Unlike with Jessica’s birth, when the joy of a new baby overcame my thoughts of problems in Russia, this time my troubles were so monumental that I couldn’t get away from them. As soon as it was clear that Elena and Veronica were healthy, my Russian problems reinvaded my mind like a horde.
I wasn’t going to share the bad news about Department K with Elena, not then, anyway. I decided to let her rest and bond with our newest daughter. We went home the following day, and I put on a brave face as friends came to meet the baby and congratulate us. But I could never shake what was going on in the background. Up until then, the main reason I’d been able to hold up psychologically had been Elena. In our relationship, we had this strange rhythm of emotions. Whenever I panicked, she was calm, and vice versa. It had worked perfectly up until now, but this news was so disturbing that I couldn’t imagine the pattern would hold.
Two days after we got home, I couldn’t wait any longer to tell her. That night, after rocking Veronica to sleep, I went to our bed and sat at Elena’s side. «I have something I need to talk to you about».
She took my hand and looked into my eyes. «What is it?»
I told her about the latest message from Aslan about Department K.
Veronica, sleeping in the bassinet, interrupted me now and then with a coo or one of those staccato exhales that newborns make — ah-ah-ah-ahhh. When I was finished, I asked Elena, «What do you think we should we do?»
The expression on her face never changed, and she had the same remarkable calm that she had always had in the past. She said quietly, «Let’s see what they do next and then we’ll deal with it. These people may be nasty, but they’re only human, just like everybody else. They’ll make mistakes».
Elena squeezed my hand and gave me one of her soft smiles.
«What about our vacation?» I asked. We had a family trip planned for August, as soon as the baby could travel.
«That’s simple, Bill. We go. We carry on with our lives».
Thankfully the next few weeks were quiet at work, with no more alarming Russian information. In mid-August 2007, we boarded a plane to make the short flight to Marseille in the south of France. Veronica slept most of the way, and Jessica and I played a little game with a plastic bottle and a bag containing half a dozen wads of paper. David handed us bottles and rags and favorite toys and snacks and did his homework in between. We touched down in Marseille, and I automatically turned on my BlackBerry to see if I’d received any calls or emails. There was nothing — nothing important, anyway — and I took this to be a good omen for the trip.
We disembarked and made our way through the airport. We collected our bags and went outside to wait for our van. As soon as we stepped outside, the heat — thick and full and pleasant — washed over us. Our driver helped us load our things and we piled in. As we pulled away from the curb, my mobile phone rang. It was Ivan.
«Bill, it’s happening again», he said, panic-stricken.
Without even knowing what he was about to say, my leg started twitching. His panic was contagious. «What’s happening?»
«The police are raiding Credit Suisse in Moscow».
«What does that have to do with us?»
«They’re searching for anything that belongs to Hermitage».
«But we don’t have anything there», I pointed out.
«True, but the police don’t seem to know that».
«What are they looking for then?»
«Hold on. I’ve got a copy of the search warrant». He dipped off the line and was back in half a minute. «They’re searching for anything that belongs to Hermitage Capital Management, Hermitage Capital Services, Hermitage Capital Asset Management, Hermitage Asset Management…. It goes on for two more pages. Should I continue?»
«No».
Apparently, the police were playing some strange game of Battleship, using every possible formulation of our company’s name in hopes of landing a direct hit. I almost had to laugh at the amateurishness of it.
«Who’s leading the raid?» I asked.
«That’s the really fucked-up part, Bill. It’s Artem Kuznetsov».
Goddamm it! Artem Kuznetsov? He seemed to have his hands in everything bad that was happening to us in Russia.
We hung up, but I knew that we had just turned another corner. Aslan, our source, had been right — these people were indeed after our assets. The only thing I couldn’t understand was why they didn’t know that we no longer had any assets in Russia. Weren’t the Russian secret police smarter than that? Perhaps not. As Elena had pointed out, maybe they really were just as fallible as everyone else.
Kuznetsov left Credit Suisse empty-handed, but he kept trying to find Hermitage assets. Over the next two weeks, as I tried to enjoy the warmth of southern France, Kuznetsov raided more banks in Moscow. He raided HSBC, Citibank, and ING; in each instance he came away with nothing.
As I learned about each of these raids, I was drawn further and further from my family. Instead of decompressing, singing lullabies to Veronica and Jessica, and playing with David in the pool, I spent most of my holiday on conference calls as we tried to figure out what our enemies were going to do next.
When my «vacation» was over, I went back to London and huddled with the team to plan our next steps. The key legal issue was the criminal case against Ivan. I didn’t really care about the bank raids, but I profoundly cared about anything that might lead to Ivan’s being arrested or extradited.
Since Eduard had found Major Karpov to be so unforthcoming about Ivan’s case, Sergei came up with an interesting idea of how we might get more information. «If the police won’t tell us what they’re doing, why don’t we go directly to the tax authorities and see what they have to say?»
This was a good idea, and we instructed our accounting firm to send a letter to the Moscow tax office where Kameya had submitted its returns, asking if Kameya owed any taxes.
On September 13, Sergei called Ivan back almost giddy with excitement. «The accountants got a reply to the letter. You won’t believe this, but it says that Kameya doesn’t owe any money at all. In fact, it says that Kameya actually overpaid its taxes by a hundred and forty thousand dollars!»
When Ivan told me this, I was amazed. This was ironclad proof that the charges against him were utterly bogus. It was as if members of the New York City Police Department had raided a Manhattan office on suspicion of tax evasion when the IRS had no problem with the taxes in question. No matter how distorted the Russian legal system was, this letter completely exonerated Ivan.
After this, I began to relax for the first time in months. As September moved into October, no more bad news came out of Russia. I had been operating in full-blown crisis mode, but over that fall, little by little my Russian crisis meetings started to be replaced by regular investment meetings. It was a great relief to talk with analysts about stocks instead of lawyers about raids.
One country that kept on coming up in these meetings was South Korea.
South Korea is hardly a developing country like Thailand or Indonesia, but its stock market traded at a 40 percent discount to the United States on a price-earnings ratio basis. This made it interesting for an investor like me. If I could find no good reason for this discount, then certain Korean stocks could potentially re-rate. I decided to get on a plane in October to visit some Korean companies to determine why their equities were so cheap.