The New York Times reports on high-level corruption within the Russian state. Once again they've translated the article and posted it on a Russian blog, comments from Russian readers are here. Two examples:

William F. Browder was one of the most prominent foreign investors here, a corporate provocateur who brought the tactics of Wall Street shareholder activists to the free-for-all of post-Soviet capitalism. Until, that is, the Kremlin expelled him in 2005.

Mr. Browder then focused on protecting his billions of dollars of stakes in major Kremlin-controlled companies like Gazprom, and on fighting to return to a land where he had deep and unusual family ties. So when he ran into Dmitri A. Medvedev, the country’s future president, at the World Economic Forum in Davos last year, he saw his chance. In a brief conversation at a dinner at the Swiss resort, he pressed Mr. Medvedev for assistance in regaining his Russian visa. Mr. Medvedev, then a top aide to President Vladimir V. Putin, agreed to pass along his request. A short time later, Mr. Browder’s office received an unexpected phone call from a senior Moscow police official, who said he had learned of Mr. Browder’s new visa application and might be able to help. “My answer will depend on how you behave, what you provide, and so on,” the official said, according to a recording of the call supplied by Mr. Browder. “The sooner we meet and you provide what is necessary, the sooner your problems will disappear.”

Mr. Browder’s problems, in fact, were just beginning.

The phone call was one move in a wide-ranging offensive by Russian law enforcement that exposed Mr. Browder to the kind of crippling investigations that Kremlin critics have regularly endured under Mr. Putin. It appeared that the ultimate goal was not only to seize Mr. Browder’s investment empire, but also to make him an example of what happens to those who do not toe the government’s line. His downfall offers a study in how the Kremlin wields power in the Putin era. The rule of law is subject to its wishes, and those out of favor are easy prey.

Mr. Browder’s case points to the official corruption that afflicts Russia, and the Kremlin’s unwillingness to adopt serious measures to combat it by bolstering the independence of the police and courts. The Kremlin may be reluctant to do so because it wants Russia’s wealth to accrue to those loyal to the leadership. Until his visa was canceled and he moved his operations to London, Mr. Browder cut a colorful figure in Russia, a foreign version of the Russian oligarchs who earned their fortunes in the mass privatization after the fall of the Soviet Union. He courted publicity, and his background made a good story: he is the grandson of Earl Browder, a leader of the American Communist Party in the 1930s. He often said that, not unlike Russia itself, he rebelled by becoming a capitalist. He arrived in Russia in 1996 after a stint in London as an investment banker, and quickly saw opportunities. Russia’s economy was undergoing colossal changes, and Mr. Browder positioned his company, Hermitage Capital, as a vehicle for Western investors to get a piece of the action.

After Mr. Putin became president in 2000, Mr. Browder became a vocal supporter of the Kremlin, saying that Russian needed an authoritarian leader to establish order and calling Mr. Putin his “biggest ally” in Hermitage’s effort to reform big business. Mr. Browder thrived, and the funds managed by Hermitage grew to more than $4 billion.

Mr. Browder does not know exactly why the Kremlin turned against him. But the Kremlin was consolidating control over prized companies like Gazprom and appeared to be chafing at criticism from outside shareholders. Once things went bad, Mr. Browder had no recourse. The police confiscated vital documents from his lawyer’s office in Moscow. He discovered that his holding companies had been stolen from him and re-registered in the name of a convicted murderer in a provincial city. Whoever was behind the scheme took over much of Mr. Browder’s corporate structure in Russia, but failed to get at his investors’ money. Even so, in recent weeks, Mr. Browder said he had learned that his former holding companies had been used to embezzle $230 million from the Russian treasury.

This article is based on interviews with Mr. Browder, his associates and lawyers, as well as on numerous documents they provided that they say prove corruption. Many of his assertions were confirmed independently. Requests for comment were made to several law-enforcement agencies in Russia that Mr. Browder accuses of carrying out or refusing to investigate the scheme. They did not respond or said they would not comment. The Kremlin has not spoken publicly about his case, despite frequent appeals by Mr. Browder and senior British and American officials. Twice in the last two years, Mr. Putin has been asked by reporters about Mr. Browder. Both times, he denied even knowing Mr. Browder’s name.

“I don’t know who this Mr. Browder is, as you say, why he cannot return to Russia,” Mr. Putin, who is now prime minister, said in May. “Russia is a big country,” Mr. Putin said. “There might have been some kind of complications. There might have been some kind of conflicts — conflicts with the authorities, conflicts in the business world, interpersonal conflicts. But that’s life, it’s complicated and varied. If a person thinks that his rights have been violated, let him go to court. We have a legal system that works, thank God.”

A spokesman for Mr. Medvedev, who succeeded Mr. Putin as president in May, confirmed that Mr. Medvedev had spoken with Mr. Browder at Davos last year, but would not comment further. Mr. Medvedev, a former law professor, has vowed to wage war on corruption, often saying that Russia is plagued by “legal nihilism.” Still, the Kremlin under Mr. Medvedev has also snubbed Mr. Browder. “If ever there was a definition of legal nihilism, this is it,” Mr. Browder said in an interview in his office in London, where he now lives. “I was actually fighting to make Russia a better place, and fighting against corruption, which is something that they should have given me a medal for,” Mr. Browder said. “Instead, they drive me out of the country and tarnish everything that I did there.”

A Personal Stake

For Mr. Browder, who is 44, Russia was more than a place to do business, His grandfather, Earl Browder, was a committed Communist from Kansas who moved to the Soviet Union in 1927, staying for several years and marrying a Russian. He returned with her to the United States to lead the Communist Party for a time, even running for president. William Browder also aspired to help build Russia. He hoped to get rich, but he argued that his fight against corporate malfeasance would benefit the country. After all, even as oligarchs got absurdly wealthy in the 1990s in highly questionable schemes, many Russians fell into poverty. “I had a lot of my family in me, and tried to find a way of connecting my past to my future,” he said.

Mr. Browder grew up in Chicago and attended the University of Chicago. After graduating from Stanford Business School in 1989, he set off for London. He later became a British citizen, not out of antipathy toward the United States, he said, but because he felt comfortable there. Mr. Browder’s company, Hermitage Capital, was first bankrolled by Edmond J. Safra, the billionaire founder of Republic National Bank in New York. Mr. Browder said the late Mr. Safra taught him not to shy from kicking up a scandal to protect his interests.

Following that advice, Mr. Browder made a lot of money and a lot of enemies after arriving in Russia in 1996, garnering a reputation as a sharp-eyed analyst of Russian industry who could also be abrasive and headstrong. Hermitage started with $25 million from Republic. The fund was so profitable in its first 18 months, reaping a gain of 850 percent, that it soon attracted more than $1 billion from institutional investors and others in the West. In the Russian financial collapse of 1998, it plunged to $125 million, but it recovered over the past decade, reaching a peak of more than $4 billion. Despite his success, Mr. Browder led a relatively austere lifestyle in Moscow, eschewing the trappings of many expatriates and working so hard, he says, that he learned to speak barely a word of Russian. He tried to keep a low profile, but did employ bodyguards when he engaged in shareholder battles.

Mr. Browder concentrated his investments on the largest Russian companies, most of them in the energy sector and under some Kremlin control. Hermitage became expert at conducting forensic audits into their finances, uncovering all manner of wrongdoing, from insider trading to outright theft. He often leaked the information to the Russian and international press. “It became a matter of desperation, not inspiration,” he said. “You had to become a shareholder activist if you didn’t want everything stolen from you.” Gazprom, one of the world’s largest companies, was a favorite target. Mr. Browder discovered that billions of dollars in gas had been sold at deeply discounted prices to shady intermediaries.

But by 2005, Mr. Putin had assumed complete control over Gazprom as part of his drive to re-nationalize central energy assets. When Hermitage released a dossier assailing mismanagement and corruption at the company, the Kremlin had had enough.
A few months later, Mr. Browder’s visa was canceled. Over the next two years, several of Mr. Browder’s associates and lawyers, as well as their relatives, were victims of crimes, including severe beatings and robberies during which documents were taken. None was solved.

Victim of Corporate Raiding

The real trouble, though, got underway in June 2007, with Mr. Browder stuck outside the country. Dozens of police officers swooped down on the Moscow offices of Hermitage and its law firm, confiscating documents and computers. When a member of the firm protested that the search was illegal, he was beaten by officers and hospitalized for two weeks, said the firm’s head, Jamison R. Firestone. Supervising the raids was the same police official who called Mr. Browder’s office about the visa three and a half months earlier, Lt. Col. Artem Kuznetsov of the Department of Tax Crime of the Interior Ministry. He said he was seeking evidence in an inquiry into whether one of Hermitage’s related entities, called Kameya, had underpaid its taxes by $44 million.

According to court documents obtained by Hermitage lawyers, the F. S. B., successor to the K. G. B., approved the inquiry. The Interior Ministry and the F. S. B. would not comment. Their role against Hermitage was not unusual. Law enforcement has been repeatedly deployed during Mr. Putin’s tenure against Kremlin critics or those whom the Kremlin did not favor in business disputes. Opposition parties faced numerous investigations during the parliamentary elections last fall.

In recent months, TNK-BP, Russia’s third largest oil company, has been subjected to 14 such inquiries, apparently in an effort to push out BP, the British oil giant, which owns half the venture, BP said. The Kremlin apparently wants a state company to take over TNK-BP, analysts said.

The issues surrounding the Hermitage tax payment were complex, but there was a larger question: why did the police need to carry out searches and seize so many documents, including many unrelated to Kameya, when such tax disputes are first supposed to be handled through routine bureaucratic channels? Even more curious, Hermitage asked the Russian tax authorities whether Kameya owed back taxes. The answer was no. But it did not matter. Hermitage was about to become victim of what is known in Russia as corporate raiding, which involves seizing companies and other assets with the aid of corrupt law-enforcement officials and judges. The phenomenon has flourished under Mr. Putin.

In the weeks after the police seized the corporate documents, someone used them to transfer the ownership of three of Hermitage’s holding companies to an entity based in Kazan, a provincial capital 450 miles east of Moscow. The entity’s registered owner was a man with a murder conviction, records show. Now that the corporate raiders had seized the three Hermitage holding companies, they resorted to a classic strategy to try to drain them of money A lawsuit was filed in a court in St. Petersburg in July 2007 against the holding companies, asserting that they had defrauded another company, Logos Plus, of hundreds of millions of dollars in a 2005 deal involving Gazprom stock.

In fact, everything about the lawsuit was bogus, Hermitage lawyers said. Hermitage had never done business with Logos Plus. The documents submitted to the court had obvious inconsistencies, suggesting that conspirators were not worried about being caught. A power of attorney for one of the Hermitage companies was dated four months before the company had been created. While it is unclear whether the judge knew about the fraud, she let the case go forward anyway. Lawyers whom Mr. Browder had never heard of showed up to defend the Hermitage companies and admitted wrongdoing. The judge ruled in favor of Logos Plus. In all, 15 such claims were put forth in similar cases. A total of $1.26 billion in judgments against Hermitage, which did not even learn of the cases until three months later.

Becoming a Personal Target
In the end, the raiders got nothing from Hermitage. After his visa was canceled, Mr. Browder, concerned about such an onslaught, had quietly moved his Russian assets off shore and sold most of them. The holding companies were shells. Still, the scheme was not done. In recent weeks, Hermitage discovered that the fake lawsuits had served another purpose. The raiders used the legal judgments to alter the holding companies’ balance sheets, wiping away their profits for 2006.

They then went to the tax authorities and applied for a refund on taxes that Hermitage had paid in 2006 on the profits. The authorities handed them $230 million from the Russian treasury, Hermitage lawyers said. While Mr. Browder did not suffer grievous financial losses, his work in Russia has been ruined. He has only small investments left here, and has evacuated his Russian staff to London, fearing for their safety. Mr. Browder has, over the last year or two, reinvented himself and Hermitage now has more than $3 billion invested in other parts of the world.

Beginning last December, Hermitage and its bankers filed dozens of lengthy complaints with Russian government agencies, presenting numerous pieces of evidence, including the phone call from Lieutenant Colonel Kuznetsov. To no avail. Mr. Medvedev appointed a committee in May to develop an anti-corruption program, and Hermitage sent letters to its members. None responded. At the same time, as Mr. Browder has stepped up his complaints, the Interior Ministry has set its sights on him personally. It has opened a criminal inquiry into whether he violated an obscure tax law in 2001.

Hermitage did convince one agency, the State Investigative Committee, which is part of the prosecutor general’s office, to examine the case. But Hermitage has come to realize that this inquiry will also most likely go nowhere. Last month, a Hermitage lawyer went to a meeting at the investigative committee about the case and saw a familiar face. It turns out that one of the officials who is helping to lead the inquiry into Hermitage’s allegations is Lieutenant Colonel Kuznetsov.