d frozen $11 million of Stepanov’s money. It was “the first freezing order in the Magnitsky case” (61).