Russia halts trading after 17% share price fall (Russia Stock Market Crashes)

Another one that I remember hearing about was the Hermitage Capital disaster. Its a next book case of why investors are bailing on Russia. The shakedown scams have become too overwhelming to handle anymore.

This is just one of many examples of what has happened. Basically, the government used the guise of stabalizing Russia's finances to grab control of large swaths of the economy.

Bill Browder, who co-founded Hermitage Capital in 1996 with the late billionaire banker Edmond Safra, would be the first to acknowledge he made a fortune in Russia. While running Hermitage, he became a tenacious promoter of minority shareholder rights in the new Russia, fighting famously fierce battles at Gazprom and UES, Russia's largest electric utility. "I was persistent, but I think other minority investors, foreign or Russian, believed I was a constructive force," he said. Yet Browder evidently made some high-powered enemies as well. He has not been able to get back into the country since his visa was revoked in late 2005, but that was to become the least of his worries. In early 2007 an officer of the Interior Ministry called Hermitage's office in Moscow and - according to transcripts of the conversation provided by Hermitage, which taped the call - hinted that Browder's visa issue might be resolved "depending on how you behave [and] what you provide." Hermitage officials believe this was an effort to elicit a bribe from them. They declined. (The Moscow office of the Russian Interior Ministry declined to comment for this article.) Four months later, a 25-man team from the Interior Ministry raided Hermitage's Moscow office, seeking, the chief investigator said, tax documents related to one of Hermitage Capital's clients. The same day, a unit showed up at the Moscow office of Hermitage's law firm, Firestone Duncan, seeking similar documents. When one of the attorneys objected, witnesses say, he was escorted to a conference room and beaten.

Hermitage's ordeal was just beginning. Investigators soon launched a hunt for its assets at four different banks at which it held accounts in Moscow: Citibank, HSBC, Credit Suisse, and ING. The company then discovered that its ownership of three Russian subsidiaries was wiped off the government's official share registry. The only way that can be done in Russia is to have, among other documents, the original corporate seal. The Interior Ministry, thanks to its raid on Hermitage's law firm, had taken that and all the other documents necessary to effect such a change.

It got worse. After the fact, Hermitage learned that a company it had never heard of, Logos Plus, filed a lawsuit accusing Hermitage of bilking it out of $376 million in a sham transaction involving Gazprom shares. Three lawyers, saying they represented Hermitage, showed up at a St. Petersburg court and essentially admitted guilt. They were impostors - they had nothing to do with Hermitage. But the judge promptly ordered that Logos Plus be paid the $376 million. Hermitage later learned that 15 such claims had been brought across the country, resulting in awards of $1.26 billion to the plaintiffs.

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