Power to Truth: The Cost of Corporate Complicity and Hidden Systems of Power

What does it take to challenge corruption on a global scale when you are fighting against a complex system that appears complicit? In this episode of the Power to Truth web series, Stanford Graduate School of Business (GSB) Professor and Corporations and Society Initiative (CASI) Director Anat Admati sat down with Sir William Browder, financier, activist, and bestselling author of Red Notice and Freezing Order.

A Stanford GSB alumnus, Browder founded the investment fund Hermitage Capital Management in 1996 and quickly became one of Russia’s largest foreign investors. His advocacy for shareholder rights and corporate governance helped grow Hermitage’s value from $25 million to $4 billion a decade later, but ultimately led to his expulsion from Russia in 2005. In 2008, his lawyer Sergei Magnitsky uncovered a $230 million fraud by state officials. After Magnitsky testified against the officials, he was arrested, tortured, and died in prison under brutal conditions the following year.

Browder’s relentless fight for justice led to the creation of the Global Magnitsky Act, which was enacted by the US Congress in 2016 to impose sanctions on human-rights violators and kleptocrats worldwide.

Admati kicked off the discussion by framing it in terms of CASI’s mission, which explores the role of corporations in society, accountability, and legal integrity.  Browder emphasized the significance of the Magnitsky Act, which is now a formidable tool on the international stage, both in giving voice to truth and in protecting the rights of the vulnerable.

“It's something that kleptocrats really hate because they like to commit their crimes in their home countries, usually for economic purposes, and then keep the spoils of their crimes in rule-of-law countries,” he said.  “The Magnitsky Act has been, I think, a game-changer in the world of international law and law enforcement.”

Browder currently leads the Global Magnitsky Justice Campaign. He explained that while the campaign’s first phase involved passing the legislation necessary to impose sanctions, the second phase has focused on tracking down the recipients of the $230 million linked to Sergei Magnitsky's murder and those who enabled the money to be clandestinely transferred to safe havens.  

“We wanted to make sure that every person who received that money is punished, and that money is taken away, and everyone who helped them, everyone who enabled them, every money launderer, every lawyer — we wanted to make sure they paid and paid dearly.”

With a dedicated team working full-time to track each dollar, Browder emphasized the essential role of tenacity in uncovering the truth. “If you keep pushing ahead, the people on the other side just don’t have the energy or the skills to fight back,” he noted.

A breakthrough in the investigation came from whistleblower Alexander Perepelichny, who had managed funds for the criminals behind the scheme. After a falling out, Perepelichny fled to the UK in 2009 and provided crucial bank statements and documents that revealed the flow of some funds, including $20 million held in Switzerland. These documents were submitted to Swiss authorities, leading to frozen accounts and sparking a broader international investigation

“We got access to the investigation files because in Switzerland, they're under civil law, which means you, as a complainant, get access to the case file,” he explained. “So, we got to see where some of that money was, and where some of the money went afterwards, and so that was the first interesting data leak.”

Browder revealed that a second major data leak came from the Organized Crime and Corruption Reporting Project (OCCRP), a nonprofit based in Bucharest, Romania. Despite limited resources, the OCCRP uncovered a criminal case file linking a bank in Moldova to the laundering of Russian funds. This discovery allowed Browder's team to trace the illicit money that journeyed through a complex web of Russian and Moldovan banks before it came to its final destination in Switzerland. Their investigation pointed to a Cyprus-based company, Prevezon Holdings, Inc. Crucially, Cyprus’s corporate registry allowed them to identify the beneficial owner as Denis Katsyv, a Russian national and the son of Moscow region vice governor Pyotr Katsyv.

The investigation, Browder explained, relied on a network of whistleblowers, data leaks, and investigative journalists, including Bill Alpert from Barron’s. According to Browder, Alpert’s dedication to uncovering the truth was relentless, as he often worked late hours, scrutinizing property databases and documents. Alpert ultimately discovered that Prevezon owned high-value properties in New York, including luxury condos in a former bank building on Pine Street.

“Really expensive, very fancy stuff,” Browder said. “It was really interesting because he wanted to publish his report, but he got shut down by Barron's. They wouldn't let him publish, but because he was part of the OCCRP, the OCCRP agreed to publish his report. And as a result of that the Swiss authorities froze Prevezon's accounts in Switzerland.”

The report's findings provided a critical link to New York, enabling Browder to involve the New York Attorney General’s office. The case was handed over to the U.S. Department of Justice’s Southern District of New York (SDNY), which, after reviewing Alpert’s research, saw enough evidence to move forward. The SDNY filed an indictment and a federal forfeiture order against Prevezon’s properties, although pursuing the company’s owners directly was impractical given jurisdictional challenges.

This marked a crucial advancement in Browder’s mission to freeze the stolen funds and hold those responsible to account. The legal proceedings stretched on for two years through a maze of motions and countermotions, including a move to disqualify Prevezon’s defense attorney, John Moscow, who had previously worked for Browder.  Ultimately, an appeals court ruled in favor of Browder.

“In the end, this was going to go to trial,” he stated. “And then, literally on the courtroom steps, they conceded to a settlement with the US Department of Justice, and they paid $6 million dollars on top of $15 million dollars in legal fees.

Even without a formal guilty plea, the settlement marked a hard-fought victory for Browder, reinforcing his commitment to pursue justice against corruption and human rights abuses.

Admati and Browder moved on to discuss another big player in the money laundering schemes: Danske Bank, Denmark’s largest bank. Danske Banke was involved in money laundering through its Estonian branch, through which $200 million of the original $230 million uncovered by Sergei Magnitsky flowed. Browder’s team filed complaints in Estonia and Denmark, leading to a public investigation that soon drew the attention of Berlingske, Denmark’s oldest newspaper, which conducted their own investigation with their team journalists.

“The CEO of the company couldn't just shrug it off as ‘fake news,’ he said, “he had to do something about it, so he hired an external law firm, an external accounting firm, and a data firm to help them analyze the information and dig in and find out what really happened.”

After receiving a data leak from Danske, Berlingske’s investigative team uncovered a staggering $8.3 billion laundered through the Estonian branch. The number ballooned to $232 billion following an internal audit, uncovering systemic money laundering that had gone unaddressed for years.

The scandal highlighted severe problems with regulatory oversight. Although Estonian authorities raised concerns, Danske’s Estonian branch fell under Danish regulatory oversight, which had failed to act. Admati and Browder concluded with a sobering reflection on global anti-money laundering efforts, pointing out that while many countries have signed agreements, enforcement remains inadequate.

“The US and UK love dirty money,” Browder remarked.  “After 15 years in this field, I’ve seen that it takes four days to launder money, and it takes 14 years to reconstruct the money laundering trail.”

Browder expressed concern about the shift toward cryptocurrency for laundering money and stressed the importance of political will and public pressure to bolster international financial justice. Overall, the conversation revealed the huge challenges in the struggle against kleptocracy and the necessity of perseverance and collaboration in the ongoing fight against corruption.