Bill Browder had hired 15 Israeli military guards and 5 security guards to project himself in Moscow.

He was a British citizen who’d made a fortune investing in Russia in the 90s. So much that he’d become the largest foreign investor in Russia.

This created a problem.

Because the rule of law is so weak in Russia, being a businessman is similar to being an inmate in a prison yard.

Your reputation is the only thing that matters, so as a Russian oligarch you do everything to increase it.

Including trying to steal $87 million from the largest foreign investor in Russia.

Dilution

That’s what one Russian Oligarch named Potanin tried to do.

His scheme’s details only matter to show you how brazen he was:

The plan was to issue new shares in a company that he and Browder already shared ownership in. Normally as an owner you simply buy some of the new shares so you don’t get diluted.

Instead Potanin made an explicit rule that any investor could buy the new shares except for Browder.

The Sit Down

As soon as Browder finds out he goes in to meet with Potanin’s chief lieutenant to find out WTF is going on.

After waiting hours to see the guy this amazing conversation goes down:

Russian: What brings you here today?

Browder: You know what. I’m here to talk about the company.

R: Yes. What about it?

B: If this dilution goes forward, it’s going to cost me and my investors millions.

R: Yes, we know. That’s the intention Bill.

B: What??

R: That’s the intention.

B: You’re deliberately trying to screw me?

R: Yes.

B: How? It’s illegal!

R: This is Russia. Do you think we worry about these types of things?

At this point any normal foreigner would back down. Foreigners in Russia had been killed over far less.

Not Browder. He started making plans:

We’re going to fight these bastards. We’re going to go to war.

Stage 1: Tell The Russian’s Friends

Browder’s first move is to call every Western business partner of Potanin.

This included people like George Soros and the Harvard endowment fund.

Browder’s pitch was simple: if you let Potanin get away with this with me, he’ll eventually do it to you.

These Western organizations did make some calls to Potanin and it did piss him off that Browder was talking to Potanin’s investors, but he didn’t budge.

No way he’d let himself get pushed around by a foreigner.

Stage 2: Make it Public

Browder then met with the Moscow bureau chief of the Financial Times. She was an expat and had been looking for a big story on an oligarch.

She wrote up the detailed saga and gave Potanin a chance to comment.

He used the opportunity to double down(!), saying Browder should have known he’d get screwed, and that it was his own damn fault(!!)

The Financial Times story got picked up everywhere: the Wall Street Journal, Bloomberg, all the usual Western suspects. The share dilution issue became the topic in Russian financial market gossip.

Stage 3: The Enemy of Your Enemy is Your Friend

Browder’s final move was to appeal to the Russian government itself.

Amazingly it worked, and they shut down the share issuance.

But only because Browder had given the government cover. He said as much:

The reason [Vasiliev, the chair of the Russian SEC] made the decision [to shut it down] is that I was screaming bloody murder. Nobody had ever taken such a visible and outspoken position. I was shooting from the trenches and this gave him cover to take his own steps.

You have to remember that … oligarchs owned the government and Vasiliev was worried about terrible things happening to him, professionally or even worse. By not initiating but responding to an attack, he felt more empowered to act.

He asked us on a number of occasions to raise specific points in the press, because he couldn’t go on the offensive until something came out publicly. He was clear that he couldn’t be seen as initiating but responding.

Good for Browder but you still have to ask: why didn’t Potanin just go ahead and kill Browder anyway?

The social dynamic here is important: because the government was the final organization to stop the issuance (instead of Browder himself) it gave Potanin a way to save face.

It’s like if you’re in a prison fight with another inmate and an officer comes to break it up.

No one “loses” so no one’s reputation takes a hit.

Remember to give your enemies a way to save face if you want something from them.

UPDATES: The journalist who helped Browder was banned last year from entering Russia.

Bill Browder has an excellent Twitter account