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. Last Updated: 07/27/2016

No Longer the Romantic

MTFyodorov says he is working to improve the economy by attracting investors.
In over 10 years at the forefront of Russia's tumultuous ride to capitalism, Boris Fyodorov, founder and honorary chairman of Moscow brokerage United Financial Group, has been one of the nation's most outspoken crusaders against corruption.

As President Boris Yeltsin's finance minister in the early 1990s, he fought against Central Bank chief Viktor Gerashchenko's penchant for printing money. Later, he was one of the first to call for an end to the country's drug-like dependency on IMF loans. As tax minister on the eve of Russia's 1998 default, he threatened to seize yachts and palatial dachas belonging to executives at state-controlled natural gas monopoly Gazprom for chronic nonpayment of taxes. Then as a Gazprom board member, he publicly called for a probe into its crony dealings -- a move that almost led to his arrest.

It could have all been so different. Before taking on those battles, he worked abroad and could have set his sights on staying in London's world of global finance.

Almost since childhood, Fyodorov says, he wanted to be a cog in the world of global capitalism. From his communal apartment in Moscow in the 1960s, Fyodorov and his father secretly tuned into the Voice of America and hatched plans for a career as an international financier.

His first job on graduation from the Moscow Finance Institute in 1980 was in the international operations department of the Soviet Union's one and only bank, Gosbank, where Fyodorov observed how exchange operations worked in capitalist countries. From there, he served a two-year stint in London from 1991 to 1992 at the European Bank for Reconstruction and Development.

By the end of his overseas assignment, Russia was headlong in transition toward its own version of a market economy, and Fyodorov decided to come home to have a hand in charting the country's course. "While I still have the strength, I want to take part in developing the Russian economy," he says. "This is my country, and I want to help change it."

And by all accounts, the firebrand critic has been successful in doing that.

Even William Browder, director of Moscow-based fund Hermitage Capital Management, who has been at loggerheads with Fyodorov in recent years, acknowledges that Fyodorov "was a key member of the opposition fighting dinosaur economic practices."

His habit of frankly speaking his mind has always distinguished him from others -- and sparked his success.

Fyodorov's climb started back in 1989 when the 30-year-old was noticed by the Communist Party Central Committee for his blunt views on the need to reform the collapsing Soviet economy.

Having given a pro-reform speech at a conference in Lithuania, he was unexpectedly named to the Central Committee's economic reform working group as its youngest official. There, with other top economists, he drafted a plan for Mikhail Gorbachev's first 100 days as president of the Soviet Union.

The trouble, he says, was that their proposals weren't implemented. "There was greater and greater fear within the Communist party. Nobody wanted to do anything."

And it was that paralysis that accelerated the Soviet Union's collapse, he says. "If you'd asked me then if there could be such a life as now, I would never have guessed."

But Fyodorov's numerous high-profile run-ins with government and business leaders on behalf of liberal market principles may have helped boost Russia toward its current, more reputable state.

In one such confrontation three years ago, he took on entrenched interests within the powerful Gazprom behemoth over allegations that top managers had stripped state-owned assets into an opaque company representing their families' private interests.

With little influence over the state-run company, minority shareholders -- like UFG, the brokerage house Fyodorov founded in 1994, and Browder's Hermitage Capital Management -- say they were sidelined as billions of dollars were being siphoned off each year into a little-known, Florida-registered gas trading firm called Itera, diminishing the value of their stakes.

Murky finances at Gazprom had long been frightening off investors, but Fyodorov was the first to call for an investigation, charging that the insider dealings with Itera were costing the company up to $2 billion every year in lost revenue. Speaking as one of the few members of Gazprom's board not appointed by the government, his claims had added weight.

Following his well-publicized demand for answers, Fyodorov found himself on the receiving end of a slew of lawsuits that froze UFG's shares in Gazprom on claims it was helping foreigners buy Gazprom shares that were reserved by law for domestic players.

Fyodorov believes the attack was initiated on the orders of Gazprom management. "That was the most dangerous battle for me. I really thought I could end up getting arrested," he says.

Luckily for Fyodorov, newly elected President Vladimir Putin was also set on a clean up drive at Gazprom. After his personal intervention, the charges were dropped and management at Gazprom was replaced. Business transacted through Itera has gradually diminished.

This was a necessary fight, Fyodorov says, but it wasn't his most important.

He says he affected the greatest change when he was working as Yeltsin's finance minister in 1993. He clashed with Central Bank chairman Viktor Gerashchenko and succeeded in stopping him from printing an endless stream of rubles to support other fledgling former Soviet states. "This was one of the major causes of inflation," he says.

Despite this decade-long track record of championing reform in the face of much resistance, Fyodorov's critics say his renegade energy has faded. Browder argues that Fyodorov, sitting comfortably on the boards of Sberbank and Gazprom, is no longer the outspoken critic of corrupt practices he once was.

Underlying the animosity between the two, Browder charges that Fyodorov -- after Gazprom, hailed as an advocate of minority shareholder rights -- in fact violated the interests of the Sberbank minority shareholders he represented on the board by voting for a dilutive share issue in return for his brokerage being named the main placing agent for that emission.

"He did a lot for investor rights, but he is no longer the young reformer we all knew and liked," Browder says.

Fyodorov, however, claims he has not changed. "My outlook is still the same," he says, though he admits having mellowed since the days of his bull-in-a-china-shop battles of the 1990s that could have cost him a place in the Putin government. Now, however, he says he's mulling a return to politics by running for the State Duma as a Yabloko or Union of Right Forces candidate in elections this December.

"Ten years ago, I was overemotional. Now I understand that I have to be more reserved, not rush in taking decisions and more often seek to make compromises. I am not the romantic I once was."

He sees a chance to help improve the economy as chairman of UFG by working to attract more investment in the country. Meanwhile, investors will be watching whether a mellowed Fyodorov can keep up with his reputation as a force for change in Russia.