Aside from work and spending time with Elena, one of the things I most enjoyed in Moscow was playing tennis, which I did often.
One cold Saturday in February 2002, I was running late for a game with a broker friend. Alexei was driving fast, and Elena and I sat in the backseat of the Blazer holding hands. As the car approached the final stretch of road that led to the tennis bubble, I saw a large, dark object in the middle of the street. Cars were swerving left and right to avoid it. I thought it was a canvas bag that had fallen off a truck, but as we got closer, I saw that it was not a bag at all, but a man.
“Alexei, stop,” I shouted.
He didn’t say anything or show any indication of slowing down.
“Goddammit, stop!” I insisted, and he reluctantly pulled the car next to the man. I opened my door and jumped out. Elena followed, and when Alexei saw there was no way out of this situation, he got out too. I knelt next to the man, cars zipping by and horns honking. He wasn’t bleeding but was unconscious, and I noticed that he was twitching and foam was bubbling from his mouth. I didn’t know what had happened, but at least he was alive.
I bent down and looped my arm under one of his shoulders. Alexei took his other shoulder, and Elena grabbed his feet. Together we moved him to the side of the road.
Once we were on the sidewalk, we found a soft bank of snow and gently laid him down. He started to come around. “Epilepsia,” we heard him mumble. “Epilepsia.”
“You’re going to be okay,” Elena told him in Russian, patting his arm.
Somebody must have called an emergency number because just then three police cars arrived. Shockingly, the officers paid no attention to the man and started thumping across the sidewalk looking for someone to blame. After hearing me speak in English and concluding I was a foreigner, they moved on to the Russians in the crowd who’d gathered around. The cops then converged on Alexei, whom they accused of hitting the man with our car. The injured man, who was at this point completely conscious, tried to explain that he hadn’t been hit and that Alexei was trying to help, but the police ignored him. They demanded Alexei’s documents and forced him to puff into a Breathalyzer. They then had a heated argument with Alexei that lasted fifteen minutes. Finally, when they were satisfied that nothing was wrong, they got back in their squad cars and drove off. The man thanked us and got into an ambulance that had arrived while Alexei was speaking with the police, and we piled back into the Blazer.
As we drove off, Alexei explained why he’d been so reluctant to help, as Elena translated: “This is what always happens in Russia. It doesn’t matter if that guy was even hit or not. Once the police get involved, they will blame someone and that’s the end of the story.”
Thankfully, because Alexei had been a colonel in the traffic police, he was able to extricate himself. But for the average Muscovite, a single act of Good Samaritan–ship could lead to a seven-year prison sentence. And every Russian knew this.
This was the story of Russia.
I went to my tennis match, but as hard as I tried, I couldn’t get the incident out of my head. What if we hadn’t stopped? Sooner or later a car wouldn’t have swerved and the man would have been severely injured or killed. Similar situations must have played out all over Russia every day, and this thought made me shudder. This perverse scenario wasn’t just confined to road safety, either. It happened in all walks of life: business, real estate, health care, the school yard, you name it. Anywhere that bad things happened, people would not get involved in order to save their own skin. It wasn’t that people weren’t civic-minded, it was just that the price for intervention would be punishment, not praise.
Perhaps I should have viewed this incident as an omen. Perhaps I should have minded my own business in Russia and not tried to fix the corrupt companies in which I was investing. But I believed that I could help. Because I wasn’t Russian—the police had ignored me as soon as they heard me speaking English—I believed I could do things that a Russian in my position would have never been allowed to do.
• • •
Which explains why, after seeing how well our campaign worked at Gazprom, I decided to go after corruption in other big companies in our portfolio. I went after UES, the national electricity company, and Sberbank, the national savings bank, to name just two. As with Gazprom, I spent months investigating how the stealing was taking place. I packaged the results into easily understandable presentations and then shared these presentations with the international media.
As with Gazprom, once the campaigns reached a fever pitch, Putin’s government would generally step in to flex its muscles.
After I revealed that the CEO of UES was trying to sell his company’s assets at a huge discount to various oligarchs, the Kremlin put a moratorium on asset sales. After I sued Sberbank and its board of directors for selling cheap shares to insiders and friends at the exclusion of minority shareholders, Russia changed the law on abusive share issues.
You may wonder why Vladimir Putin allowed me to do these things in the first place. The answer is that for a while our interests coincided. When Putin became president in January 2000, he was granted the title of President of the Russian Federation, but the actual power of the presidency had been hijacked by oligarchs, regional governors, and organized-crime groups. As soon as he took office, it became his highest priority to wrest power from these men and return it to its rightful place in the Kremlin, or more accurately, into his own hands.
Basically, when it came to me and my anti-corruption campaigns, Putin was operating on the political maxim of “Your enemy’s enemy is your friend,” so he would make regular use of my work as a pretext to knock his oligarch enemies off-balance.
I was so wrapped up in my own success and the runaway returns of the fund that I didn’t understand this. I naively thought that Putin was acting in the national interest and was genuinely trying to clean up Russia.
Many people have asked why the oligarchs didn’t just kill me for exposing their corruption. It’s a good question. In Russia, people get killed for a lot less. It was a completely lawless society where anything could happen, and where anything often did happen.
What saved me was not anyone’s fear of the law, but paranoia. Russia is a country that lives on conspiracy theories. There are layers upon layers of explanations for why things happen, and none of them is straightforward. In the mind of an average Russian, it was inconceivable that an unassuming American guy who barely spoke Russian would aggressively be going after Russia’s most powerful oligarchs on his own. The only plausible explanation was that I must have been operating as a proxy for someone powerful. Considering how each of my battles with the oligarchs led to an intervention by Putin or his government, most people assumed that this someone was none other than Vladimir Putin himself. It was a ridiculous thought. I had never met Putin in my life. But because everyone thought I was “Putin’s guy,” no one touched me.
The upshot of our campaigns and Putin’s interventions was a spectacular recovery in my fund. By the end of 2003, the fund had gone up more than 1,200 percent from the bottom of the market. I’d recovered all of the losses from 1998. It had taken five years and a Herculean struggle, but I’d achieved my goal of pulling my clients out of that terrible hole. In addition to vindicating myself, I also felt that I’d discovered the perfect business model: not only was I making lots of money, but I was also helping to make Russia a better place. There are very few jobs in the world that allow you both to make money and do good at the same time, but I had one of them.
It seemed as if it was all too good to be true, and it was.
Early one Saturday morning in October 2003, as I was running on the treadmill in my apartment watching CNN, a breaking-news headline came across the screen saying that Mikhail Khodorkovsky, the CEO of Yukos and Russia’s richest man, had been arrested.
I jumped off the treadmill, wiped the sweat from my brow, and hurried to the kitchen, where Elena was preparing breakfast. “Have you heard the news?” I shouted, still out of breath.
“Yes. I just heard it on the radio. It’s unbelievable.”
“What do you think will happen?”
“I don’t know. I can’t imagine that he’ll be in jail by Monday morning. Rich people don’t tend to spend much time in jail in Russia.”
My emotions were mixed about Khodorkovsky’s arrest. In the short term, the Russian market would take a big hit and my fund would lose money if he stayed in jail for even a few days. Longer term, however, if he miraculously stayed in jail and this was to be the beginning of a crackdown on the oligarchs, it meant that Russia had a chance at becoming a normal country. Ultimately, that would be a good thing, not just for the fund, but for everyone living in Russia.
When I arrived at the office on Monday morning, Khodorkovsky was still in jail, and the market opened at 10 percent down. His arrest and detention was on the front page of every major newspaper in the world. My clients started panicking, and I fielded calls from them all day. What did this mean? What was going to happen next? Should they take their money out of Russia?
I didn’t know—nobody did. It all came down to the personal negotiation between Vladimir Putin and Mikhail Khodorkovsky, a negotiation in which neither law nor logic played any role.
For reasons that no one will ever really know, this negotiation went badly for Khodorkovsky, and he was still in jail by the end of the week. Then the Russian government escalated matters by seizing Khodorkovsky’s 36 percent block of Yukos.
This was unprecedented. Not only was it a personal disaster for Khodorkovsky, but for the whole financial market. The fear of expropriation sat at the back of every investor’s mind, and now it was happening under Vladimir Putin. Over the next four business days, the market slid a further 16.5 percent, and Yukos lost 27.7 percent of its value.
Why was Putin doing this? The most popular theory was that Khodorkovsky had broken Putin’s golden rule: “Stay out of politics, and you can keep your ill-gotten gains.” Khodorkovsky had violated this maxim when he’d sent millions of dollars to the opposition parties for the upcoming parliamentary elections, and when he had begun to make statements that were clearly anti-Putin. Putin is a man who believes in symbols, and since Khodorkovsky had overstepped the mark, Putin had to make an example out of him.
As if to drive this home, Putin engaged in a full-scale witch-hunt against anyone connected to Khodorkovsky. In the weeks that followed his arrest, Russian law enforcement agencies went after the political parties he’d financed, his charities, and scores of his employees.
In June 2004, Khodorkovsky and his business partner, Platon Lebedev, were put on trial and convicted of six counts of fraud, two of tax evasion, and one of theft. Each was sentenced to nine years in prison. Since this was all about symbolism, Putin did something unprecedented: he allowed television cameras in the courtroom to film Russia’s richest man as he sat silently in the courtroom cage.
It was a powerful image. Imagine you’re Russia’s seventeenth-richest oligarch. You’re on your yacht moored off the Hôtel du Cap in Antibes, France. You’ve just finished screwing your mistress and you wander out of your stateroom to the galley to pick up two glasses of Cristal champagne and some caviar. You grab your remote and switch on CNN. There, right before your eyes, you see one of your peers—a man who is far richer, smarter, and more powerful than you—sitting in a cage.
What would your natural reaction be? What would you do?
Anything to make certain that you don’t end up in that cage.
After Khodorkovsky was found guilty, most of Russia’s oligarchs went one by one to Putin and said, “Vladimir Vladimirovich, what can I do to make sure I won’t end up sitting in a cage?”
I wasn’t there, so I’m only speculating, but I imagine Putin’s response was something like this: “Fifty percent.”
Not 50 percent to the government or 50 percent to the presidential administration, but 50 percent to Vladimir Putin. I don’t know this for sure. It could have been 30 percent or 70 percent or some other arrangement. What I do know for sure was that after Khodorkovsky’s conviction, my interests and Putin’s were no longer aligned. He had made the oligarchs his “bitches,” consolidated his power, and, by many estimates, become the richest man in the world.
Unfortunately, I wasn’t paying enough attention to see that Putin and I were on a collision course. After Khodorkovsky’s arrest and conviction I didn’t alter my behavior at all. I carried on exactly as before—naming and shaming Russian oligarchs. There was a difference this time, though. Now, instead of going after Putin’s enemies, I was going after Putin’s own economic interests.
You might wonder why I couldn’t see this. It all came back to that incident with the man in the road. The police had ignored me that day because I wasn’t Russian. I believed that, because I was a foreigner, I was somehow exempt from the informal rules that governed everyone else’s lives in Russia. If I had been a Russian citizen engaging in my anti-corruption work, I would certainly have been arrested, beaten, or murdered.
But Putin was not as brazen then as he is now. Back then killing a foreigner would have been too drastic a move. And putting me in prison would have made Putin just as much of a hostage to the situation as I was. If he did this, every Western head of state would have been forced to spend a third of their meetings with Putin arguing for my release. In the end, Putin came up with a compromise that satisfied everyone in his circle—on November 13, 2005, upon returning to Moscow from London, I was stopped in the VIP lounge at Sheremetyevo-2, detained for fifteen hours, and expelled from the country.