Transcript of remarks by Steve Pease
January 18, 2023
at Readers’ Books in Sonoma, California
about his new memoir, Nothing Ventured: An American Life
In 2023, author Steven L. Pease published his memoir: Nothing Ventured: An American Life. He has also written two books about Jewish culture – The Golden Age of Jewish Achievement, and The Debate Over Jewish Achievement
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Steve is the former chairman and CEO of The U.S. Russia Investment Fund. He is a director and the former co-chair of the U.S. Russia Foundation for Economic Advancement and the Rule of Law, both nonprofits focused on the U.S.-Russia relationship.
Introduction by Andy Weinberger
I want to welcome you all to our first event of 2023. I’m hosting this event for Steve Pease and his memoir, Nothing Ventured.
I’ve known Steve for a long time. I don’t agree with him politically about anything, but he’s a very nice guy and this is all about his memoir.
I think that all of us, when we reach a certain age, start to think what’s our life been all about. It’s healthy to try to sum it up, especially when we have a few fewer years going in the other direction.
And Steve has had a wonderful adventurous life. He is a what I call a serial entrepreneur. That’s better than a serial killer, I suspect. But he has owned and sold and worked at many companies and had many corporate adventures. Also, he has gotten to travel a lot as a result, and part of that – a lot of it – was in Russia which is of great interest these days because of Russia’s invasion of Ukraine. I’d love to hear what he has to say about that.
He’s also – along the way – somehow gotten smitten with Jews. He thinks we’re special. I tried to talk him out of that, but to no avail. He’s written a book about Jewish achievement and that’s also for sale tonight. It’s kind of a Guinness book of Jewish records and we sold that book quite well, when it first came out.
So I want to turn it over to Steve Pease, and here he is.
Steve Pease
Well, first, thanks to all of you for coming. I’m overwhelmed, so I hope I can tell you something you find worthwhile for the time you spend this evening. I also want to thank Andy and his assistant Rosie who is not here tonight but who helped pull this all together. Andy Weinberger is an institution in this town. Readers’ Book is very important for all of us who live in Sonoma.
This is my third time at bat here thanks to the relationship I have had with Andy. It’s true, he didn’t want me to write the book about Jewish achievements, but so did lots of other Jews!
It helps me to know if we have any Russian speakers in the audience tonight. Okay, how many of you have been to Russia at least once? How many have been twice or more. That’s impressive. Very good. I ask the question for a couple of reasons, one of which is that I didn’t write this book thinking that my speaking would be mostly about my experiences in Russia. That was part of my life but not the only part. Nonetheless, Mr. Putin has availed me the opportunity to spend the bulk of this evening talking about Russia and my experiences there.
I do want to oppose the idea that the IT (Sonoma Index Tribune) advanced when they wrote their article about this presentation. I do not consider myself an expert. I’m not a Ph.D. Russian scholar. I never even learned to speak the language. I learned how to do serial translation at the beginning and later, contemporaneous translation to get by. But I didn’t want to invest the years required to learn how to speak the language. I‘ve had 37 years of experience in Russia and it will soon be 38. I’ve been there 50 times, so I think I know a lot about the place, but I don’t consider myself an expert.
Most of my colleagues, including two former ambassadors to Russia are the experts. I’m not, but I think I know more than most Americans about the country and I have a pretty good feel for the place and the people.
Karen Mireau Rimmer once told me about a quote from Soren Kierkegaard which I find useful. He was a 19th‑century Danish philosopher who said, “Life can only be understood backwards but it must be lived forward. I think that’s very true. If somebody would have asked me when I got out of business school what I thought would happen in my life I would never have hit the mark in saying anything meaningful about what has transpired. There is too much serendipity. Things happen. You get lucky. It does have something to say for the life of being prepared for things that happen and that you can respond to.
I don’t know how many of you might like the Eagles. I happen to be an Eagles band fan. It is probably the most popular band in the 20th century. They took in Joe Walsh, a fabulous guitar player and songwriter with a great voice. In the three–hour Amazon Prime History of the Eagles, he tells his story. One of the things he says is “As you live your life, it often seems like total chaos” (and believe me, he knew what total chaos was). “But,” he says, “often if you look back on it, you discover that it takes on the character of a finely-crafted novel.” I think that was true for him and it was useful for me when I was thinking about doing this memoir.
Beginning my career.
I think all of my life, I intended to become an entrepreneur. My dad was a small business owner in Spokane. He owned his own moving and storage company. Part of my growing up was my working on the trucks with the guys who were his employees and making sure they didn’t think I was a slacker or that I was going to rat on them in some way to my dad. I formed lots of friendships with nice guys, who did hard work, and I had to earn their respect.
So, I got out of Harvard Business School in ‘67. These days, if you get out of Harvard Business School you are likely to go to Wall Street. I was not interested in becoming a financier. It didn’t appeal to me. Instead, I went into management consulting – not because I wanted to be a management consultant – but because I would be exposed to business problems and business culture. I might also find some small business I liked and gain the experience leading it. So I wanted the experience of running a company as well as the experience of turning one around.
I had some friends that were in venture capital. Frank Caufield was one of the original venture capitalists out of the early seventies. He made a lot of money and was very successful. He was a friend from our consulting days together and he introduced me to venture capital. I worked for him in a company for which Kleiner, Perkins, Caufield & Byers had provided financing. It wasn’t turning out as they had hoped. They wanted some advice. So, I learned a lot about venture capital and later formed my own venture capital partnership with Frank as an advisor.
Line management, turn arounds, and venture capital thus became the three legs on which I built my career. It all turned out to be more interesting than I might have ever expected.
In the 1980s and ‘90s, I turned around one company three times. I don’t know of many people who have had that experience. I found it fascinating. PLM, later called PLM Railcar Maintenance Company, and still later renamed Transcisco, was that company and I would join it.
In the beginning, it was losing money. I asked the treasurer how much it was going to lose the month I started. He said, “We should break even.” In fact, we lost a hundred thousand dollars. I learned very quickly that you couldn’t count on what people told me would happen. But we took that company from losing $3 million in my first year and five years later, we had two publicly traded companies that together were making $5 million. So, I kind of earned my bones as a turnaround guy.
What PLM did was to maintain railroad equipment. It arose from the great insight of the entrepreneur who started the business. He realized you could start a company based on the fact that electric utilities in the United States were going to have to buy their own coal cars when the United States shifted from oil to coal as its major a source of power.
The founder (Mark Hungerford) managed to get a lot of money to build repair shops for such cars. When I came aboard, we probably had 12 or 13 shops all over the United States from Waycross, Georgia to Sioux City, Iowa to Miles City, Montana, Rock Springs and Bill Wyoming, and other locations. Some shops were small. Others were large. Miles City was a former yard of the Milwaukee Road where we had room for probably 300 or more railroad cars.
We had an inventor who started the Sioux City, Iowa shop. Sioux City was interesting because of the large number of slaughterhouse yards in the area and the sophisticated waste disposal facilities required to safely dispose of all the animal waste. Our shop was highly regarded because it could unload residual contents, completely wash out and clean the inside of a tank car in less than a day.
They could take tank cars whose last load was asphalt and in 24 hours, the car was so clean you could put Jewish food in it and have the car koshered by a rabbi. It was remarkable.
Dick Loevinger, the guy who started the shop, had a revolutionary idea. He said, “Look, tank cars are poorly designed.” If you look at a railroad tank car you see a big shell and you assume that that’s the whole car. What you discover when you know more is what you are looking at is just a cover. Underneath there is a smaller tank that contains the contents (the “lading”, as they call it). Between the outer shell and the inner shell are manifold–like pipes that carry steam. The reason they carry steam is because, in the dead of winter, if you’re carrying high fructose corn syrup, for example, you have to warm up the contents before you can unload it.
Dick said, “What you really should do is put pie-shaped plates in the bottom of the cars and slope them down from both ends of the car to the unloading drain in the bottom center of the car.”
If you use a conventional tank car, the steam pipes encircle the inner tank from top to the bottom and end to end. When you turn on the steam to heat the car’s contents, you’re really cooking it from the outside in. If the tank is full of high fructose corn syrup, for example, you are likely to burn it. Moreover, in winter, it will take a very long time to unload.
But if you put plates on the bottom of the tank car and put the steam pipes underneath those plates, you will get convection currents going. The contents on the bottom of the car are going to get hot and gravitate to the top. That will cause the colder contents on the top to flow down to the bottom of the car.
Meanwhile this convection flow results in an even temperature throughout the load. You don’t need to worry about some parts of the car overheating or cooking. So an Archer Daniels Midland tank car carrying high fructose corn syrup could warm the contents much more quickly to an even temperature and be unloaded much faster.
That experience – developing Dick’s patented tank car invention and producing cars for Archer Daniels – led directly to my initial efforts in Russia.
My For-profit years in Russia.
1985 to 1996 became my “for profit years” in Russia. They were followed – from 2001 until now – by my pro bono years.
The for-profit years were launched by my hunch that I could take Dick Loevinger’s invention to Russia. The country lives on the hard currency it gets from selling petroleum and petrochemical products to foreign buyers. They couldn’t survive without it,
But if you pick up a load of oil in Siberia and ship it to Tallinn, Estonia, (the open water port on the Baltic from which Russia ships most of its oil to foreign buyers), it could take a week to get the car to Tallinn and another week to unload it. We had something that would do all that much more quickly, and it could be done by retrofitting existing cars.
At the time, the Soviet Union was beginning to approach the financial collapse that ultimately happened.
In 1985 my second wife, Joyce, and I decided to get married and made plans for our honeymoon. Always curious about Russia, we chose to call the first part of our honeymoon trip R&R. That was not the “Rest and Recreation” of the Viet Nam era. Instead, it was “Russia and the Riviera.” We spent the first eight days of our married life in Moscow, Kiev, and Saint Petersburg.
Having done some homework – I had learned there was an organization called AMTORG. This was the commercial arm of the KGB. So I arranged for Joyce and me to meet with them on the first day of our honeymoon in Moscow. I told them I’ve got something you guys should have. There were four of them.
I told them, I thought we could retrofit 5,000 tank cars – which is the number we ultimately did retrofit with our technology. The retrofitted cars would be much more productive.
As noted earlier, we already knew it would take a week to get the cars from Siberia to Tallin and another week to unload them. We could unload them in a day. And, if you’re dealing with a beleaguered and aging fleet, they knew they could not afford to replace the fleet with new cars. Our proposal sounded like Mana. They bought into the whole thing. We got to know the Ministry of Railroads, and the Ministry of Petrochemicals quite well and they became our partners.
I think we could all agree that Russia is – as Churchill said – “a riddle wrapped in a mystery inside an enigma.” Well, I lived that life for a long time. It really is a very different place. I learned to like it in many ways, but I also went in somewhat skeptical.
The month before we got married, left on our honeymoon, and had our meeting with AMTORG, Gorbachev came to power. In the following months things began to change in Russia – glasnost, perestroika, and all that. The Soviet economy began to deteriorate as reforms were being introduced. There were also serious hardships for many Russians. Times were tough and the hard times lasted through most of the years between 1985 and the early 2000s. At the same time, many foreign investors, most of the US State Department, and other western European countries were optimistic about the reforms and foresaw Russia becoming a successful market economy and democratic.
That was the basis on which a lot of money went into Russia as it fell apart – people, particularly foreigners, began to sense the opportunity to make serious money and try to change Russia for the better. It turned out not to be so and I will come back to that later.
So Joyce and I took our R&R honeymoon. It marked the beginning of my for–profit years in Russia as we created and operated with our partners – two Russian Ministries and HAKKA, a Finish construction company that served Russian and Finnish railroads.
Origin of Soviet Finnish American Transport (SFAT)
Railroads in Russia are much more important than they are in the US. Russia spans 11 time zones east to west, and it is 5,500 to 6,000 miles wide. There are very few roads across the Russian East and not many rail lines, but rails are the only practical way to ship raw materials including petroleum and petrochemicals, military troops and equipment and the like. You’ve got to move troops. You’ve got to move equipment. Railroads do that.
Thus, in the business partnership we developed, it was critical to have the Ministry or the Ministry of Railroads as your partner or you would not survive and hopefully the Ministry of Petrochemicals as well. We also managed to bring in the Finns whom I had welcomed to tour our U.S. shops. They also had the capability to produce the pie-shaped plates and install them in the cars being retrofitted. Their representative, Pertti Happonen, also became a member of our board of directors. All three were great partners. And like the Russians, the Finns loved to drink.
We named it Soviet Finnish American Transport or SFAT, (the acronym). If you saw our cars in Russia you’d see these immense tank cars often with white exteriors and the letters SFAT – not in Cyrillic, characters – but in English painted or stenciled on both sides of the cars.
A lot of people knew these cars were different from other tank cars owned than by the Ministry of Railroads, but the basic idea was simple – convection solved the unloading problem for tank cars carrying petroleum and petrochemicals and with that, we were able to dramatically improve the productivity of the fleet.
But first, we had to get the money to retrofit those cars.
Around that time, the United States was beginning to introduce enterprise funds all over the former Warsaw Pact countries – first in Poland, and later in other countries as well. Ultimately, there were 18 Warsaw Pact countries. The US government put $ 1.2 billion in to try and help each of them migrate from Communist command economies to market economies. One of them was in Russia. It became The U.S. Russia Investment Fund. I approached them about getting the money to do the retrofits. They couldn’t seem to get their act together so I gave up on them.
But one of my directors was a Viennese banker with Credit Anstaldt Bank in Vienna. He said, “Steve, I know Ron Freeman, the number two guy at the European Bank for Reconstruction and Development (EBRD), and I’m going to make an introduction.” So I met Ron. He loved the idea. I also had a meeting with him and other senior EBRD managers in London. They all liked the idea and loaned us $42 million to retrofit the cars.
As we got them retrofitted we built the business. We began to earn a lot of money by Western standards. We were making 30% profit on revenues and it’s hard to think of an industrial company in the United States that gets those margins. It is also impossible to think of a transportation company that does so well. It became known that we were making a good deal of money which made life even more interesting. It was quite a ride.
Russia could be a dangerous and complicated place.
When word got out, there were so many other people going to Russia thinking life was going to be easy. They could help Russia and make a lot of money. But very few did. When you had a profitable company it became widely known. The guy who ran our venture said, “Steve, when you come to Moscow for our board meetings, I don’t want you to get a cab. I want you to wait in the baggage area. I’m going to send a driver and an armed guard and they’re going to take you to the car and then to your hotel. In later days, they are going to take you from your hotel to the various meetings you have.” That’s the way we operated for about three years.
It was also interesting to me that our partners did not want us to set up our main office in Moscow. They did not want the hard currency we received when the tank cars were unloaded to land in Moscow because they thought it would be grabbed. What they said was we need to set up our main operations in Cyprus. Cyprus was a British territory when Russia and went through the Revolution. And they were among the first countries to recognize The Soviet Union. So, you had this long relationship. Cypress was kind of like a younger brother. It was unique in the sense that they had Western auditors. It also had sophisticated computer technology and great communications. We also had access to the Ministry’s car management information service, which was better than that available for any railroad in the United States. We knew at any minute where every car was, and if it was in a repair shop we knew the status of the repairs.
It was a great choice but, it was also vindicated when we had bank accounts in Moscow and different Russian agencies, decided to grab them (and there was no money to grab). We shut down the bank accounts. A week later, we opened new bank accounts and moved money to Russia to pay our bills. We operated that way for years.
Russia had other risks. The Moscow mayor was a chap by the name of Luzhkov. He had been in that job for a very long time. He had a lot of power. And even to this day, his wife is probably the wealthiest woman in Russia. Luzhkov decided that because the Ministry of Railways was domiciled in Moscow, he could grab those shares to privatize them which probably meant most of it would end up in his back pocket. From my standpoint, that meant our deal would be dead. If you didn’t have the Ministry of Railways as your partner, you get nowhere in this kind of venture.
My idea was to go to a guy by the name of Anatoly Chubais. He was the Russian who was privatizing the country. We invited him to a luncheon at the Bank of America in San Francisco at one point to celebrate all we had been through. He introduced himself to everyone saying, “Hello, my name is Anatoly Chubais, and I am the second most hated man in Russia.” And what he didn’t say, but everybody in the room knew, was that the number one, most hated man in Russia was Gorbachev. That was because, by that time, the country’s economy had gone downhill.
So I knew we had to write a letter to Chubais and get him to intervene. I found myself at the consulate in San Francisco, and I met one of the Visa officers, Sasha, I said, Sasha would you help me write a letter and I explained why? He said, yes. So we wrote a four-page single-spaced letter to Chubais in Moscow, explaining to him, why he had to intervene and keep the mayor of Moscow from privatizing, the shares that belonged to the Ministry of Railways. And it worked.
Chubais did, in fact, intervene and it made all the difference in the world.
Russia could sometimes be a hassle.
I often experienced one particular kind of hassle. In a city, a traffic cop would step off the curb and waive a flag or sign at your car. On the highway, he would step out in front of his car and do the same. The driver knew he had to pull over because if he didn’t, the cop could start shooting at the back of the car. Russians were used to it. I learned that the longer the driver was out of the car dealing with a cop, the bigger the bribe was going to be to get out of there.
It was just a way of life and Sasha, the guy who helped me write the letter to Chubais, and who later became a good friend, once asked me, “Steve, why is it that in California and the United States, when a cop pulls you over, you don’t offer him a bribe?” I thought I had just learned a huge amount about the differences between our two cultures.
We had Sasha to our place in Sonoma several times. He loved the house and hoped to copy it when he went back to Moscow. In order for him to come to Sonoma, he had to check off with the FBI since he was going more than 30 miles away from the consulate in San Francisco. He had to have their permission to do it.
So one day I got a call from a lady who introduced herself as Dixie and said, “Steve, I am with the FBI and I’d like to come to talk to you at your home.” I said, “Of course,” and invited her. I’d been debriefed most of the times when I returned (from Russia) because the US government was very interested in what was going on there. We were operating one of the few successful new ventures of any scale and we were being paid in hard currency. Our profits were real and they were significant. So Dixie showed up. I was expecting perhaps a blue suit and low heels. Instead she looked like she’d just flown in from Las Vegas – you know, blonde in a black outfit, but she was charming and very smart.
She said, “Steve, we would like to ask you to offer Sasha American citizenship.” I said, “Of course, and I’m going to do that because you asked me to. But I don’t think he’s going to say yes.” The reason was that his father was a military attaché who had been posted all over the world and was trusted by the Communists and later by the Russian government. Sasha will know that the minute he takes US citizenship he will never be able to go back to Russia. His family relationship will be totally estranged, and, by the way, he may also know that there was a traitor by the name of Aldrich Ames in the CIA who got the names of 12 to 15 Russians who were cooperating with Americans. He turned those names over to the FSB. The FSB asked the Russians to please return to Moscow, as in “We have some business to discuss.” They all disappeared. Every one of them. I think Sasha may have known that. So I told Sasha that I was not trying to nudge him to do this. I was merely asking him something the US government was interested in and if he said, no, I would completely understand. He did say no.
Russian friendships.
Sasha would call us every 4th of July and every Christmas to wish us well. He probably came to our place in Sonoma two or three more times before he returned to Moscow. Later, during my pro bono years, every time I was in Moscow, we would have dinner and he invited me out to his house. We were pretty close. But in 2012, Putin, who had already served two terms as president, and then turned the keys over to Medvedev, decided he was going to come back again as President. There were all kinds of demonstrations on the streets of Moscow.
Hillary Clinton managed to speak her mind about this. All of a sudden, relations between the US and Russia got a little stiff. Sasha began to find himself concerned about what it might mean for him, and he was beginning to be a little skeptical about whether or not the stuff I was doing on the nonprofit side was altruistic. The Russians had already kicked USAID out of Russia years earlier after USAID had already spent three billion dollars trying to help Russia migrate to a democratic market economy. So, when Putin decided to take over Crimea, I think every person I knew (American, European, or whatever) that had friendships with Russians found that, by and large, they were all cut off from those friends. I tried two or three times to see if an email might stir some conversation. But to this day, since 2015, I’ve had no communication with him. I understand he has no choice. Even if he wanted to, it would be stupid of him to open up a line of communication. They do monitor all of that kind of stuff.
In 1995/96 I decided maybe it’s time to find a home for this business. There were only four of us really involved in the management that mattered. One of which was the Russian who ran the show – a former Russian military Colonel, who headed railroad operations for the military. He was a good guy, I really liked him. He was the one who told me I was going to have an armed guard and a driver for me. But I also knew that he was capable of being taken hostage. They could have made his life very miserable and we depended on him.
I also had a superb salesman (Bill Bryant) who lived in Napa – a brilliant guy. He made a deal with the Burlington Northern Railroad in which he lease-optioned, 300 coal cars. He closed the transaction, bought the cars, and immediately sold them. We put a $3 million profit in our pocket in an industry that was very tough. It was a slick deal. But Bill was an alcoholic. He had a small winery in Napa, and I always thought someday I’d get a call saying he’d had an accident on his way from San Francisco to his home in Napa. He was a great guy and a good friend. To lose him would have been a disaster.
The other key guy had been a senior salesman for the Pullman Standard Railcar Company when it was the largest railcar builder in the United States. George Tedesco was approaching eighty and we relied on him. He was critical.
I was the fourth leg on the stool that kept it all going. But I did not want to run the company if I lost one, two, or all three of these people.
It was time to put PLM/Transcisco in stronger hands. The largest railcar builder in the United States at the time was Trinity Industries. It probably still is. We decided to approach them to see if they might be interested in owning it. They ended up saying yes.
I had taken over the company to turn it around a third time when it was bankrupt. At that time, it was worth less than $900,000. We sold it to Trinity a few years later for $46 million. Out of that process, Transcisco and SFAT were in much stronger hands. Employees had greater job security, and I earned what I came to call my “Go to Hell” money. I did not invent that term. Don Valentine, one of the premier venture capitalists said, “You know, I’ve met lots of entrepreneurs. They don’t want to be billionaires. They want to run their own show and they want to have financial independence, so that when somebody tells them to do something that they don’t want to do, they can tell him or her to ‘go to hell’.” Selling the US company (PLM/Transcisco) that I led to Trinity Industries, gave me my “Go to Hell” money.
I then had three or four years plus a computer and the internet to investigate disproportionate Jewish achievement. I didn’t get the book out after three or four years, but I realized the Internet would allow me to do something I had long wanted to do, which was to find lists of the highest achieving people in many fields and learn which of them were Jewish.
I will give you only one example this evening. If you want me to come back for a talk on Jewish achievement, I’ll do that.
The Jewish people are 12 to 15 million people in the world. That is 2/10 of 1% of the world’s population of seven or eight billion. Guess how many Nobel prizes they have earned – 25%. It’s astonishing – it is 100 times more than one would expect. There are 60 exhibits in that book – all different kinds of domains. And Jews are high achievers in all of them.
Jews are simply the highest achieving group of people on the planet and certainly over the last 200 years. So I got into that topic and became something of an expert. The book is still considered one of the best ever written on Jewish achievement.
In 2000, I talked to my friend Frank Caufield. I said, “Frank, you know I tried to get money out of the Enterprise Fund and they couldn’t figure out a way make financing for SFAT work.” He said, “Steve, I want you to meet Pat Cloherty. She’s now running the show. She should want you on her board and I want you on the board because I’m on it”.
So I met Pat and she made an offer. I slept on it and then said yes. In 2001, I joined the board of The U.S. Russia Investment Fund (TUSRIF) which was Russia’s enterprise fund.
So, what the heck is an enterprise fund? There were 10 of them serving the 18 former Warsaw Pact countries. They were all venture capital funds created and run by pro bono board members. The funds’ executives were compensated, but no one could make more than a congressman or woman. In venture capital, if the most you can earn is what a congressman gets paid, you will never get good people. It is much too small. Later, enterprise funds convinced USAID, State, and the Hill to adopt carried interest compensation for their staff but not for board members.
In April or May of 2001, I was elected to the TUSRIF Board joining Frank and another new Board member, Jim Kinsey, the chair of AOL, and others. Part of the reason I was doing this with TUSRIF and later, with the U.S. Russia Foundation, was the people who were involved at the board level. They were remarkable.
I had two former ambassadors to Russia, who really were “old Russia hands.” and two sitting federal judges who had long been doing Rule of Law work in Russia. Almost no one even knew about them. We had two women Ph.Ds., one a Ph.D. historian running GE Capital in Eastern Europe and the other, a Johns Hopkins Ph.D. economist who was the first woman to run a Federal Reserve Bank (in Cleveland, Ohio). I was small potatoes compared to these people and yet I was working with closely with them. It was fascinating. In addition, I was meeting and working with some very interesting Russians. So I was pleased to be part of it.
The American government put $1.2 billion into the enterprise funds and when they were all liquidated, they had generated $1.7 billion. I cannot think of another foreign aid program I’ve ever heard about that put so much money into a new innovative program, made a $500 million profit, and it (they) did the job that they were intended to do.
In Poland, for example, the Enterprise Fund and foundation get great respect from Poles. The fund created and sold many businesses and used the proceeds to create and operate a major Polish foundation focused on leveling the playing field in rural Poland. They help the small communities some distance from Warsaw and the other large cities. The foundation supports education and libraries and other infrastructure in rural Pollard This has all happened because of the money made by the Polish Enterprise Fund.
I loved what I did. Over those years, near the end of my memoir, I say I would do it all over again. The experiences I had, the people I met and worked with will be treasured ‘til the day I die.
Okay, one last story.
We took on USAID and the State Department. The early model for handling enterprise fund liquidation proceeds had been that when they sold off their investment portfolio, half the proceeds would go back to the Treasury to repay the taxpayers. Our general counsel, Rob Odle, who was involved in forming most of these enterprise funds, said, “Steve. That’s a waste. That money will get lost in the rounding if you return it. So much more can be done with it if you retain it. We told State and USAID that we wanted to preserve all of the proceeds, because Russia is too important. If Russia really became more democratic, more open, and headed in the right direction, then we could use that money to further support that progress. If Russia did not make progress we would then figure out what to do with it.
USAID and the State did not like that idea but the chairman of the Senate Foreign Relations Committee, Richard Lugar, did. In 2008, he put a hold on all the money that would have gone to the Treasury. That is why, as recently, as six months ago, after we had already endowed The U.S. Russia Foundation with $153 million, we also had a separate escrow account of another $153 million.
On February 24th, 2022, Putin invaded Ukraine. We had two board meetings scheduled for the following week. One was for the Enterprise Fund, the other was for the Foundation.
We talked to a USAID contract employee for whom we had great respect. He suggested we consider proposing a significant grant to the Ukraine Enterprise Fund. A week later, we sent a written proposal to USAID in which we requested their support for TUSRIF to make a grant of $100 million to the Ukraine Enterprise Fund. (The other $53 million would be granted to the U.S. Russia Foundation.)
The Ukraine enterprise grant would help sustain small businesses being damaged or destroyed by Putin’s invasion. They might not otherwise be able to survive. And, because the Ukraine Fund is also a foundation, it could also make other direct grants to help Ukraine rebuild.
We sent that grant request to USAID in early March, 2022. It was May before we finally had a meeting with them. Because those at senior levels had not been well briefed on what we had done over the years and more recently, we first had to explain what we we’re all about.
Later, they told us the Hill thought Russia was toxic. They were not about to approve what we were proposing. Later USAID came back to us and confirmed they could not propose a $53 million grant to the U.S. Russia Foundation. They said, “We might be able do $7.5 million.” We already knew that they were willing to do $7.5 million. So, we talked them up to $18 million.
The next problem arose on the Hill. We (USRF) had always been low profile in Washington, D.C. (It made no sense to be high profile about what we were doing.) We always did was in the best interests of the U.S. taxpayers and Russia. For example, early on, we set up programs to create partnerships between Russian and American universities to help Russian universities commercialize inventions and intellectual property they had developed. Russia has a long history of great inventions that never went anywhere. U.S. universities, on the other hand, have long developed successful commercial businesses from their inventions. The partnerships we set up were intended to help Russians learn how to do the same. In like manner, we helped partner Russian and American law schools because Russian law schools generally taught using lectures. They had never learned how to teach using the case method, but they wanted to. These are just two small examples of the kinds of things we were doing from inception.
Since the invasion, we have been working with other NGOs to support the independent Russian media that have since left the country and now operate from the Baltics, Georgia, the Czech State, Amsterdam, and other venues.
In addition, we have provided financial support for some of the 700,000 to one million Russians who have fled their country since February 24th. We can’t afford support for all of them, but we and other NGOs are all doing what we can. We are also still working with Russian attorneys who travel to Prague and other places outside Russia to get trained in how to provide defenses for Russian citizens who are being abused. That’s the kind of thing we do. So, when USAID asked for us to help with explaining all this to the committees on the Hill that have jurisdiction, we sent our CEO. He has only been with us for a year-and-a-half. He was magnificent. He met with 25 to 30 congressional staffers to explain what we are doing and when he walked out, they had agreed.
As I was writing the memoir drafts, I would say that someday I am going to be able tell you how this all turned out. By December 2022, the proposed Congressional Notification went to the Hill with $135.7 million going to Ukraine and $18 million to the Foundation. It was cleared by them, and in the first weeks of January we had transferred $135.7 million dollars of government issued treasuries to the Ukraine and $18 million to USRF.
So, I think it would be good to stop there, except for one more important thing.
Jeff Splitgerber back there in that the last row of this room is the guy who suggested I write a memoir. I told him, “No, I’m not famous, or wealthy and not that smart. He said, “Why don’t you meet Karen Mireau Rimmer. I did and she is a gem. This lady has helped 30 people write memoirs. I really encourage you to consider it. I am pleased Jeff convinced me. She has been wonderful to work with. So I encourage you to consider it. And, if you do, talk to Karen. You could not find anyone better and her home and office is only a mile or so away from most of us.
OK, I’ll stop. Thank you all very much. I really appreciate your being here and I hope you found it worth your while.
There is time for some questions.
Questions and answers.
Q: Since you have been dealing with Ukraine, I wonder if you could say something about what you think is likely to happen in the short- and in the long term as a result of the invasion
A: The answer is I don’t know. I’m very proud that the United States is doing what it’s doing. I’m proud we have managed to get most of the Western Europeans involved in the same thing.
I think Putin deserves to be ousted but never believe that will be easy. In his heyday he was getting 80 and 90 percent approval ratings or more. When he began the invasion, it dropped to like 60 percent.
Levada is an independent polling firm in Moscow and they’re straight. When you see the name Levada on anything they post, they are giving you the straight poop.
They said it went down to 50 percent at the time of the invasion. Then it went back up again. When he went after the additional 300,000 troops. It went down again. Then it went back up.
I think if we play our cards, right, we can make it unwinnable for him. Whether or not we are going to take that risk, I don’t know because Putin is a nasty guy. I mean, killing women and children, destroying schools, blasting civilian housing . . . just look at what he did in Syria. He would do that any place.
I would very much like to see him gone. Yet, if he does go, there is no promise that the Siloviki – the senior FSB guys that are just like him might not follow him in the office, and Yevgeny Prigozhin, the chap who heads the Wagner Group of mercenary fighters might be much worse.
I know there are many Russians outside Russia. In San Francisco there’s a Russian I met with a few weeks ago. He is the great grandson of Stolypin, who was a Russian reformer back in the 1910–1920s. There are all these people who still think of themselves as Russians and who would like to return home if the door was ever open to do that and help make Russia a “normal country.”
We would love to provide support to that.
I think we have the weapons and the wherewithal to help defend Ukraine if we have the courage to stand behind it. But it’s a risk. Putin might do something really stupid and we really would end up in a big mess. He wouldn’t win it, but we would be penalized very badly for it, but I’m rooting for Ukraine.
By the way, as you probably know Sonoma has a Ukrainian Sister City, Kaniv, Ukraine. They’ve been very interested in our prospective grant to the Ukrainian Enterprise Fund. I was pleased to be able to tell a lady involved in that program that most of the money has already been transferred.
Q: Hi Steve. How are you? When you were talking, I just kept thinking of Bill Browder and his story. Were you scared during your time there and after reading Bill Browder’s book, were you scared?
A: That’s a good one and I can I appreciate you asking. Pat Cloherty was the (TUSRIF) leader from whom I took the gavel. She was a remarkable entrepreneur. One night in the first two years I was on that board, she had a small dinner. Browder was there and was the speaker.
He told a great story. If you’ve read his book, you know the story. I put money into Browder’s Hermitage Fund and made good money. But when Putin arrested an oligarch Mikhail Khodorkovsky in Siberia, you may remember that when he landed his plane in Siberia, he was surrounded by KGB guys with machine guns.
They put him in jail for 10 years and then, when he got out, they put him back in jail for another 10 years. I decided it was too chancy. I sold my Hermitage shares and never again invested in Russia.
Browder is an interesting chap. I know Russians and Americans who don’t like him. He gave up his US citizenship, became a Brit, and never had a good answer for why he thought that was necessary. But I know that what he did in setting up the freeze of laundered assets, and with Magnitsky Act are the best things that he’s done. The idea that the minute any laundered money touches American soil we can go after it and all the properties owned by that person in the United States is important. And of course, it is much the same all over Europe. The Magnitsky Act is a huge weapon.
Putin may own as much as half of the wealth of Russia. His deal with the oligarchs is that if you want to run your own show, you’ve got a partner. But the Magnitsky Act means we can begin to affect the wealth of the very wealthy, maybe even including Putin.
I saw Browder speak at the Authors Festival in Sonoma. He did a good job and I’ve listened to or read three or four of his speeches. He comes across as being absolutely authentic, and so I like him, but I sure know people that don’t.
Q: It seems that there’s an epidemic of oligarchs falling out of windows. What’s that all about?
A: There’s two things it’s usually about. The first is to teach everybody else a lesson. If you can take a high-profile oligarch and shame or kill him, everybody will know what happened and most will learn they don’t want to challenge the regime. The other thing is, if the oligarch really has done something nasty, the Kremlin will likely kill him. He will lose everything he has and his family will be terrorized as well. Terror was a state policy from roughly1917 ‘til now. Ten million Russians died under Stalin and 1.7 million to 2 million were killed in the Gulags. It was a nasty bitter place.
Russians often believe they’re tough and they’re used to having to be durable. You have to learn to live with these kinds of things. Such is life. I’d love to see it get better.
Russians can also be wonderful, warm, and friendly people that you really care about. We had a lady who set up a not–for–profit for kids in Russia. Then she became Putin’s Deputy Minister for protocol. What that meant was that Russia had never had a protocol for first wives. Her job was to develop and use it.
We had a director, Steve Biegun, who was Trump’s special emissary to North Korea and later was named Deputy Assistant Secretary of State. He knew her because, when he was part of a not–for–profit in the 1990’s in St. Petersburg, she worked with him. He suggested we might want to have her on our board of directors. She was telling us things about the culture we did not know. But she was viewed as being a traitor by the Kremlin. One day when she and I were meeting at a Marriott Hotel in Moscow in the club lounge, two Russians came in and sat down next to her. She became nervous. I asked if she was uncomfortable. She said yes. We got up, walked to the elevator punched ground floor and knew we were being followed.
We got off the elevator before the ground floor and they did not know that. We got on another elevator and went back up to a different floor and had our meeting.
I called her the ‘Sparrow.’ She was so small, but she was very brave. She had the experience that every time she would go to the airport to fly out of Russia, she would be asked, “Are you going to go to a TUSRIF meeting or a USRF meeting?” They were monitoring her and intimidating her. That was what they wanted to do. One day, they stopped her son driving in Moscow, took him to the police station and began interrogating him about him and his mother. He got angry. They were going to put him in jail. It was about 8 hours later that his father was able to finally get him released. It was just brutal. They didn’t need to do that. She was a loyal Russian but they had to show her. This is the way life is. I don’t know if I really answered your question, however?
Q: About sanctions in Russia, you would think the Russians would actually run?
A: If you’re an oligarch and you’ve got $1.2 billion stashed away and you’ve given Putin effectively $1.2 billion, you know that if you defy him you are likely to have serious problems. You have to go along if you’re going to stay in that place. and have your family with you There is just not a lot of choice about that.
Ukrainians also have a history of a lot of corruption. One of the things about Ukraine that is different is that at least, they’re trying to begin to make some headway. It’ll be a long time before they get to where we might like for them to be but they’re trying. They want to be independent. We think they deserve that. I support it, but that does not mean much in this world.
As I said, Russia, was long run on terror. You learned early on that the only people you could really trust were your family. Anything said to other people. might get spilled by them – even inadvertently – so you did not take those kinds of chances. But God I would like for it to be different.
I don’t know that I answered your question. What was your original question?
Q: It was about sanctions because they really do penalize almost everybody.
A: They don’t penalize only the oligarchs. They affect almost every industry that matters in Russia. Most are affected. The reality is you can’t leave Russia. I mean, you can go to Khazakstan. You can go to Turkey and there are other places you can go, but almost nowhere in Western Europe. People had homes all over the place. That’s where their yachts were. So yes, the sanctions work, but they’re not sufficient. Better yet, the sanctions that work best penalize the sale of oil. And that’s beginning to work. Their hard currency returns have come down significantly. And we’ve also had a warmer winter both here and in Europe, where we haven’t needed as much natural gas as were afraid that we would. The best way to try to freeze them out. is to make the amount of money Putin can get in hard currency to go down as close to zero as we possibly can. That may or may not happen but we’re trying.
You know the whole invasion so far has backfired on him. One of his arguments was that he did not want Ukraine to become a NATO country because Ukraine is only 500 miles away from Russia. Instead, the invasion has made Finland a NATO candidate and it is only 250 miles away from St. Petersburg.
No guarantees yet, but I do believe tight sanctions, our trying to keep them from being able to sell oil to the West. And while the Chinese and Indians are buying a lot of oil they are getting huge discounts.
Q: Do sanctions affect average Russian? Are they going to put up with suffering?
A: It affects them. Everything is more expensive. And there are the 700,000 to 1,000,000 Russians that have left. Mostly these are the young Russians who are in all kinds of technology businesses and all of a sudden, you can’t hire new talent. They’re not there. They’re going to have problems. Food prices are higher. Inflation is affecting them. It isn’t disastrous, but it is painful. The interesting thing is because they think of themselves as durable, most of them will try to find a way through even if they’re eating “Stone Soup.”
They’re not likely to rebel openly. I think if anybody tries to do something, it is going to be done very quietly, behind the scenes with some very brave people who take a big risk in trying to pull it off. I’d love to invest in them, but I don’t really think it will work.
Thank you everybody.
Please note:
This transcript has been lightly edited
from the original video for the purpose of clarity.