Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice (16 page)

On October 14, 1997, BP announced it was buying 10 percent out of Vladimir Potanin’s 96 percent block of Sidanco for a 600 percent premium to the price we had paid a year earlier.

It was a home run.

It had been an eventful year. Not only had my business finally taken off, but more importantly, my son, David, was born in November 1996. As Sabrina had promised, she brought him to Moscow after his birth and we’d lived there as a family ever since. She decorated the nursery, even making the curtains and cushions herself, and found a few other expat mothers to be friends with.

Even though she made these efforts, Moscow didn’t gel for her. During 1997 she made more and more frequent trips to London and by Thanksgiving she and David were barely in Moscow at all. I wasn’t happy about it, but I couldn’t force her to stay if she was miserable. So I went back to London every other weekend to see her and David.

That Christmas, Sabrina insisted on taking a vacation to Cape Town, South Africa. I’d grown up associating South Africa with apartheid and racism, so I had no desire to visit. Sabrina’s persistence was more powerful than my prejudices, though, and in the end I agreed. I didn’t care that much, anyway, since I had to keep working—as long as my cell phone had a signal and I had access to a fax machine, I’d be fine.

We flew to Cape Town on December 19, 1997, and checked in to the Mount Nelson Hotel—and my low expectations vanished. I’d never seen such an amazing place in my life.

The Mount Nelson was a grand British colonial building under the fortresslike shadow of Table Mountain. The Cape Town sun shone every day and the green lawns, guarded by dark, swaying palms,
went on forever. The pool was full of frolicking children as parents lounged nearby. A continual warm breeze fluttered through the white tablecloths of the outdoor dining area and waiters with perfect manners stood by attentively, ready to bring drinks, food, or anything else we desired. The Mount Nelson was like heaven. It was the polar opposite of Moscow in December.

We settled in and I started to relax for the first time in years. As I lounged on a sun bed next to the pool, watching David play with his toys on a towel, I became aware of just how tired I was. I drifted into a state of complete relaxation. Sabrina was right to have chosen this place. I closed my eyes. I could have sat in that chair and basked in the sun for days.

But a few days after we arrived, just as I’d started to truly decompress, my mobile phone rang. It was Vadim, my new head of research. Vadim was a twenty-seven-year-old financial analyst with a PhD in economics from the top university in Moscow whom I’d hired five months earlier to professionalize my fledgling operation. He had thick glasses, a mop of curly dark hair, and the ability to figure out the most complex economic puzzles in minutes. “Bill,” he said gravely, “some really disturbing news just came across the Reuters wire.”

“What is it?”

“Sidanco is doing a share issue. They’re going to nearly triple the total number of shares, and they’re selling them cheap—almost ninety-five percent lower than the market price.”

I didn’t get it. “Is that good or bad?” If everyone was allowed to buy the new shares, it might have been neutral or even marginally good for us.

“Very, very bad. They’re allowing every shareholder
other than us
to buy these new securities!”

This was absurd. If Sidanco was able to increase the total number of shares by nearly a factor of three without letting us in on the action, then Safra and the fund would essentially go from owning 2.4 percent of the company to owning 0.9 percent of the company and get
nothing in return. In broad daylight Potanin and the people around him were going to get $87 million of value from Safra and my clients with the simple stroke of a pen.

I sat upright. “This is unbelievable! Are you sure, Vadim? Maybe Reuters got the announcement wrong or something.”

“I don’t think so, Bill. It looks real to me.”

“Go and get the original documents and translate them for yourself. This
can’t
be right.”

I was shocked. If this dilutive share issue ended up having a bad ending, the credibility I’d built by finding Sidanco would evaporate and bring my investors enormous losses.

I was also confused. I couldn’t fathom why Potanin would do something like this. What was his purpose? Why dilute the value of our shares and create a scandal when he had just had a spectacular windfall himself? After his big sale to BP, he still owned 86 percent of the company, and with this dilution he was only getting the benefit of 1.5 percent from us. It didn’t make any financial sense.

Then I remembered why he would do this: because it is the Russian thing to do.

There’s a famous Russian proverb about this type of behavior. One day, a poor villager happens upon a magic talking fish that is ready to grant him a single wish. Overjoyed, the villager weighs his options: “Maybe a castle? Or even better—a thousand bars of gold? Why not a ship to sail the world?” As the villager is about to make his decision, the fish interrupts him to say that there is one important caveat: whatever the villager gets, his neighbor will receive two of the same. Without skipping a beat, the villager says, “In that case, please poke one of my eyes out.”

The moral is simple: when it comes to money, Russians will gladly—gleefully, even—sacrifice their own success to screw their neighbor.

This was the exact principle on which Potanin and his control group seemed to be operating. Never mind that they’d made forty
times more money than us: that a group of unconnected
foreigners
also had a big financial success was unbearable to them. This was simply not supposed to happen. It was not . . .
Russian
.

What
was
Russian was to have your business ruined—which was exactly what would happen to me if I didn’t get back to Moscow and fix this situation. I spent the next few nights in Cape Town trying to forget about my problems, but I simply couldn’t.

Our vacation ended several days later, and Sabrina, who wanted nothing to do with winter in Russia, took David back to London. I arrived in Moscow on January 12, 1998, the day before Russian New Year’s Eve (Russia celebrates the Gregorian calendar’s New Year on January 1, and then twelve days later celebrates again for the Julian calendar’s New Year’s Eve on January 13). As soon as I got there, I spoke with Vadim, who had confirmed everything. The share dilution would take about six weeks to worm its way through the regulatory apparatus, but the deal was going to happen.

I needed to do something to stop it.

A day later, on January 13, I saw an opportunity. I received a call from a friend who told me about a Russian New Year’s party at the home of Nick Jordan, a wealthy Russian American banker at JP Morgan. Nick had a brother, Boris, who was Potanin’s financial adviser and the head of a new investment bank called Renaissance Capital. I knew them both as acquaintances, and I convinced my friend to bring me along to the party.

The party was in an enormous luxury Brezhnev-era apartment several blocks from the Kremlin—the type that investment banks paid $15,000 a month for so that their expat employees could “endure the hardships of Moscow.” It didn’t take long to pick out Boris from the crowd of caviar-eating, champagne-swilling Russian American expats. In many ways Boris Jordan was what Russians considered a classic American: a loud, chubby glad-hander cut from the same cloth as your stereotypical Wall Street broker.

I went straight for him. When he caught sight of me, he was
clearly surprised, but he didn’t overreact. Instead he met me head-on with a meaty handshake. “Bill, how are ya?”

I cut right to the chase. “Not great, Boris. What’s going on with Sidanco? If this dilutive share issue goes through, it’s going to be a real problem for me.”

Boris was taken aback. He didn’t want a confrontation at his brother’s New Year’s party. He looked at the other guests, a toothy smile plastered to his face. “Bill, it’s all a big misunderstanding. Don’t worry about a thing.”

He turned his attention to a silver tray of hors d’oeuvres and carefully picked one. Avoiding my gaze, he said, “Tell you what. Come over to Renaissance tomorrow at four-thirty and we’ll sort it out.” He popped the morsel into his mouth and spoke freely, food clinging to his gums and teeth. “Seriously, Bill. Everything’s going to be fine. Have a drink. It’s a New Year’s party!”

And that was that. He was so convincing—and I so wanted to believe him—that I stayed at the party for a while and left with some measure of calm.

I woke the next morning in the darkness (in January, the sun in Moscow doesn’t rise until around 10:00 a.m.) and went to work. By the time I headed to Boris’s office the sky was dark again. At 4:30 p.m. sharp I walked into Renaissance Capital, which was located in a modern glass office building close to Russia’s White House, the big white building where the government sits. I was unceremoniously shown to a windowless conference room. I was not offered anything to eat or drink, so I sat there and waited.

And waited.

And waited.

After an hour my paranoia began to get the better of me. I felt like a fish in a tank and I started to peer around for hidden cameras, though I couldn’t see any. Regardless, I was starting to think that Boris had lied. Everything was
not
going to be fine.

I was ready to leave when the door finally opened—only it wasn’t Boris. It was Leonid Rozhetskin, a thirty-one-year-old Russian-born,
Ivy League–educated lawyer whom I’d met on a few occasions (and who would, a decade later, be murdered in Jurmula, Latvia, after a spectacular falling-out with various people he did business with).

Leonid, who’d clearly watched the film
Wall Street
one too many times, had slicked-back, Gordon Gekko–styled hair and sported red suspenders over a custom, monogrammed, button-down shirt. He took the chair at the head of the table and laced his fingers over one knee. “I’m sorry Boris couldn’t make it,” he said in lightly accented English. “He’s busy.”

“I am too.”

“I’m sure you are. What brings you here today?”

“You know what, Leonid. I’m here to talk about Sidanco.”

“Yes. What about it?”

“If this dilution goes forward, it’s going to cost me and my investors—including
Edmond Safra
—eighty-seven million dollars.”

“Yes, we know. That’s the intention, Bill.”

“What?”

“That’s the intention,” he repeated matter-of-factly.

“You’re
deliberately
trying to screw us?”

He blinked. “Yes.”

“But how can you do this? It’s illegal!”

He recoiled slightly. “This is Russia. Do you think we worry about these types of things?”

I thought of all my clients. I thought of Edmond. I couldn’t believe this. I shifted in my seat. “Leonid, you may be fucking me over, but some of the biggest names on Wall Street are invested with me. The pebble may drop here, but the ripples go everywhere!”

“Bill, we’re not worried about that.”

We sat in silence as I processed this.

He looked at his watch and got up. “If that’s all, I have to go.”

Shocked, I tried to think of something else to say and blurted, “Leonid, if you do this, I’m going to be forced to go to war with you.”

He froze, and I did too. After a few seconds he began to laugh. What I’d said was preposterous and we both knew it. Still, while I
didn’t exactly want to take the words back, I wondered what exactly I’d meant. Go to war? Against an oligarch? In Russia? Only a fool would do that.

My nerves shuddered but I remained stock-still. When Leonid was finally able to contain himself, he said, “Is that so? Good luck with that, Bill.” Then he turned and left.

I was so upset that for several seconds I couldn’t move, and when I finally could, I shook with humiliation, shock, and a ton of trepidation. I marched out of the Renaissance offices in a daze into the minus-fifteen-degree Moscow night. I climbed into my car, a secondhand Chevy Blazer that I’d recently bought, and Alexei put it in gear and started for my apartment.

After a few minutes of silence I opened my cell phone and tried to reach Edmond in New York. My first few attempts failed, but eventually I got through. His secretary told me he was busy, but I insisted that we needed to speak. I was afraid to talk to him, but now that it was clear that we were about to get screwed out of $87 million, I had to explain the situation. He was calm, but clearly upset. Nobody likes to lose money—and Edmond was a notoriously bad loser. When I had finished, he asked, “What are we going to do, Bill?”

“We’re going to fight these bastards, that’s what. We’re going to go to war.”

The words were mine but they still felt foreign.

There was a silence. The line crackled. “What are you talking about, Bill?” Edmond asked seriously. “You’re in Russia. You’ll be killed.”

I gathered my wits. “Maybe I will, maybe I won’t. But I’m not going to let them get away with it.” I didn’t care if I was being brave or stupid, or if there was even a difference. I’d been backed into a corner and I meant what I said.

“I can’t be part of this, Bill,” he said slowly, safe in New York, 4,650 miles away.

I was not safe, though, and it filled me with adrenaline. I ran with it. “Edmond,” I said as Alexei pulled the car around onto Bolshaya
Ordynka, the street I lived on, “you’re my partner, not my boss. I’m going to fight these guys whether you’re with me or not.”

He didn’t have anything else to say and we hung up. Alexei parked in front of my building, the engine idling and the heat blasting. I got out and went upstairs. I did not sleep at all that night.

The next morning I walked into my new office, a bigger space that we’d moved into a few months earlier, with my head down. Regret, along with a lot of uncertainty, had crept into me overnight. But when I reached the reception area, a commotion shook me from my thoughts. Packed into the room were more than a dozen heavily armed bodyguards. The one in charge came up to me, his hand outstretched, and in an Israeli accent pronounced, “I’m Ariel Bouzada, Mr. Browder. Mr. Safra sent us. We have four armored cars and fifteen men. We’ll be with you for as long as this situation lasts.”