Deception: The Untold Story of East–West Espionage Today
By Edward Lucas
Walker & Company, 2012
Review by Joseph C. Goulden
The collapse of the Soviet Union touched off a land–rush scramble of U.S. law firms to establish footholds in Moscow, hoping to benefit from the riches that would presumably flow as the economic system shifted from communism to a form of capitalism. Russia’s petroleum wealth, and its emerging strength in the world commercial market, encouraged the firms’ enthusiasm, as did a promise by leader Vladimir Putin that the country would have a viable legal system and operate under the rule of law. Western lawyers were somewhat encouraged that Putin studied international law at Leningrad State University before deciding to make his career with the KGB, the Soviet intelligence agency.
Now the international legal community has a sobering reason to take a second look at the so–called “Russian justice.” The precipitant is a case in which a young Russian attorney, working for a Moscow law firm established by two American lawyers, was thrown in jail on flimsy charges that his clients were engaged in a tax scam. According to the prison diary kept by the lawyer, Sergei Magnitsky, his brutal treatment was beyond Kafkaesque.
In his final days, as he was dying from various internal ailments, he was handcuffed and beaten by prison guards wielding batons. He died at age 37, leaving a wife and two small children.
The case has drawn strong protests from the International Bar Association and many human rights organizations. Congress is considering retaliatory legislation that would bar Russian officials involved in the episode from entering the United States.
Why is the death of a lawyer—however horrible—and the manipulation of the Russian legal system discussed in a book on espionage? Author Edward Lucas contends that much of the commercial thuggery endemic in today’s Russia is carried out in conjunction with the Federal’naya Sluzhba Bezopasnosti—the Federal Security Service, or FSB, successor to the KGB. Lucas writes with authority; he has covered Russia and other parts of Eastern Europe for The Economist for more than a quarter century, focusing in recent years on what he terms the “petrofascism” of the Putin regime.
The affair that resulted in Magnitsky’s death begins with an American–born financier, now a British citizen, named William Browder (ironically for a capitalist, his grandfather was Earl Browder, long the president of the Communist Party USA). In the 1990s, Browder sensed opportunities in the Russian economy. Granted, “the rule of law was weak, property rights flimsy, political stability uncertain, the economy rocky, and crime and corruption pervasive,” the author writes. But Browder felt that the companies and shares on sale “were not valueless, just cheap.”
If market perceptions improved only a tad, Browder reasoned, investors could reap huge returns. “Suppose, for example, the investors reckoned that an ill–run Russian oil company, instead of being worth a mere one percent of a comparable foreign one, was instead worth ten percent. That would raise the values of its shares tenfold—meaning a colossal profit for someone who bought before the perception changed.”
Browder created an investment company, Hermitage Capital Management, and pursued a three-prong strategy. He bought companies that owned underlying assets such as oil, gas, or minerals. Second, Browder talked up Russia as an investment destination, “insisting that it was merely ‘bad’ instead of downright ‘horrible.’” And—perhaps unwisely, in retrospect—he highlighted abuses of shareholder rights by management. When he sensed evidence of fraud or waste, he filed lawsuits and launched media campaigns.
Browder succeeded. Hermitage and its associated companies had an increased investment value of thirty–five–fold. As Lucas writes, “Few in the history of finance can boast such a record.”
But success brought him into conflict with the government. Lucas writes, “The Putin regime’s longer-term aim was not to promote good corporate government and shareholder value but to seize money and power for itself.”
As its legal and audit adviser, Hermitage relied on a law firm, Firestone Duncan, which had been established in 1993 in Moscow by two recent American law school graduates—Jamison Firestone from Tulane University and Terry Michael Duncan from The George Washington University. (Tragically, after only four months in Moscow, Duncan was killed by a gunshot to the head while trying to aid a New York Times reporter–photographer who was injured during a demonstration outside a radio/TV complex.)
The stated purpose of Firestone Duncan was to “service the specialized legal and audit needs of foreign ventures doing business in Russia with Russian partners.” More than a dozen large U.S. firms ranging through the alphabet, from Akin Gump to Winston & Strawn, have outposts in Moscow.
The Putin government moved against Hermitage under the pretext of a tax claim against one of its relatively small companies, Kameya, which had paid $135 million in taxes in 2006. (By comparison, Aeroflot, the country’s largest airline, paid $130 million.) In May 2007 Kameya received a federal tax audit notice that “all taxes had been paid in full and none was owed.”
Nevertheless, a month later, 25 Interior Ministry officers, led by Lieutenant Colonel Artyom Kuznetsov, raided the Hermitage offices in Moscow and seized documents, computers, and other materials relating to Kameya and other companies. Next, the Kuznetsov raiders descended on Firestone Duncan, confiscating two vanloads of documents and corporate seals. A lawyer who protested was beaten so badly he spent two weeks in the hospital.
Browder, by now self–exiled to London for his own personal safety, reached out to Magnitsky—“a notable figure in the field of tax law”—to recover the seized materials and to resolve the tax dispute. But early on he was notified that an “arbitration court” had returned judgments totaling millions of dollars against Hermitage. Further, “lawyers acting for Hermitage” had accepted full liability on behalf of the company. And finally, the Hermitage companies had been re-registered under new owners by lawyers using the seized documents and corporate seals. In a complaint, Hermitage stated that it “had no prior knowledge of, or acquaintance with, these lawyers … never hired or appointed them and … never authorized or ratified their appointment as attorneys or agents of any kind.”
Magnitsky fought on doggedly, filing numerous complaints against Kuznetsov and other officials. Kuznetsov retaliated by starting a criminal case against Magnitsky and other lawyers, claiming that they did not have genuine powers of attorney to represent Hermitage. As Lucas comments, “In effect, he was saying that the only person who could legally represent the company was the person who stole it. That marked a grim step to lawlessness. A lawyer is an officer of the court, bound to do his professional best to make his client’s case clearly and convincingly. It is a sure sign of a rotten legal and political system when lawyers are punished for the crime of representing their clients.”
In November 2008 officers came to Magnitsky’s home and arrested him in front of his wife and two children. In recounting Magnitsky’s fate, Lucas warns that “squeamish readers may wish to skip what follows.” Let me just summarize some grisly happenings. During his first months, Magnitsky was confined to a cramped holding cell, with four beds for eight prisoners, and glaring lights 24 hours a day. He was shuffled from cell to cell, his papers and other belongings “going missing” during the moves.
He began to experience severe abdominal pains, and he lost some 40 pounds. Doctors determined his ailments were caused by untreated gallstones and prescribed surgery within a month’s time. But nothing was done, even as Magnitsky suffered increasingly severe pain.
Painkillers were to no avail. So Magnitsky was strapped into a straitjacket and taken away for “psychiatric treatment.” “Eight guards from a special disciplinary squad arrived. They handcuffed the dying man, beat him with rubber batons and took him to an isolation cell, where he lay handcuffed on the floor by the side of a bed. He was found dead an hour and a half later,” Lucas recounts. The Russian contention is that Magnitsky was an out-of-shape drunk who died of natural causes. (Lucas writes that he was a teetotaler.)
Jamison Firestone withdrew to London in December 2011; he fears arrest if he returns to Moscow. Browder now lives in London. Other lawyers in the case report vandalism of their offices and homes.
Lucas reports widespread belief in Moscow that Kuznetsov “is in fact an FSB officer, making sure that his masters’ interests are served.” (The officer and his family registered as owners of properties valued at $3 million in the period following the Hermitage seizure.) As Lucas writes, “The FSB acts as the regime’s enforcer, punishing the brave and bullying the cowardly to head off any credible political or economic challenge. In return, it has a license to loot, using both the tools of espionage and a veneer of legality in which criminal actions have the force of law.”
Lucas has a warning for American lawyers who are thinking about a Moscow practice: “[T]ruth is that the law in Russia is a trap for the brave, not a weapon for the weak. By challenging the authorities in court, you leave yourself open to their retribution. The idealistic Mr. Magnitsky [learned] this the hard way.”
Joe Goulden’s most recent book is The Dictionary of Espionage: Spyspeak Into English.
Henry Friendly: Greatest Judge of His Era
By David M. Dorsen
Belknap Press/Harvard University Press, 2012
Review by Leonard H. Becker
In his foreword to David M. Dorsen’s biography of Judge Henry J. Friendly, Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit observes that as a general rule, judicial biographies do not make for great reading. Judge Posner acknowledges that a recounting of the life and work of Judge Friendly would not have seemed likely to depart from that rule. But Judge Posner rightly confesses error with regard to Dorsen’s masterful presentation. The author has brought an otherwise distant, forbidding figure to life and demonstrated Judge Friendly’s lasting contributions to federal law.
Henry Friendly was born in 1903, into a moderately well-off family, in Elmira, New York, and grew up there. (His forebears, from Germany, originally bore the name “Freundlich.”) Friendly’s brilliance as a scholar impressed itself on his professors at Harvard College and Harvard Law School, from each of which he graduated summa cum laude. He served as president of the Harvard Law Review and attained the highest overall grade at the law school since Louis Brandeis. Professor Felix Frankfurter, later a Supreme Court justice, arranged for Friendly’s clerkship with Justice Brandeis and thereafter strove, without success, to lure Friendly back to Harvard to join the law school’s faculty.
Instead, Friendly entered private practice, going to work at a Wall Street law firm. In 1928 a successful career at such a place was far from a sure thing for a Jewish boy, no matter how bright he was. Friendly’s talents overcame the ethnic disadvantages in those times; he became a partner eight years after he joined the firm. (One of his partners at the firm was John Marshall Harlan II, who preceded Friendly to the Second Circuit and went on to serve on the Supreme Court.)
Friendly’s most significant accomplishment while in private practice was to take on the representation of Pan American Airways and its head, Juan Trippe, for whom Friendly ably handled numerous administrative agency proceedings involving route certifications and rate settings.
In 1946, with new leaders in Friendly’s law firm no longer holding out the assurance that Jews there would be treated evenhandedly, Friendly joined several of his colleagues in founding Cleary, Gottlieb, Friendly & Cox, where he continued his representation of Pan American, serving both as a partner at the law firm and as vice president and general counsel of the airline. By the 1950s, growing bored with private practice and wearying of the demands imposed by his client Trippe, Friendly commenced to angle for an appointment to the Second Circuit, encountering the usual infighting among the various contenders. In 1959 he secured the prize, in part through the involvement of Herbert Brownell Jr., President Dwight Eisenhower’s attorney general.
Virtually from the outset of his judicial career, Friendly impressed colleagues and litigants with his sheer brilliance. In an age that preceded word processors and ghost writers, Friendly’s output was astonishing. He drafted his own opinions in longhand with two legal pads before him (one for text, the other for footnotes), and left it to his law clerks to fill in the occasional blanks. Even the most complicated cases rarely took more than a day or two of his time to turn out a circulating draft. Often contained within his elegant prose was a barbed hook that sank into the rhetorical victims before they knew what had hit them. Among the many samples offered by Dorsen is this opening to a diversity-of-citizenship case with a choice-of-law twist:
Our principal task … is to determine what the New York courts would think the California courts would think on an issue about which neither has thought. They have had no occasion to do so. But … the court seised of the case is obliged, as best it can, itself to blaze the trail of the foreign law that it has been directed to follow.
Dorsen provides telling anecdotes of Friendly’s interactions with law clerks, fellow judges, and members of the bar. To all, Friendly came across as austere, distant, and at times terrifying. His attitude toward his clerks was stern, in the mode of “I pay you to correct my mistakes, not to make fresh ones of your own.” (In this regard, he sounds a lot like Brandeis.) Of a particularly bright, loquacious law clerk, Friendly observed he had a lot of ideas, but Friendly hadn’t used any of them.
Friendly was withering in his contempt for many of the district judges in the courts overseen by the Second Circuit, an attitude that he put on display in his internal decision memoranda to his brethren on the Court of Appeals and, on occasion, in his published opinions. He refrained from taking lunch in the judges’ dining room at the federal courthouse in Manhattan because he preferred not to socialize with the trial judges or to be roped into discussions of pending cases. He occasionally reversed trial court judgments on grounds not raised by the parties, either below or before his own court. He held a dim view of the reasoning capabilities of the Warren Court, and often was dubious about its results as well. (At first he disapproved of the High Court’s reapportionment decision in Baker v. Carr, but he came around after several years.)
A large segment of Dorsen’s book is devoted, necessarily, to a review of Friendly’s judicial opinions. This is stuff only a lawyer could love, but Dorsen handles the material astutely in providing a thorough overview of Friendly’s accomplishments.
Friendly’s interactions with his family ran somewhat along the same track as that involving his clerks and fellow judges. In 1930 Friendly married Sophie Stern, the daughter of a prominent Pennsylvania jurist; the couple had three children. He was strongly attached to his wife, but distant from his offspring. At home, as at his chambers at court, he buried himself in his private quarters and tolerated minimal if any interruption. As the years passed, he grew close to one his daughters, but not so to his other two children.
For years, Friendly suffered from defective eyesight and underwent numerous surgeries in an effort to improve his vision. His fear of impending blindness after he largely lost the use of one eye, coupled with a congenital disposition toward pessimism that probably qualified as chronic depression, intensified when his wife died in 1985, a few months after she was diagnosed with cancer. Having told a number of people of his wish to be spared further suffering and to avoid burdening others, he took his own life one year after Sophie died. He was 82 years old.
In one relatively minor respect, Dorsen’s commanding biography may not live up to its promise. Judging the accuracy of the subtitle, Greatest Judge of His Era, depends in part on how you define “era.” If you take the relevant period to coincide with Friendly’s tenure on the Second Circuit—1959 to 1986—then you necessarily put to one side the iconic figures of Justices Brandeis, Oliver Wendell Holmes, Benjamin Cardozo, Robert Jackson, and (for the most part) Frankfurter. Even then, the relevant category perhaps should be narrowed further to exclude great trial judges (which Friendly acknowledged early on he would not have been).
Among the notable appellate judges who did not make it to the Supreme Court, Friendly surely ranks among the highest, arguably equaled, if not excelled, only by Learned Hand. Friendly was a towering figure in the law, his opinions cited with approval not only by his colleagues on the Second Circuit but across the country and in the Supreme Court’s decisions as well. His law review articles on administrative law commanded respect from all levels of the judiciary. The standards he set for sustained concentration and the exercise of informed judicial judgment have remained vital, long after his passing. Perhaps the highest tribute paid him is the large number of his clerks who have gone on to judgeships themselves, including the present chief justice of the United States and two members of the federal Court of Appeals for the District of Columbia Circuit.
Len Becker served as District of Columbia Bar Counsel from 1992 to 1999 and as general counsel in the Office of Mayor Anthony A. Williams from 2003 through 2006. In 1968–69, he served as law clerk to Edward Weinfeld, a judge on the U.S. District Court for the Southern District of New York and a close friend of Judge Friendly. Becker resides in Washington, D.C., and may be reached at email@example.com.