Streetwise Professor

January 10, 2018

Red on Red: Simpson vs. Browder

Filed under: Politics,Russia — The Professor @ 7:02 pm

Some time back I promised a post on Bill Browder. A hectic schedule and the holidays intervened, so though I’d collected loads of material, I didn’t have time to write a post. Events from yesterday–namely the release of the transcript of Fusion GPS head Glenn Simpson’s interview with Congressional investigators–make this timely, so I’ll try to summarize what I have concluded. Oddly, one conclusion is that when it comes to Bill Browder, Simpson and I are of like mind. On other matters no–but even there Simpson’s Browder testimony shows precisely why his opinions on Trump are suspect.

As for Browder, here are my conclusions in somewhat abbreviated form.

First, Browder assiduously cultivates the image that Diogenes’ search for an honest man would have ended had the old Greek met one Bill Browder. But in fact, his honesty, integrity, and scruples are highly questionable indeed.

The essence of the Browder as Hero narrative is that he was a lone crusader for honest business practices in Russia, and that he fought a corrupt and brutal establishment. In retribution, the establishment stole one of his companies in order to defraud the Russian government, and killed Browder’s loyal employee, Sergei Magnitsky when he had the temerity to challenge them. Bill Browder, martyr by proxy.

A review of his actual business dealings in Russia strongly suggests a very, very different story.

For one thing, Browder was engaged in the voucher privatizations of the 1990s. These were, without cavil, among the most monstrous acts of mass theft and fraud in modern economic history. They were the primitive capitalist accumulation that built many modern Russian fortunes (and filled more than a few graveyards). Any Dudley Do-Right who tried to operate in that environment would have been ground to dust within weeks, if not days. It was an extreme Darwinian environment in which the most unscrupulous and often most brutal prevailed. If Browder survived that–and indeed thrived–draw your own conclusions.

For another, Browder’s initial partner in Hermitage Capital Management (his investment vehicle in Russia) was Edmund Safra. Safra’s sketchy dealings are legendary. He always dismissed allegations about his shady business practices as antisemitic, but there are many other Jewish financiers who have not attracted the same criticism. Further, Safra was involved (through his Republic Bank) in a mysterious scheme to jet billions of dollars in cash to Russia during the 1990s–it was dubbed “the money plane.” Just what went on there is unknown, but it doesn’t pass the smell test.

Safra died under bizarre circumstances in Monaco in 1999. An ex-Marine who served as his nurse was convicted of murder, but few find that story plausible, or complete. One of the competing theories is that he was killed by the Russian mob. (There are so many suspects, that maybe the true story is something along the lines of Murder on the Orient Express–everybody did it.)

Regardless, voucher privatizations plus Safra is hardly the CV of a commercial saint.

Browder also claims that he tried to bring honest corporate governance to Russia. He points to his attempts to change Gazprom as an example.

A different story is far more plausible: Browder’s investment in Gazprom was an arbitrage play, pure and simple. Due to restrictions on foreign ownership of Gazprom’s Russian shares, those shares sold at a substantial discount to the ADRs traded outside of Russia. Browder found a way–legal he says, illegal say the Russians–to buy Gazprom Russian shares. This allowed him to capture the big discount.

Putting the legality of the structure that he used to buy the shares aside, making an arb trade like that can be very profitable, and thus very attractive. That’s why Browder and his investors wanted in. Given the farcical prospects for actually changing Gazprom’s governance, I’m pretty sure that the Corporate Crusader act that Browder put on was just a cover for his more mercenary motives.

And this is a general impression that I come away with after reading a lot about him. The whole Last Honest Man in Russian Investing shtick was a canny PR ploy that allowed his backers to distance themselves from the tawdry (and worse) reputation that investing in Russia had at the time. Browder was their beard that allowed them to pretend that they were in an honest relationship.

Browder has been prosecuted by the Russian government, both for tax violations and his purchase of Gazprom shares. He portrays these prosecutions as vengeance for his crossing the wrong people in his crusade for honest business practices in Russia. I have no doubt that his prosecution might have been selective, and indeed driven by vengeance–but maybe not as revenge for his honesty, but for his taking from the wrong people. Further, even if the prosecutions were selective (i.e., others doing the same but not prosecuted) and driven by vengeance, that doesn’t mean they weren’t justified–and perhaps even just.

I don’t have the basis to opine on the legality of the structure of his Gazprom purchases. But I can say that the Russian accusations regarding tax violations seem very plausible. These involved setting up companies that received tax breaks for hiring disabled veterans, but the Russians colorably show that he did no such thing.

The Russians also allege that he was in fact involved in the tax fraud that resulted in Magnitsky’s death. This allegation is far more speculative, and perhaps libelous–but it is not totally lacking in plausibility, especially in light of Browder’s track record.

Since getting kicked out of Russia in 2005, and since Magnitsky’s death, Browder has spent his life crusading against Putin and the Russian government. The centerpiece of his campaign is the alleged involvement of Russian government officials (tax officials mainly) in the theft of $230 million in tax refunds fraudulently obtained from a Hermitage company seized by the Russians, and the death of Magnitsky while in custody in an investigation of the theft.

Here it is evident that Browder’s relationship with the truth is, well, situational and transactional. The best evidence of this is his deposition in the Prevezon case in New York. Browder tried mightily to avoid being served, and here is one place where Browder and Simpson intersect: Simpson was part of the effort to serve Browder, on behalf of his (indirect) client, Prevezon CEO Denis Katsyv.

During that deposition, Browder admitted repeatedly that he had no evidence whatsoever to back some of his most lurid and damning allegations against those he alleges were complicit in the Russian tax fraud and the death of Magnitsky. For instance, he has claimed repeatedly that he could trace the ill-gotten gains from the tax fraud to specific individuals. In the deposition, he admitted he could not.

(Here Browder has something in common with dossier assembler Christopher Steele. Once in court testifying under the penalty of perjury, Steele was at pains to admit that the claims in the dossier were unsubstantiated, in contrast to his hair on fire representations to the FBI.)

This is particularly outrageous given the fury with which Browder attacks anyone who questions his dealings or veracity.

So my conclusion is: Browder is a con-man and a liar. If he tells you the sun rises in the east, buy a compass and wait for sunrise.

Glenn Simpson of dossier infamy is of the same opinion. Simpson did a deep documentary dive on Browder for Prevezon’s lawyers, Baker Hostetler, and came to many of the conclusions I outline above, and some more to boot. If you read the transcript of Simpson’s interview (not testimony) before Senate Judiciary Committee investigators, you’ll see what Simpson dug up and the basis for his conclusions.

Well, doesn’t this mean that I therefore have to give credence to Fusion GPS’s research on Trump? Quite to the contrary: the difference in the methods in the Browder and Trump matters is striking. When investigating Browder, Fusion GPS did a deep dive on documentary evidence in the US, Russia, and presumably Cyprus (where Browder registered companies). (See pp. 41-49 of the transcript. Simpson is so detailed in his description of what he did in the Browder investigation that the lawyer questioning him said “Thank you for the narrative answer.” LOL.)

In contrast, with regards to Trump, Simpson et al (a) read some books, and (b) commissioned the Steele investigation, which apparently just involved in talking to people (just who is a complete mystery) who passed on unverified and unverifiable gossip. The basis for Simpson’s claim that Trump had Russian mafia connections is that Trump had connections with Felix Sater who allegedly had connections with the Russian mob: similarly Paul Manafort.

Thus, whereas the foundation for Simpson’s opinions on Browder is rock-solid, that for his opinions on Trump are charitably described as quicksand.

Simpson’s statements also call into question his honesty. When asked when he had any Russian-speaking employees, he mentioned one guy–who happened NOT to be Nellie H. Ohr, wife of ex-DOJ Associate Deputy AG. We now know that Mrs. Ohr worked for Fusion. Sean Davis said on Twitter that this was an “interesting omission.” I said it was an interesting perjury.

Simpson also insinuated that the FBI had an independent source to justify FISA-ing Trump campaign personnel–and that this guy was a walk-in. When the transcript was released, a “source close to Fusion GPS” said nope. Never happened. He was referring to Papalopolous. Another strike for his credibility.

Simpson strains credulity past its breaking point when he claims that even though he had dinner with Natalia Veselnitskaya the night before and the night after her meeting with Trump Jr., the subject never came up (she was at the other end of the table, he doesn’t speak Russian and she doesn’t speak English–even though they apparently could communicate well enough for her to get him to help her obtain a visa). Simpson claims to have been shocked at the news. Please. Big investigative reporter turned PI/opposition researcher has no clue about a bombshell meeting even after spending hours with some of the principals? He didn’t even bother to ask through a translator (who Veselnitskaya must have had along) “hey, Natalia, whatcha been doing in New York?” Please.

So my rule for Simpson is the same as for Browder: unless he has the documents to prove it, don’t believe a word he says. He will distort the truth to advance his agenda.

The most entertaining part of this is the red-on-red nature of the battle. Heretofore Browder has been something of a hero among the anti-Trump set (yeah, I’m looking at you, Michael Weiss) because he is ardently anti-Putin, and Trump is supposedly Putin’s bitch. But Simpson has even better anti-Trump bona fides, for the dossier is directly anti-Trump, whereas Browder’s  anti-Putin stance is anti-Trump only via (an alleged) transitivity.

So given a choice between Browder and Simpson, most of the anti-Trumpers are going with Simpson, and either explicitly or implicitly dumping and dissing Browder.

Karma, Bill. Karma.

Browder being Browder, he will no doubt go after Simpson with all guns blazing.

I’m stocking up on the popcorn.

The left and the media (I repeat myself, yet again) may end up ruing their choice. Given the extremely dubious nature of the dossier and those who funded, created, and disseminated it, and the very great likelihood that it was used as the basis to engage in counterintelligence surveillance of Trump campaign personnel, I believe that the dossier will likely prove the greatest political boomerang in modern political history, and will end up braining those who threw it (which includes the Clinton campaign, Fusion GPS/Simpson, the FBI and other US intelligence agencies, the media, and the “Resistance”). And if this happens, Bill Browder will be little more than collateral damage.

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  1. If you disregard legal technicalities and ask what it is fundamentally that Browder and Manafort have been doing to earn their living, my answer is they have been doing, in different technical capacities, the exact same thing (could have formed a single full-service firm for efficiency): facilitating massive money laundering for Russian organized crime. So as long as they get what they deserve under RICO statutes (even if it’s technically for tax evasion or conspiracy or whatever), any popcorn is optional.

    Comment by Ivan — January 11, 2018 @ 8:49 pm

  2. It was obvious from the start that Steele’s dossier was mostly rubbish. First, anyone with an eye on the Russian press and social media would have been able to put together a report like this. Second, a spy who both has access to the highest ranks in a hostile country’s hierarchy and is willing to expose his sources for a modest fee is a logical impossibility.

    As for Browder, I doubt his pre-Magnitsky record is much different from the record of a typical emerging market investor. Starting from 1995-6, international investors were able to buy Russian stocks without getting involved in any of the voucher nastiness you mention. The risky part – such as buying up vouchers from the general public and shares from employees, as well as bidding for minority stakes at cash and voucher auctions – had been taken care of by local actors.

    Browder says he set up Hermitage in April 1996 with $25 million of seed money from Saffra. At that time, a number of Moscow-based brokerages – such as CSFB, Brunswick, Troika Dialogue, UFG, and, from the summer or fall of 1996, Renaissance Capital – were offering international investors access to the Russian stock market. Most likely, Hermitage traded by placing orders with some of them. That’s how most of the large players operated, such as Soros’s Quantum funds, Kenneth Dart, and Harvard Management Company (although I’ve read somewhere that HMC had gotten direct access to primary stock auctions via Andrei Shleifer and Jonathan Hay). It does not mean that minority investors always suffered silently when management siphoned off profits or the majority shareholder tried to dilute their holdings, but that wasn’t the voucher privatization stage – that was the next chapter, a much more civilized one by comparison.

    It stands to reason that Browder profited from the Gazprom ringfence arbitrage. He was not alone in this, but his fund is the only one that’s been prosecuted so far.

    Is Browder a liar? I haven’t seen evidence of his lying. He’s prone to exaggeration and connecting dots that are best left unconnected. He’s given to self-aggrandizement, the media playing along calling Browder “Putin’s enemy number one” and other such nonsense. His theory of Russian tax officials transferring funds offshore using his companies seems plausible but is impossible to prove at the moment – other than, perhaps, to a hypothetical jury intimately familiar with the workings of Russia’s business and bureaucracy, under the preponderance of evidence standard. Browder’s claim that Veselnitskaya is close to the Kremlin is probably bogus, but not a deliberate lie.

    This said, it’s almost impossible to deny that Magnitsky was mistreated while in jail and died from the mistreatment – and the Russian authorities failed to hold anyone accountable for this outrage.

    Comment by Alex K. — January 13, 2018 @ 3:47 am

  3. Well, SWP, I never ever would have made the Browder connection.

    But, along the lines of what you’re saying:

    Comment by elmer — January 13, 2018 @ 9:19 pm

  4. Q. And what, if anything, did you conclude
    What Fusion GPS found out about Trump’s Finances

    Comment by Anders Dahl — January 15, 2018 @ 6:23 pm

  5. @Anders–Probably not much, or we would have heard about it by now

    The ProfessorComment by The Professor — January 15, 2018 @ 8:32 pm

  6. Fascinating stuff, thankyou.

    The description for the Fusion-GPS/Steele dossier that I’m starting to hear around the internet, is that it’s behaving like the torpedo fired by the (bad) Russian sub at the end of Hunt for Red October – it missed its mark, has done a u-turn, and is now homing in on you-know-who.

    I don’t think Trump has ever missed a chance to clean the clock of someone who attacked him. This is going to be well worth watching.

    Comment by Global Super-Regulator on Lunch Break — January 17, 2018 @ 3:53 am

  7. @Global–Good analogy. I hadn’t read that before, but it fits very well.

    As an aside, the Hunt for Red October episode is not a figment of Tom Clancy’s imagination. It was an all-too-common occurrence for US submarines in WWII. One of the most successful subs, the USS Tang, commanded by Richard O’Kane, was sunk buy such a fish. There were perhaps more such occurrences than those documented at the link: some of the 48 or 49 subs sunk but not on the list might have met their end due to their own torpedoes.

    The Germans, Italians, Japanese, and British didn’t have similar problems, at least to anywhere near the same extent. It was the American Mark 14 torpedo that was uniquely susceptible (which was just one of its many flaws–it is one of the great scandals of WWII).

    I indeed think it likely that the Democrats and Deep State have put a political Mark 14 into the water.

    The ProfessorComment by The Professor — January 17, 2018 @ 8:02 pm

  8. “Democrats and Deep State ” sounds like Max Kaiser . Glenn Simpson’s testimony before the Senate Judiciary Committee, released this week, is a tale of two research projects. One is about the financier turned criminal-justice crusader William F. Browder. The other is about the American president, Donald J. Trump. Taken together, they shed light on some of the darkest corners of l’Affaire Russe. But what Simpson’s testimony most starkly reveals are the hazards that journalists and politicians alike encounter when they stop working for the public — and start working for clients with tendentious personal agendas.
    Let’s begin with research on the researcher. Simpson is an investigative journalist turned — something. In 2009, he left the Wall Street Journal and, after one entrepreneurial false start, hung out a shingle for Fusion GPS. According to Simpson, its stock in trade is “business intelligence.”
    Simpson insists he’s still an investigative reporter, in quest of nothing but the facts. At Fusion GPS, however, he works for corporations, individual billionaires and governments — figures who, unlike newspapers, pay real money. For the first time, there is one entity Simpson is not working for: readers.
    In his testimony, Simpson comes off as a mercenary for hire by anyone with fat stacks of bitcoin.
    But this week Simpson did end up serving readers, and especially those with bottomless appetites for minutiae on Trump’s Russia ties. On Tuesday, Sen. Dianne Feinstein made public the transcript of Simpson’s August testimony. Simpson spoke to the senators and their lawyers for 10 hours; the document is 312 pages long.
    The ex-journalist, it seems, had fingers deep in two Russian piroshki.
    He organized what’s widely considered a calumny campaign against Browder, Putin’s nemesis and champion of the Magnitsky Act. That elegant piece of legislation limits banking and travel for Russian officials and oligarchs responsible for human rights abuses. (The more recent Global Magnitsky Act expanded its purview.)
    At the behest of Republican groups and then Democratic ones, both conducting standard opposition research on Trump, Simpson also commissioned and oversaw the dossier that suggests Trump is vulnerable to Russian blackmail. Executive-produced by Christopher Steele, a former British spy, the dossier also says something about urine, the Moscow Ritz-Carlton and sex workers. That part of course is of no interest to anyone.
    How does a onetime journalist come to pursue an attack on Putin’s arch-enemy Browder and an exposé of Putin’s pal Trump? That’s where things get sticky.
    To discredit the Steele dossier — which may point to a criminal conspiracy between Trump and the Kremlin — Republican senators in the hearing pressed Simpson on his ties to the firm that commissioned the Browder project. That company, Prevezon Holdings, is a Russian real-estate outfit run by the Katsyvs, an oligarch family close to Putin. The Justice Department had charged Prevezon with money laundering. Browder was expected to testify for the government.
    Prevezon’s emissary to Simpson was — stay with me as the Russian names pile up — Natalia Veselnitskaya, a Russian lawyer known to concerned citizens for her part in the June 2016 meeting in Trump Tower between representatives of the Trump campaign and those promising kompromat on Hillary Clinton.
    Republican senators tried to make Simpson’s venture with Veselnitskaya and Prevezon look treacherous. They had one high card: Virtually all in Congress view attempts to smear Browder, a powerful whistle-blower on financial crimes and international human-rights abuses, as heretical. Simpson, who has said he’s sympathetic to Browder, claimed he was only after the facts, and he did turn up evidence of various financial shell games by Browder, shady maneuverings typical of the very rich. Prevezon, in turn, tried to make hay of these details, but failed. Browder’s honor is intact. In May, Prevezon settled the Justice Department suit for $5.8 million.
    A little sports reporting here: The Republicans fumbled it, and failed to discredit Simpson just as Fusion GPS had failed to discredit Browder. In his testimony, Simpson comes off as a mercenary for hire by anyone with fat stacks of bitcoin. And if he’s not proud of his smear work on Browder, neither does he seem proud of the illustrious dossier, even though Steele decided it was sufficiently consequential to — as Simpson testified — take it to the FBI, radically amplifying earlier alarms that Trump’s campaign was compromised.
    In the smear-the-whistleblower tradition of Harvey Weinstein with his accusers and Prevezon with Browder, the Trump camp is now suing Fusion GPS for producing this dossier, and Buzzfeed for publishing it; they’re claiming it’s defamatory. More despicably, Republican Sens. Charles E. Grassley and Lindsey Graham have urged the Justice Department to investigate Steele. For Prevezon to use a business intelligence firm to undermine its enemies is one thing. For public servants to try to bully the Justice Department into prosecuting theirs is quite another.
    In 2007, before Fusion GPS was a twinkle in his eye, Simpson, as a journalist, noted a disturbing trend. He wrote in the Wall Street Journal: “A number of notable Washington insiders are earning big fees these days by representing controversial clients from the former Soviet Union.”
    Simpson’s focus in that piece was William Sessions, a onetime FBI director who had turned to representing Semyon Mogilevich, a fearsome Russian mob boss. Simpson cited other men-about-D.C. who had crossed from cop to robber. Republican presidential candidate Bob Dole, no less, had been paid more than half a million dollars to get a visa for a Russian outlaw. And there was an advisor to Dole’s presidential campaign who seemed to be on the payroll of a Putin-aligned Ukrainian billionaire. His name was Paul Manafort.
    Whether Simpson sees himself as having crossed the same line — from D.C. insider to highly-paid courtesan of the Kremlin — we don’t know. He doesn’t touch on it in his testimony. But if reader-citizens have learned nothing else about Washington in the last year, we now know that many would-be public servants are indeed in service, just to someone other than the American people.

    Comment by Anders Dahl — January 20, 2018 @ 5:53 pm

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