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MAY 1, 2006
By Maria Bartiromo From Russia, A Cautionary Tale Bill Browder has had a hot hand in a hot market: Russia. His emerging-market fund, Hermitage Capital Management, with some $4.1 billion under management, is the single largest foreign investor in Russia. But doing business there can be fraught with risk, and at times Browder feels as though he just woke up in a Russian novel. Last November, Browder was suddenly denied entry when he landed in Moscow. He has been trying to return to Russia ever since. 
What happened on Nov. 13? For the last decade I have kept homes in London and Moscow, and every other weekend I have traveled back to London -- 25 trips a year. I took an Aeroflot afternoon flight [from London to Moscow]. With all of the intense traveling, I decided to pay for a service where you go to a VIP lounge, present your passport, and get a cup of coffee instead of standing in line. So I go to the VIP lounge, and 45 minutes later my passport still hasn't been stamped. I sent my driver [to see what was afoot]. Then I notice there is some unpleasant tension between my driver and the immigration person. I go up to the immigration desk, and they tell me that my visa is not going to be accepted and that I have to return to London. Do you think the government is blocking your return? No, I don't think it's a policy decision. I believe a corporation unhappy with our activities [is behind all this]. The government should be happy because my fund is so successful. If you invested $1,000 in 1996...it would be worth $23,000 today. Tell me about your biggest investment, Gazprom. I started investing in a significant way in 1999. At the time, the government owned 38%; today it's 51%. The management didn't own anything, but they were busy transferring assets to their own account. Back then, Gazprom was trading at a 99.7% discount per barrel of proven reserves to ExxonMobil (XOM ). The market knew something bad was going on and assumed everything was going to get stolen. [Our] forensic analysis...discovered only 9.65% of the assets had been stolen. The market was overreacting. We bought a lot of stock and then [figured out] how they were stealing. I now have hundreds of millions of dollars invested...so each year we compile a dossier that [lays out] things the company should be doing differently. This helps the stock price because...many things we identify stop happening. But it isn't good for the people who benefit from the things we identify. How big is Gazprom, and is the stealing still going on? Put it this way: 9.65% of the assets of Gazprom is equivalent to an oil company the size of ExxonMobil. The stealing doesn't go on today because we have been so active in stopping that stuff. [Gazprom spokesman Sergei Kupriyanov says he can't comment on what happened before the new management team came on board in 2001.] Isn't it hard to do business in a country where you can't be sure what happens next? Well, that is why you make 23 times your money in 10 years. Are you afraid? Look at [former Yukos CEO Mikhail] Khodorkovsky. He went to jail. I am not an enemy of the state. I am helping the state. Tell me about Russia today. Russia, like Saudi Arabia, is a petrol state. About 70% of exports are oil and gas -- 66%, actually. With oil prices at these levels, Russia is a booming economy. So regardless of the visa nonsense, it's hard not to be bullish about Russia right now. Is the U.S. government aware of what is happening? It is -- at a very high level because a lot of U.S money is involved. Your situation is something of a litmus test for Russia. This is really a test case of whether narrow commercial interests can override [President Vladimir] Putin and the national interests. I am a big test case.  Maria Bartiromo is the host of CNBC's Closing Bell
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