Thursday, October 08, 2009

Russia Is A 7

Many years ago, we spoke with a renowned investor in Russian equities, whose name we will keep to ourselves for the time being. At that point (Fall 2003), he announced that on the corporate governance spectrum of 1-10 with 1 being horrible and 10 being great, the US was maybe an 8 and Russia was a 7.

Now, we don't want to say the US is perfect, but the story you'll watch below is of the top competitor of the aforementioned Russian manager - Bill Browder of Hermitage Capital. After years of being an outspoken activist against corrupt corporate governance in Russia, Bill was denied entry to the country without explanation. He subsequently modified Hermitage's investment mandate to be "global ex-Russia."

The shell corporation that he left behind in Russia, which had no assets, was later used by corrupt Russian government officials to steal almost a quarter of a billion dollars. When Browder found this out - after the crime occurred - he blew the whistle and, well, you can watch the video to find out what happened next.

While Russia may not be a 7 on the corporate governance scale, it's a 10 on the places most likely to murder you for public dissent.

[Hat Tip: Max Headroom]