American Role in Creating Russian Kleptocracy Missing in Financier’s Senate Testimony
Investigative economist James S. Henry and TRNN’s Paul Jay discuss Bill Browder’s accusations of corruption and murder against Vladimir Putin; Henry says Trump’s dubious Russia connections are more about Russian oligarch’s investments and secret loans than election manipulation
PAUL JAY: Welcome to The Real News Network. I’m Paul Jay in Baltimore. On Wednesday, July 26, financier Bill Browder testified before the Senate Judiciary Committee about his allegations of Vladimir Putin’s involvement in massive corruption and murder. His testimony, while missed by much of the media at the time, has since become a viral news story.
Browder founded and ran one of the largest investment firms in Russia, Hermitage Capital Management, from 1996 to 2005. He made a fortune in the privatization mania that looted the Russian economy and was encouraged by U.S. foreign policy. He had a falling out with President Putin, who he says initially supported Browder’s fight against corruption but then turned on him as Putin carved out more territory for himself.
Hermitage claimed in a pre-released statement published by The Atlantic Magazine that Putin demanded a 50% cut of all major business ventures in Russia, which made him the world richest man with a fortune of more than $200 billion stashed in western banks. Here’s a segment from that testimony.
BILL BROWDER: Vladimir Putin, I believe to be the richest man in the world, I believe he’s worth $200 billion. That money is held all over the world in banks in America and all over. The purpose of Putin’s regime has been to commit terrible crimes in order to get that money. He doesn’t want to lose that money by having it frozen, so he personally is at risk of The Magnitsky Act. It’s a very personal venal issue, which is why, the first reason why, he’s so upset.
PAUL JAY: Browder presented no verifiable evidence of the financial claims or evidence of Putin’s direct involvement. According to Browder, when a group of Russian oligarchs forced him and a partner out of $230 million via extortion and forgery, he and his lawyer, Sergei Magnitsky, went to the authorities with a fraud claim. Browder says Magnitsky was arrested. When he refused to withdraw Browder’s case he was mistreated in prison and eventually died there.
Browder says that he has fought to make Putin accountable for these crimes and that one of his lawyers on his team was poisoned. Another was thrown out of a fourth floor window and survived. Browder successfully lobbied U.S. senators for passage of a law to sanction the Russian officials involved interview the Magnitsky affair by prohibiting them from entering the United States or using the American banking system.
This is known as The Magnitsky Act, passed in 2012. This leads us to accusations that the Trump campaign held discussions with Russian lobbyists about lifting the sanctions in the run up to the U.S. presidential elections.
Now, joining us to assess Browder’s testimony and Trump’s possible role in all of this is James Henry. James is an investigative economist, a lawyer, and global justice fellow at Yale. He’s also a senior advisor to the Tax Justice Network. Thanks for joining us, James.
JAMES HENRY: You’re quite welcome.
PAUL JAY: Before we get going, let me do a little bit of caveat or framing of this. Preface of this I guess is a better word. In criticizing Putin and criticizing Russia, and doing stories about corruption and doing stories about Russian interference or intervention in this or that, I think it behooves anyone who’s in the United States to first recognize that when we’re talking about the Russian oligarchy, we also have to recognize there is an American oligarchy.
To have some moral high ground supposedly, which I think is reflected in much of the American media, is ridiculous. I think if one looks at certainly the international footprint, the United States has committed far, far graver war crimes than Putin’s Russia has. Not to say they haven’t some, but perhaps more domestic than international, but even domestically.
We live in the city of Baltimore. For much of the people in the city of Baltimore, according to the Department of Justice, their constitutional rights are violated every single day of the year. Let’s not diminish what America’s role in the world is, both internationally and domestically.
On the other hand, we’re not also apologists for Putin’s oligarchs, either. We are not timid or unafraid to talk about, or afraid to talk about, what the oligarchy in Russia is capable of and has done. All that being said, who the heck is Bill Browder anyway? Let’s start, James. Tell us who is Browder. How seriously do we take his testimony?
JAMES HENRY: Well, he’s one of the biggest investors in Russia during the 1990s. I think that’s a good point of departure here because I think one of the key points about the 1990s was that, as my colleague Jeffrey Sachs has admitted, United States never had kind of a Marshall Plan for Russia. We kind of let them fall into a great depression after the fall of the Soviet Union.
A lot of the mistakes that were made, presided over by the Clinton administration, had to do with this very rough transition that Russia went through in which 25 or 30 people ended up acquiring a whole lot of the state wealth and the Russian national wealth during that period. That’s where the oligarchy that we’re complaining about today came from.
One of the reasons that Putin came to power, in fact, was in a reaction to that kind of dismal performance during the 1990s and the failure of kind of a liberal, democratic transition. I think that’s a very important thing for Americans to understand before they get too judgmental about Putin and his politics. He came out of-
PAUL JAY: Bill Browder was one of the people in on trying to loot the post-Soviet Russian economy. If I understand it correctly, he played in a pretty dangerous shark pool, and then the sharks turned on him.
JAMES HENRY: Well, [crosstalk]. Yeah. I mean, I hesitate to use the words loot. I think there are awful lot of American and foreign investors in general who played in that pool. Most of them made out quite handsomely for a while, and then they got burned.
It was really I think a question of many of these investors were dealing with a business environment where corruption was the rule of the day and the oligarchs were getting loans for shares in order to buy up huge chunks of the Russian economy. About 150,000 companies were privatized in Russia for a grand total of $9.8 billion. That was a pittance. [crosstalk]
PAUL JAY: Just to make sure everybody gets the significance of what you just said, large commanding heights of the Russian economy sold for less than the personal fortunes of many of the American billionaires. As you say, a pittance, like lunch money for some of the billionaires in this world.
JAMES HENRY: Well, exactly right. Then, because Russia failed to develop the rule of law and reliable courts and other protections for private property that Americans take for granted, the next step was for there to be an enormous tidal wave of flight capital leaving Russia. As of 2014, we had about $1.3 trillion of foreign flight wealth that soared out of Russia owned by these oligarchs and others.
I mean, if Putin had actually owned $200 billion, he’d own about 20% of that. I doubt it’s that high, but, in any case, this was entirely a kind of botched transition of the Russian economy from the former Soviet Union to its current state.
PAUL JAY: What do you make of Browder? 50% of all major business transactions in Russia have to go to Putin, that Putin’s got … Just the richest man in the world, and so on.
JAMES HENRY: Well, I’m just a journalist. I’d like to look at some documentary evidence or some kind of substantiation. There have been all kinds of estimates for the volume of Putin’s alleged wealth. 2007, there was a report published by some Russian analysts in The Guardian that claimed he had a $40 billion stock of offshore wealth.
The 50% claim is interesting, but it’s something that has no substantiation. Though it’s easy for us to demonize Putin and ignore the past and sort of the origins of Putin, but I think the key thing is how did Putin and Donald Trump come to be? I mean, it basically … When we look at Trump and his [crosstalk].
PAUL JAY: James, just for a sec.
JAMES HENRY: Yeah.
PAUL JAY: Before we get into the Trump connection.
JAMES HENRY: Yeah.
PAUL JAY: Let’s just go back a little bit at the Magnitsky thing.
JAMES HENRY: Right.
PAUL JAY: It seems to be … There’s no question Magnitsky in fact was in prison, did die in prison.
JAMES HENRY: Yes.
PAUL JAY: I think the Russians do not acknowledge that he was murdered in prison, but what do we know of some of those kinds of claims? He claims his lawyer was poisoned and so on. Again, he presents no evidence of any direct connection to Putin. This is all kind of assumed.
JAMES HENRY: Yeah. Well, I think that the circumstances surrounding Magnitsky’s death are pretty well established. I think Browder’s on strong ground when he claims there’s been not only Magnitsky’s death, but a whole series of rather suspicious tragic endings for people who spoke out against Putin and his team. That led to The Magnitsky Act in 2012.
I mean, I think it’s plausible to say that Magnitsky and the deaths of people like [inaudible] and several others involved in the Hermitage case were retaliation for their behavior, and possibly just a response to the fact that this money that was ripped off from Hermitage ended up in New York real estate.
I think Browder has a good claim there, but a lot of these issues, I mean, I think this underscores the need for the U.S. Congress to really get off the dime here and start investigating some of these accusations with real subpoena power so we get to the bottom of it.
PAUL JAY: One of the accusations is the information that came out in the Panama Papers. This is this bank where the papers were released about who had accounts there. Recently brought down the prime minister of Pakistan.
JAMES HENRY: Yeah.
PAUL JAY: Others have suffered some consequences having been revealed to have had shady banking dealings there. What do we know about the cellist and the $2 billion that is supposed to be connected to Putin?
JAMES HENRY: Well, the cellist is a godfather of Putin’s … One of his daughters. Goes back. They have a relationship going back to the 70s. He turns up in the Panama Papers as a beneficial owner of a number of companies, like the five companies which were involved in channeling funds back and forth. There’s a bank called [inaudible] Bank, which was quite important in this transaction. Maybe at least $2 billion was traceable through the Panama Papers’ emails having passed through these companies.
Roldugin never really denied any of that and doesn’t have much of an explanation for how he as a musician ended up as a beneficial owner of these companies. Once again, we’ve never had really hardcore balance sheet statements or asset accounting for how much wealth is actually held through those Panama companies.
PAUL JAY: The Senate Committee, the House Committee, they’re all focused on this election interference, which as far as I can make out there’s nothing in the public domain that is a hard case that Russia was involved in it. I mean, I think it’s fairly obvious that if you look at RT, the Russian-owned television network, and other platforms that the Russians were hoping Trump would win, and why not? Trump was advocating diminishing, reducing tensions with Russia and might’ve lifted sanctions.
That being said, the exposure in Wikileaks of DNC wrongdoings undermining the Sanders campaign … Seems to me the bigger crime was the undermining of the Sanders campaign. All that being said, and for partial political reasons, they want to make hay out of the election interference. Why aren’t those committees using subpoena powers to go after this side of it where there really seems to be some smoking guns, the financial side?
JAMES HENRY: Well, the financial side I think is a much stronger area to investigate. There’s no question that Trump engaged in quite a few projects with shady business partners. Not only Russians and people from the former Soviet Union states like Kazakhstan, but also Columbia and the case of the Trump SoHo.
We see a number of partners channeling through kind of dodgy Icelandic companies. There’s a whole litany of projects where there may well have been bribery involved in the construction process that would be prosecutable under the Foreign Corrupt Practices Act. Money laundering, securities fraud involving investors that were not told about the felony connections of some of Trump’s partners, like in the case of the Trump SoHo.
There’s an enormous number of those kinds of dealings, but they’re not consistent with Trump being a Putin mole. It’s more like he’s basically a kind of Berlusconi figure who engages in deals with all kinds of dodgy partners. I think that’s something that should’ve come out before the election, but unfortunately the media basically dropped the ball on that. [crosstalk]
PAUL JAY: Well, it’s not just the media.
JAMES HENRY: Yeah.
PAUL JAY: You would think the Clinton campaign would’ve been all over this, and didn’t. Is it possible they didn’t and also possible the media, because the politicians didn’t, it’s because it’s a Pandora’s Box? In exposing Trump it may open up a lot of threads that may expose other people, some of whom might be friends of the Clintons and others. I mean, I don’t think … Trump’s probably not the only member of the American oligarchy playing this game.
JAMES HENRY: No, I think there are people who are on both political parties who stand to lose if we do too much investigating about these kinds of financial deals. The most interesting aspect of this from that standpoint is now where do we go from here? We’re kind of waiting for Congress to get its act together, but people are counting on Mueller to really investigate the election coordination.
It’s not clear that he has a mandate to investigate all of this financial chicanery. It may just fall through the cracks. We may never really get to the bottom of it.
PAUL JAY: The irony of this, we just published a story that sort of referenced this, maybe the one decent policy that Trump had, at least in my opinion, of reducing tensions with Russia and Syria and elsewhere, it’s probably motivated by very banal economic on Trump’s part. Both his prior shenanigans with various Russian oligarchs, but also a big energy play. I think clearly Tillerson and Exxon wanted to have all sanctions lifted so they could have a great, big energy deal with Putin and Russia.
JAMES HENRY: Yeah. Well, none of that really happened. I think the main, if you wanted to say that Putin benefit from Trump’s election, the only clear-cut thing you can point to is the climate change policy. Russia really has no green technology. Putin is warned as recently as last year in a strategic review that actually that climate change controls was kind of a leading threat to Russia’s oil-based exports. That’s the one thing that you could say Trump really has helped Putin with is the [crosstalk].
PAUL JAY: Don’t you think that there’s a conflict here between different sections of American capital? The section, Exxon directly, and perhaps other parts of the fossil fuel industry, they wanted this, lift sanctions on Russia and have a freer hand in playing the Russian energy sector.
Military industrial complex wants to keep tensions high. They need this rationale for … They just delivered a new … The first Ford-class aircraft carrier for-
JAMES HENRY: Yeah.
PAUL JAY: I think the sticker price was $13 billion, but it’s probably coming in more at 16 or 17. They’re going to do I believe it’s 11 or 12 of these things. You need a big existential power as the threat to justify these kinds of expenditures. Different sections of American capital want different things out of this Russian narrative.
JAMES HENRY: Yeah. It’s not a simple kind of determinist formula. I mean, you see just in the last six months you’ve seen Trump plumping for NATO to increase defense spending. That can’t make Putin happy. We now have military exercises going on toe to toe on the eastern front with Russia, about to have 100,000 troops in western Belarus.
Putin has not gotten the relaxation of the Ukrainian sanctions. Whether Trump left to his own devices would’ve pushed that through, we don’t know, but this is kind of a … Sort of a complicated policy menu. It’s not just one sort of set of interests that’s able to control the flow.
PAUL JAY: Yeah. No, there’s a lot of contending interests here, including the military industrial complex of Russia who makes tons of money on arms manufacturing for Russia and for export.
JAMES HENRY: Yeah.
PAUL JAY: And who probably don’t mind a lot of saber-rattling coming from the Americans as well. It’s a lot of different interests that profit from volatility and threat.
JAMES HENRY: Exactly. I mean, I think the only thing you can consistently say about Trump’s behavior is that he’s basically an opportunist. I’m not sure what he believe at the end of the day, but he’s clearly going to make this up as he goes along. I think Putin’s going to have buyer’s regret as well, assuming he had some impact on the election, which we’re not sure about at all.
PAUL JAY: In terms of going forward, you don’t expect them to do a serious and financial side of this investigation, in which case they may not end up with very much except the lobbying against The Magnitsky Act, which there seems to be enough smoking gun around there that [crosstalk 00:19:53] discussions about that.
JAMES HENRY: Yeah. I don’t think there’s any evidence that Trump actually lobbied against The Magnitsky Act, as Browder claimed they wanted them to do. I think going forward the issue is does anybody have a mandate to investigate the real stuff, which is the financial chicanery? I just think that falls between the cracks here. It’s not clearly something that Mueller has a mandate to do.
He might try to investigate some of the activities of Trump’s senior team, like Manafort, who are engaged in some of these financial deals, but whether it really extends to Trump’s own financial dealings is doubtful. Unless we get more of hardcore evidence that there was really coordinated effort with respect to rigging the 2016 elections, we haven’t seen that so far, all of this financial chicanery may just go by the boards as well.
PAUL JAY: Yeah. As I say, I think that’s the most likely because I think if it’s ever undertaken seriously it goes way beyond Trump. He’s not the only one involved in this.
JAMES HENRY: Right.
PAUL JAY: Anyway, thanks very much for joining us, James.
JAMES HENRY: You’re very welcome.
PAUL JAY: Thank you for joining us on The Real News Network.