Wednesday, November 18, 2009

Want to Invest in Russia? Your Employees Might Be Killed

One more illustration about investing in Russia. Sergey Magnitsky, lawyer for Hermitage Capital investment group, died in jail. He was imprisoned for almost a year, government and court decided to keep him in jail until his court date.

Hermitage Capital was a little bit more lucky than many other investors. William Bowder, CEO of the company, withdrew most of money from Russia before government people could rob him. That probably was the reason for persecution of Magnitsky.

This is a lesson for anybody who wants to invest in Russia. Not only you risk your money, you also risk your people. If your company falls in disfavor in Russia, your employees can be jailed under invented reasons, they can be killed by prison officials or by hired killers on the street. Russian government thugs don't care who those employees are. They can imprison pregnant women, women with small children, terminally ill people. There are hundreds of examples.

And to get to the good side of Russian government, you'll have to bribe officials, sometimes surrender significant pieces of your property to government owned companies. Even in this case you are not safe: if your Russian counterpart falls in disfavor, you can lose everything.

Full disclosure: at the time of publication author did not have any positions, long or short, in Russian companies or in funds invested in Russia.

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1 comment:

Homer II said...

I like precious metals, miners right now. I study all the miners alot and there is one who looks good on paper: Kinross [KGC]. However, their largest asset in a property in Russia. I would not invest with them for fear that there is much political risk of confiscation of that property by the Russian government. They are mafia.