Dan Gertler Diamond and The London Hedgies In Corrupt Congo

The spotlight on a scandal in the heart of Africa is turning towards Britain

Clive Newall just couldn’t make any headway. The president of First Quantum Minerals had been negotiating for a year to get back a prized mine seized by the Democratic Republic of the Congo (DR Congo). Yet officials in Kinshasa seemed always to confect a new reason to stymie him. It was odd.

Unconfirmed reports, meanwhile, had begun circulating that the government had already sold the asset, called Kolwezi, to Dan Gertler, a controversial Israeli tycoon who made his first fortune in the diamond trade.

His fears were confirmed in August 2010 when ENRC, then a FTSE 100 mining giant, unveiled a $575m deal to buy a majority stake in Kolwezi — and four other Gertler mines. First Quantum’s asset was gone.

Newall always felt the odds had been stacked against him. Now he knows they were.

Ten days ago, a subsidiary of Och-Ziff pleaded guilty to funding a vast bribery scheme perpetrated by an unnamed business partner in DR Congo, understood to be Gertler.

The admission was part of a sweeping $412m (£333m) deal to settle charges brought by America’s Department of Justice and Securities and Exchange Commission that the New York investment giant funded illegal payments to officials in several African countries, including Libya and Guinea, in exchange for prize assets.

The picture that emerges from three related US court orders could not be clearer: Newall never had a chance. According to court documents, in the three years from 2008 — covering the time the British executive was frantically trying to recover his company’s mine — Gertler handed at least $23m in bribes to “DRC Official 2”. This is understood to be Augustin Katumba Mwanke, a close adviser to Joseph Kabila. Mwanke died in a plane crash in 2012.

Och-Ziff’s so-called deferred prosecution agreement details a litany of questionable deals that The Sunday Times has chronicled since 2010. The fine is the largest levied against a hedge fund for breaking foreign bribery laws and closes a dark chapter for the company.

But it shifts the spotlight to Britain, where much alleged wrongdoing in one of the darkest chapters in UK corporate history took place. On these shores, no charges have yet been brought.

ENRC, the miner once listed in London, bought and still owns and operates many of Och-Ziff and Gertler’s ill-gotten assets.

Since April 2013, it has been under criminal investigation by the Serious Fraud Office (SFO).

Two of Och-Ziff’s London-based employees who are allegedly at the heart of the bribery, could yet be charged. The pair, identified as “Employee 3” and “Employee 5” in court documents, are understood to be Michael Cohen, 45, ex-head of Och-Ziff’s London operation, and Vanja Baros, 41, a private equity analyst who focused on Africa and was also based in Och-Ziff’s office in the capital.

In July, the Treasury granted extra funding to the SFO for the ENRC probe. US authorities are still investigating “individuals”.

The saga can be traced back to January 29, 2008, when Och-Ziff announced the creation of a joint venture, Africa Management.

The vehicle was set up with two partners: Palladino Holdings, an investment firm run by South African deal-maker Walter Hennig; and Mvelaphanda Holdings, founded by South African freedom fighter-cum-tycoon Tokyo Sexwale.

The set-up was simple. Africa Management created funds under the name African Global Capital. The African partners would bring them the assets, Och-Ziff would write the cheques, and they would all share in the spoils.

Around that time, according to court documents, the head of Och-Ziff’s London office Cohen started parallel talks with Gertler, an aggressive businessman who had built a reputation for leveraging his close friendship with President Kabila to build a burgeoning empire in DR Congo’s mining industry.

They, too, reached an accord but didn’t record it officially. The understanding between Gertler, Cohen and Baros, however, was that “Och-Ziff’s funds would be used, in part, to pay substantial sums of money to DRC officials to secure access to opportunities in the DRC mining sector”, court documents said.

The partnerships quickly bore fruit. Africo Resources, a listed Canadian miner, had bought the rights to a big DR Congo copper project called Kalukundi but hit a roadblock.

As it was preparing to raise money from international investors to start work on its asset, a new “owner” appeared, claiming it had bought Africo’s stake for only $600,000 from a former employee. Legal fisticuffs ensued. Africo was forced to postpone its fundraising.

Enter Gertler, with an enticing offer. His Virgin Islands vehicle, Camrose, would not only buy out the claimant, but also back a C$100m fundraising, making Camrose the company’s majority shareholder. With few options, Africo accepted. As it turns out, the squeeze on Africo was manufactured by its saviour, Gertler.

Katumba Mwanke, Kabila’s adviser and, according to court documents, one of the biggest recipients of illicit payments from Gertler, “orchestrated the taking of Africo’s interest”. Once the company took its case to court, the Israeli bribed judges and officials “to ensure that Africo did not obtain a favourable ruling”.

In a text to an associate, cited in the court documents, Gertler wrote: “We can’t accept a mid-result . . . Africo must be screwd [sic] and finished totally!!!”

Camrose grew. Gertler and Och-Ziff wanted to cash in, but to attract a suitor they needed to beef it up with more assets including Kolwezi.

ENRC was a familiar buyer. The year before, the Kazakh mining giant, founded by three central Asian tycoons after the collapse of the Soviet Union, made its first foray into Africa when it paid £584m for Camec.

The London-listed developer was chaired by former England cricketer Phil Edmonds and 35%-owned by Gertler. Only three months before the Africo deal, in April 2008, Och-Ziff invested $150m in Camec. Days later, Edmonds’ company lent $100m to the government of Zimbabwe as part of a purchase of platinum assets.

Soon after Camec’s loan to Robert Mugabe’s regime, his Zanu-PF party, in the midst of a presidential election, unleashed a violent crackdown on the main opposition.

According to court documents, Cohen forwarded to Baros a text message from the chief of Africa Management, who said the company in which Och-Ziff had just invested had “paid 4 arms into zim[babwe]”.

A spokesman for Edmonds reiterated a previous statement that “categorically denied” any money went to Zanu-PF.

The funds were paid, it said, to “international creditors for . . . commodities, seeds, grain, fertiliser and fuel”. Edmonds has had no involvement with ENRC since selling Camec in 2009.

ENRC’s swoop on Camrose the following year, its second big acquisition in Africa, came amid mounting pressure over the Kolwezi seizure. First Quantum had secured a ruling from a Paris tribunal that forbade the DR Congo from selling the mine. The World Bank, a shareholder in the project, had also kicked up a fuss.

To stop it all falling apart, some very big bribes were required. According to court documents, of the $575m price tag for Camrose, ENRC paid $50m in cash, which Cohen was told “was for DRC Partner to ‘use on the ground’ to corruptly acquire Kolwezi”.

Gertler’s holding company, Fleurette, said: “We dispute all accusations of wrongdoing in any of our dealings in the DRC, including those with Och-Ziff.

We dispute any allegation of bribery.” ENRC was an investment parter with Gertler for two more years before buying him out for $550m in cash in December 2012. Four months later the SFO launched a probe into “fraud, bribery and corruption” at ENRC.

ENRC’s founders hastily launched a takeover bid, delisting ENRC at a fraction of the price it floated. It shut up shop in the capital, moved its head office to Luxembourg and renamed itself Eurasian Resources Group.

It said: “In light of the ongoing SFO investigation into ENRC we do not consider it appropriate to comment on any of your questions at this time.”

The DR Congo last week launched a passionate defence of Gertler, who, according to court documents, paid more than $100m in bribes to DR Congo officials between 2005 and 2015.

Barnabé Kikaya Bin Karubi, Kabila’s chief diplomatic adviser, told Bloomberg News: “For us, an attack on him is an attack on the Congo. Mr Gertler’s businesses are legitimate. He pays his taxes, making a good contribution to our government in monetary terms.”

Despite the lurid accusations and monster fines, only one individual has been arrested — and he was first named by The Sunday Times more than four years ago.

In June 2012, we reported on a secret loan Palladino (Och-Ziff’s partner in Africa Management) made to Guinea, another poor country with weak institutions and huge, largely undeveloped mineral resources.

The deal was signed on behalf of Palladino by a Gabonese businessman, Samuel Mebiame. It entitled the company to a large share of concessions owned by the state mining company if president Alpha Condé’s cash-strapped government defaulted.

The story caused uproar. Guinea quickly repaid and cancelled the loan and Mebiame vanished from view — until two months ago, when as the net was closing on Och-Ziff, he was arrested on a visit to America.

Authorities said Mebiame, 43, worked for a joint venture between a hedge fund and other investors “as a ‘fixer’. . . routinely bribes to foreign government officials”. It is understood the unnamed hedge fund in Mebiame’s charges is Och-Ziff; the joint venture is Africa Management.

US-born Cohen, a naturalised Briton who lives on a 930-acre estate in Hampshire and has a £335m fortune according to The Sunday Times Rich List, declined to comment. So did Baros. Lawyers for both men, however, said their clients were innocent and once the evidence was all out it would be clear that they “did nothing wrong”.

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