Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice

 
Author’s Note

1
  Persona Non Grata

2
  How Do You Rebel Against a Family of Communists?

3
  Chip and Winthrop

4
  “We Can Get You a Woman to Keep You Warm at Night”

5
  The Bouncing Czech

6
  The Murmansk Trawler Fleet

7
  La Leopolda

8
  Greenacres

9
  Sleeping on the Floor in Davos

10
  Preferred Shares

11
  Sidanco

12
  The Magic Fish

13
  Lawyers, Guns, and Money

14
  Leaving Villa d’Este

15
  And We All Fall Down

16
  Tuesdays with Morrie

17
  Stealing Analysis

18
  Fifty Percent

19
  A Threat to National Security

20
  Vogue Café

21
  The G8

22
  The Raids

23
  Department K

24
  “But Russian Stories Never Have Happy Endings”

25
  High-Pitched Jamming Equipment

26
  The Riddle

27
  DHL

28
  Khabarovsk

29
  The Ninth Commandment

30
  November 16, 2009

31
  The Katyn Principle

32
  Kyle Parker’s War

33
  Russell 241

34
  Russian Untouchables

35
  The Swiss Accounts

36
  The Tax Princess

37
  Sausage Making

38
  The Malkin Delegation

39
  Justice for Sergei

40
  Humiliator, Humiliatee

41
  Red Notice

42
  Feelings

 
Acknowledgments

 
About the Author

 
Index

To Sergei Magnitsky, the bravest man I’ve ever known.

Everything in this book is true and will surely offend some very powerful and dangerous people. In order to protect the innocent, some names and locations have been changed.

Red Notice
 
n. 
A communication issued by Interpol requesting the arrest of wanted persons, with a view to extradition. An Interpol Red Notice is the closest instrument to an international arrest warrant in use today.

I’m a numbers guy, so I’ll start with some important ones: 260; 1; and 4,500,000,000.

Here’s what they mean: every other weekend I traveled from Moscow, the city where I lived, to London, the city I called home. I had made the trip 260 times over the last ten years. The “1” purpose of this trip was to visit my son, David, then eight, who lived with my ex-wife in Hampstead. When we divorced, I made a commitment to visit him every other weekend no matter what. I had never broken it.

There were 4,500,000,000 reasons to return to Moscow so regularly. This was the total dollar value of assets under management by my firm, Hermitage Capital. I was the founder and CEO, and over the previous decade I had made many people a lot of money. In 2000, the Hermitage Fund had been ranked as the best performing emerging-markets fund in the world. We had generated returns of 1,500 percent for investors who had been with us since we launched the fund in 1996. The success of my business was far beyond my most optimistic aspirations. Post-Soviet Russia had seen some of the most spectacular investment opportunities in the history of financial markets, and working there had been as adventurous—and occasionally, dangerous—as it was profitable. It was never boring.

I had made the trip from London to Moscow so many times I knew it backward and forward: how long it took to get through security at Heathrow; how long it took to board the Aeroflot plane; how
long it took to take off and fly east into the darkening country that, by mid-November, was moving fast into another cold winter. The flight time was 270 minutes. This was enough to skim the
Financial Times
, the
Sunday Telegraph
,
Forbes
, and the
Wall Street Journal
, along with any important emails and documents.

As the plane climbed, I opened my briefcase to get out the day’s reading. Along with the files and newspapers and glossy magazines was a small leather folder. In this folder was $7,500 in $100 bills. With it, I would have a better chance of being on that proverbial last flight out of Moscow—like those who had narrowly escaped Phnom Penh or Saigon before their countries fell into chaos and ruin.

But I was not escaping from Moscow, I was returning to it. I was returning to work. And, therefore, I wanted to catch up on the weekend’s news.

One
Forbes
article I read near the end of the flight caught my eye. It was about a man named Jude Shao, a Chinese American who, like me, had an MBA from Stanford. He had been a few years behind me at business school. I didn’t know him, but also like me, he was a successful businessman in a foreign land. In his case, China.

He’d gotten into a conflict with some corrupt Chinese officials, and in April 1998, Shao was arrested after refusing to pay a $60,000 bribe to a tax collector in Shanghai. Shao was eventually convicted on trumped-up charges and sentenced to sixteen years in prison. Some Stanford alumni had organized a lobbying campaign to get him out, but it didn’t work. As I read, Shao was rotting away in some nasty Chinese prison.

The article gave me the chills. China was ten times safer than Russia when it came to doing business. For a few minutes, as the plane descended through ten thousand feet over Moscow’s Sheremetyevo Airport, I wondered if perhaps I was being stupid. For years, my main approach to investing had been shareholder activism. In Russia that meant challenging the corruption of the oligarchs, the twenty-some-odd men who were reported to have stolen 39 percent of the country after the fall of communism and who became billionaires
almost overnight. The oligarchs owned the majority of the companies trading on the Russian stock market and they were often robbing those companies blind. For the most part, I had been successful in my battles with them, and while this strategy made my fund successful, it also made me a lot of enemies.

As I finished the story about Shao, I thought,
Maybe I should cool it. I have a lot to live for.
Along with David, I also had a new wife in London. Elena was Russian, beautiful, incredibly smart, and very pregnant with our first child.
Maybe I should give it a rest
.

But then the wheels touched down and I put the magazines away, powered up my BlackBerry, and closed my briefcase. I started checking emails. My focus turned from Jude Shao and the oligarchs to what I had missed while in the air. I had to get through customs, to my car, and back to my apartment.

Sheremetyevo Airport is a strange place. The terminal that I was most familiar with, Sheremetyevo-2, was built for the 1980 Summer Olympics. It must have looked impressive when it opened, but by 2005 it was far worse for the wear. It smelled of sweat and cheap tobacco. The ceiling was decorated with row upon row of metal cylinders that looked like rusty cans of Folgers coffee. There was no formal line at passport control, so you had to take your place in a mass of people and stay on guard so that no one jumped ahead of you. And God forbid you checked a bag. Even after your passport was stamped you’d have to wait another hour to claim your luggage. After a four-hour-plus flight, it was not a fun way to gain entry into Russia, particularly if you were doing the trip every other weekend as I was.

I had done it this way since 1996, but around 2000 a friend of mine told me about the so-called VIP service. For a small fee it saved about an hour, sometimes two. It was by no means luxurious, but it was worth every penny.

I went directly from the plane to the VIP lounge. The walls and ceiling were painted pea-soup green. The floor was tan linoleum. The lounge chairs, upholstered with reddish brown leather, were just comfortable enough. The attendants there served weak coffee or
overbrewed tea while you waited. I opted for the tea with a slice of lemon and gave the immigration officer my passport. Within seconds, I was engrossed in my BlackBerry’s email dump.

I barely noticed when my driver, Alexei, who was authorized to enter the suite, came in and started chatting with the immigration officer. Alexei was forty-one like me, but unlike me was six feet five inches, 240 pounds, blond, and hard-featured. He was a former colonel with the Moscow Traffic Police and didn’t speak a word of English. He was always on time—and always able to talk his way out of minor jams with traffic cops.

I ignored their conversation, answered emails, and drank my lukewarm tea. After a while, an announcement came over the public address system that the baggage from my flight was ready for retrieval.

That’s when I looked up and thought,
Have I been in here for an hour?

I looked at my watch. I
had
been there for an hour. My flight landed around 7:30 p.m. and now it was 8:32. The other two passengers from my flight in the VIP lounge were long gone. I shot Alexei a look. He gave me one back that said,
Let me check
.

While he spoke with the agent, I called Elena. It was only 5:32 p.m. in London so I knew she would be home. While we talked, I kept an eye on Alexei and the immigration officer. Their conversation quickly turned into an argument. Alexei tapped the desk as the agent glared at him. “Something’s wrong,” I told Elena. I stood and approached the desk, more irritated than worried, and asked what was going on.

As I got closer, I realized something was seriously wrong. I put Elena on speakerphone and she translated for me. Languages are not my thing—even after ten years, I still spoke only taxi Russian.

The conversation went around and around. I watched like a spectator at a tennis match, my head bouncing back and forth. Elena said at one point, “I think it’s a visa issue, but the agent isn’t saying.” Just then two uniformed immigration officers entered the room. One pointed at my phone and the other at my bags.

I said to Elena, “There’re two officers here telling me to hang up and go with them. I’ll call back as soon as I can.”

I hung up. One officer picked up my bags. The other collected my immigration papers. Before I left with them, I looked to Alexei. His shoulders and eyes drooped, his mouth slightly agape. He was at a loss. He knew that when things go bad in Russia, they usually go bad in a big way.

I went with the officers and we snaked through the back hallways of Sheremetyevo-2 toward the larger, regular immigration hall. I asked them questions in my bad Russian, but they said nothing as they escorted me to a general detention room. The lights there were harsh. The molded-plastic chairs were bolted to the ground in rows. The beige paint on the walls peeled here and there. A few other angry-looking detainees lolled around. None talked. All smoked.

The officers left. Sealed off behind a counter-and-glass partition on the far side of the room was a collection of uniformed agents. I chose a seat near them and tried to make sense of what was happening.

For some reason I was allowed to keep all my things, including my mobile phone, which had a workable signal. I took this as a good sign. I tried to settle in, but as I did, the story of Jude Shao reregistered in my mind.

I checked my watch: 8:45 p.m.

I called Elena back. She wasn’t worried. She told me she was preparing a briefing fax for the British embassy officials in Moscow and would fax it to them as soon as it was ready.

I called Ariel, an Israeli ex-Mossad agent who worked as my company’s security adviser in Moscow. He was widely considered to be one of the best in the country, and I was confident that he could sort out this problem.

Ariel was surprised to hear what was happening. He said he’d make some calls and get back to me.

At around 10:30 I called the British embassy and spoke to a man
named Chris Bowers, in the consular section. He had received the fax from Elena and already knew my situation, or at least knew as much as I did. He double-checked all my information—date of birth, passport number, date my visa was issued, everything. He said because it was Sunday night, he probably wouldn’t be able to do much, but he would try.