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Are Kidnappings, Death Threats, and Assasinations Simply "Part of Doing Business" in Russia?

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20 year-old Ivan Kaspersky, son of Russian software entrepreneur Yevgeny Kaspersky, has gone missing in Moscow.

According to Russian website Life News, the younger Kaspersky was abducted on his way to work on Tuesday. The kidnappers are reportedly demanding a ransom of 3 million euros.

Reports such as this have become all too common over the past several years -- so much so that British businessman William Browder, founder of Hermitage Capital Management, shared his harrowing experience doing business in Russia with readers of the Telegraph, as foreign minister Sergei Lavrov traveled to London to "extol the virtues of investing" in the country two months ago.

"Doubtless, there will be a good deal of talk about modernising the Russian economy and extolling the virtues of investing in it," Browder wrote. "Reference will be made to large investments made by BP (BP), Pepsico (PEP) and other multi-nationals as evidence of the 'improving investment climate.'

"But before anyone takes these representations at face value, they should hear my story."

To call Browder's time there "Kafkaesque" would be missing the mark by a healthy margin.

To wit:

The trouble began after my fund launched a campaign to clean up the multi-billion dollar corporate malfeasance taking place in the Russian state-owned gas monopoly Gazprom, and in Surgutneftegaz. After we named names and exposed the details of several enormous corruption schemes, the Russian foreign ministry declared that I was a "threat to national security". On November 13, 2005, I was deported and barred from re-entering the country.

My deportation was the beginning of an unimaginable nightmare. On June 4, 2007, the Russian police raided my offices in Moscow, seizing documents which were then used by Russian officials to expropriate our investment holding companies, forge billions of dollars of fake liabilities and embezzle taxes that we had paid to the Russian government the previous year. Incredibly, officials then approved – overnight – the largest fraudulent tax refund in Russian history, amounting to US$230 million. This was paid out two days later to a group of criminals working hand in hand with corrupt officials. Meanwhile, my employees and I received anonymous death threats.

So we hired a young Russian lawyer named Sergei Magnitsky to investigate. Working with lawyers and forensic investigators, he pieced together evidence of the criminal conspiracy and testified on the record against senior police officials, judges and criminals involved. Sergei was then arrested by the same police officers he had provided evidence against, locked away without bail or trial and shuffled between increasingly harsher detention centres for a year in an effort to get him to change his testimony. He was denied medical care and family visits, and tortured. After 358 days in detention, he was found dead. The Wall Street Journal (NWS) described his death as a "slow assassination".

Browder goes in to say, "It is a fact that there is no safety for people working in Russia and no protection of property rights. Local journalists have been attacked and killed in broad daylight, human rights activists and intellectuals are silenced, opposition leaders are detained, business competitors and professionals are wrongly accused and prosecuted, and foreign whistleblowers or international journalists are deported."

While the opportunity for big returns are obviously attractive, the potential for major losses -- financial and otherwise -- might give most people pause. Besides, there are plenty of other, safer places in which to do business these days:

Ciudad Juarez.



Just stay out of Moscow.
POSITION:  No positions in stocks mentioned.