May 13, 2021

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The U.S. Magnitsky Act vs. Dan Gertler

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In 2017, the United States launched its Global Magnitsky Sanctions program, meant to target human rights abusers and kleptocrats around the world. The very first list of sanctioned entities included one Dan Gertler, an Israeli billionaire who had been accused by the Treasury Department’s Office of Foreign Assets Control, in consultation with the secretary of state and attorney general, of amassing his fortune through a series of “opaque and corrupt mining and oil deals” in the Democratic Republic of Congo.

Over the next six months, around 30 of Gertler’s companies were further sanctioned, as the Treasury Department forbade him from working with U.S. institutions and froze his American assets. That should have been the end of the story.

What followed instead seems better suited to the pages of a political thriller than a newspaper, with Gertler allegedly attempting to evade the sanctions through a complex money-laundering network that stretched across several continents, while hiring high-profile lawyers to lobby the United States government on his behalf to remove them altogether.

At last, in the final days of Donald Trump’s presidency, administration officials granted Gertler a special license that restored his access to the U.S. banking system for a year, essentially lifting the sanctions on him. That decision, which was not announced publicly until after Trump left office, was decried by lawmakers so fiercely that the administration of President Joe Biden revoked the license in early March. State Department spokesperson Ned Price roundly condemned Gertler, accusing him of “extensive public corruption” in a scathing statement.

But the State Department’s speedy and emphatic revocation of Gertler’s special license belied just how difficult it is to secure sure-fire victories in the fight against corruption. In the meantime, questions linger about how Gertler came so close to getting everything he wanted, and exactly who helped him along the way.

A Young Diamond Dealer

Gertler arrived in the Democratic Republic of Congo in 1997, a 23-year-old adventurer brimming with ambition. The son of a prominent Israeli diamond trader, he’d recently completed his mandatory service in the Israeli Defense Forces and had already traveled to Liberia and Angola to buy rough stones. Gertler now wanted to challenge the South African giant De Beers for dominance in the diamond business.

He got to Congo at a time of great upheaval in the country. Laurent-Desire Kabila, the leader of an armed insurgency backed by Rwanda and Uganda, had just overthrown the despotic regime of Mobutu Sese Seko. But Kabila’s outside backers soon turned on him, reinvading Congo just a year later, while lending support to armed groups in the east that threatened his grip on power.

Gertler nevertheless managed to thrive amid the chaos and was soon dealing $2 billion in diamonds annually. It helped that he had developed a fast friendship with Joseph Kabila, Congo’s army chief at the time and the son of the newly installed president. Facing an increasingly perilous situation, the elder Kabila turned to his son’s friend for financial assistance, offering Gertler a monopoly on the country’s diamond mines in exchange for $20 million in cash, according to a 2001 U.N. investigation—and Gertler agreed.

Kabila then used the money to buy weapons in a scheme that helped popularize the term “blood diamonds,” referring to the use of revenues from diamond mining to fund conflict. Gertler is even rumored to be the inspiration for the 2006 Hollywood film of that name.

The State Department’s speedy and emphatic revocation of Gertler’s special license belied just how difficult it is to secure sure-fire victories in the fight against corruption.

Gertler’s dangerous mix of business and politics came to a head in 2001, when Laurent-Desire Kabila was assassinated by one of his teenage bodyguards. In the aftermath of his father’s death, Joseph Kabila assumed the presidency, still waging a war in eastern Congo that saw armies from eight neighboring countries clashing for influence and a stake in the country’s vast mineral wealth.

In an effort to shore up diplomatic support for his embattled regime, Kabila sent Gertler to the United States as his personal envoy. In a 2002 letter to then-President George W. Bush, Kabila described the Israeli businessman as an “old and trusted friend.”

“Mr. Gertler has convinced me to put his trust in you rather than succumb to the help offered by other nations,” wrote Kabila, in a desperate plea for Washington’s help.

Over the next year, Gertler, still in his 20s and with no previous foreign policy experience, met with Condoleezza Rice, then Bush’s national security adviser, and Jendayi E. Frazer, then a special assistant to the president. He also ferried letters between Washington, Kinshasa and Kigali, which was still supporting Kabila’s enemies in eastern Congo. Gertler was “serious and credible,” Frazer told journalists, explaining that his actions helped bring about a drawdown in a war that according to some estimates had claimed more than 5 million lives.

Gertler’s intervention also helped to cement Kabila’s grip on power, even as it allegedly expanded his own personal wealth.

Acting as a middleman between the Congolese government and a bevy of Western companies, Gertler moved up from dealing diamonds to trading in even more lucrative minerals, including oil, copper and cobalt, which is now ubiquitous in batteries that power cellphones and electric cars. Anti-corruption campaigners have long alleged that Gertler often obtained these resources at far below their market value, before selling them off at an enormous profit, and allegedly pocketing hundreds of millions of dollars. But the diamond magnate has always refuted accusations that he used this strategy to profit from buying and selling mining assets, telling Bloomberg reporters in 2012, “the lies are screaming to the heavens.”

According to a report authored by former United Nations Secretary-General Kofi Annan, Gertler’s alleged arbitrage, combined with his apparent monopolistic control of these industries, resulted in Congo losing out on some $1.36 billion in just five deals between 2010 and 2021.

In these arrangements and others like them, according to the U.S. Treasury Department, Gertler and his company, Fleurette Properties, served as a middleman, using offshore companies to sell Congolese mining assets to multinational firms. Opacity in the mining sector, where Gertler was king, also caused the International Monetary Fund to cancel a loan program worth $532 million to Congo in 2011.

Five years later, the U.S. Justice Department filed a prosecution agreement that accused an unnamed “DRC Partner” of paying $100 million in bribes to Congolese officials to help the New York-based hedge fund Och-Ziff win favorable access to Congo’s mineral wealth. The description of the “DRC Partner” is not inconsistent with Gertler’s profile and has been “widely reported to be him,” according to the Guardian.

“Dan Gertler is everywhere, in each business in Congo,” Emmanuel Umpula, director of the Congolese nonprofit African Resources Watch, said bitterly, when asked about Gertler’s influence. “Where there is money, Dan Gertler is there.”

Former President Bush and Congo’s former president, Joseph Kabila, Washington, Oct. 26, 2007 (AP photo by Pablo Martinez Monsivais).

Meanwhile, Kabila was also getting richer. A 2017 report from the Pulitzer Center for Crisis Reporting revealed that the Kabila family had a stake in 80 businesses at the time, reaping the benefits of their political power. According to the U.S. Treasury Department, Gertler also acted on behalf of Kabila, helping him set up offshore leasing companies.

The Israeli tycoon, whom Forbes values at about $1 billion, has repeatedly denied any allegations of corruption, even famously declaring that he deserves a Nobel Peace Prize for his actions in Congo. A spokesperson for Gertler at the high-powered London public relations firm Powerscourt Group responded to inquiries by directing me to Gertler’s website, the homepage of which describes him as a “philanthropist.”

Slapped With U.S. Sanctions

As Gertler was making his fortune in Congo, former hedge-fund manager William Browder was pushing the United States government to enact the Magnitsky Act, the first law of its kind in the world, to enable the U.S. to target Russian human rights abusers and corrupt actors with individual sanctions. Browder sought justice for his friend, Sergei Magnitsky, a scrupulous tax attorney who was beaten to death in a Russian jail after failing to retract testimony that Russian bureaucrats had stolen $230 million in taxes paid by Browder’s Moscow-based Hermitage Capital.

At first, the act, written and championed by Sens. Benjamin Cardin and the late John McCain, was aimed only at Russian officials. “Vladimir Putin went out of his mind when it was passed, and he retaliated by banning the adoption of Russian orphans by American families,” Browder told WPR in an interview. “He also made it his single largest foreign policy priority to repeal the Magnitsky Act and stop it from spreading to other countries.”

Putin’s ire showed Cardin and McCain that they were onto something, and they began pushing to turn the original Magnitsky Act into a global program. In 2016, the same year that the Treasury Department accused an unnamed “DRC Partner” of paying $100 million in bribes, the Global Magnitsky Act was signed into law by then-President Barack Obama. Under the newly broadened range of the law, the Treasury Department works with the Department of Justice, the G-7’s Financial Action Task Force and civil society to identify corrupt individuals, using tools and typologies that flag suspicious behavior for further investigation. It then issues a list of those individuals and entities, in consultation with the secretary of state and attorney general, under the Magnitsky Act, which does not require targeted individuals to be found guilty in a court of law before imposing sanctions.

“It’s now effectively the new technology for dealing with human rights abuses and kleptocracy,” Browder said. The act has been applied more than 200 times to date, and it inspired the United Kingdom, European Union and Canada to institute their own versions of it.

According to Sasha Lezhnev, deputy director of policy at The Sentry, a Washington-based nonprofit that tracks dirty money, it is no mistake that Gertler was among the first group of people sanctioned under the act in the United States. “There is corruption all around the world,” he said. “The U.S. government doesn’t sanction everyone involved in it. But it decided to make Gertler one of the case examples for its Global Magnitsky Sanctions program.”

Gertler didn’t take the sanctions lying down, lobbying the Trump administration to lift them. But according to whistleblowers Gradi Koko and Navy Malela, he allegedly also sought to find ways around them.

Just months after Gertler landed on the sanctions list, Koko, who was then the head of accounting and risk at Afriland First Bank, was in his company’s Kinshasa offices when, he claimed in an email to me, he spotted the Israeli trader in the corridor, flanked by security. Under the terms of the sanctions, Gertler was prohibited from doing business at any institution that deals in U.S. dollars, so his presence at the bank, which is Swiss-owned and headquartered in Cameroon, immediately roused Koko’s suspicions.

Koko launched an internal investigation, but says that when he mentioned his concerns to Patrick Kafindo, the bank’s director, Kafindo allegedly told him that he could be shot in the street if he shared them with anyone else. Terrified, Koko fled to an undisclosed location in Europe with his family, taking bank documents out of Kinshasa with him.

Back in Congo, Malela, the second whistleblower, who worked as an IT specialist at Afriland First Bank, continued to gather documents containing more evidence of alleged wrongdoing, but fled the country shortly after Koko, also afraid for his life.

“There were real and verifiable facts, which made us suspect that our headquarters were involved in this process of circumventing U.S. sanctions and money laundering,” Koko told me. “As auditors, we had to make our voice heard on this.”

“To the international community, [it looks like] there was a corrupt process that led to Mr. Gertler receiving relief from the sanctions.”

The documents Koko and Malela saved formed the basis of a groundbreaking investigation by the NGOs Global Witness and the Platform to Protect Whistleblowers in Africa, known as PPLAAF, which alleged that Gertler had used Afriland First Bank to transfer tens of millions of dollars in personal wealth out of Congo in a complex money laundering scheme that traversed Israel and Europe.

All the while, the NGO researchers worked on a knife’s edge. “The threat of legal action was something we felt through much of our reporting on this,” said Margot Mollat, a campaigner with Global Witness, in an interview. “I cannot tell you how many letters we received at that time. It was accusation after accusation.”

The letters moved beyond intimidation when Gertler sued Global Witness and PPLAAF for defamation, repeatedly denying that he moved money through Congo. He’s also sued the Israeli newspaper Haaretz, which investigated and reprinted the money laundering allegations, for libel, demanding the equivalent of about $2.7 million in restitution.

Lawyers for Gertler at the U.K. firm Carter-Ruck, which specializes in reputation management, did not respond to requests for comment.

The Room Where It Happened

As news of this alleged money laundering scheme unfolded in the media, Gertler was reportedly doing everything in his power to have the sanctions on him lifted. As early as 2018, Gertler began seeking counsel from Alan M. Dershowitz, a celebrity attorney who has defended O.J. Simpson, Jeffrey Epstein and Donald Trump.

In 2019, Dershowitz and former FBI director Louis Freeh registered as lobbyists representing Gertler and began meeting with high-level officials to discuss easing the sanctions on him, according to The New York Times. Their intervention was a well-known fact in Washington, despite the fact that its final result—the special license—was shrouded in secrecy.

J. Peter Pham was a senior diplomat, Africa adviser and former special envoy to the Great Lakes region for the Trump administration. He told me he was “blindsided” by the news that Gertler had been granted a special license.

Other State Department officials, including Assistant Secretary of State Tibor Nagy and U.S. Ambassador to Congo Mike Hammer, were reportedly not informed about the decision ahead of time either.

Sanctions experts were as surprised by the special license as Pham. “This was unique. I never saw a license of this type,” said John E. Smith, a long-time civil servant who worked at the Treasury Department’s Office of Foreign Assets Control under several different presidents, before departing in 2018. “It essentially granted Mr. Gertler all the relief he would have gotten from being removed from the [sanctions] list, but issued in a private fashion, away from prying eyes,” Smith, who is now in the private sector, added.

Dershowitz and Freeh had also reportedly solicited Frazer, the special assistant in the Bush administration, who’d worked closely with Gertler, to pen a letter praising the businessman, which they then distributed to Trump administration officials. Frazer was terse when queried by WPR. “Everything I have to say is already on the public record,” she wrote in an email.

Former Treasury Secretary Steven Mnuchin and former Secretary of State Mike Pompeo were reportedly in favor of easing the sanctions on Gertler. Neither could be reached for comment. Dershowitz declined to be interviewed for this story, and messages left at Freeh’s New York-based law firm were never answered.

A portrait of Sergei Magnitsky.

Sergei Magnitsky’s mother holds a portrait of her son, in Moscow, Russia, Nov. 30, 2009 (AP photo by Alexander Zemlianichenko).

Gertler’s representatives have often stated that easing sanctions on him would benefit the national security of both the U.S. and Israel. And figures close to Prime Minister Benjamin Netanyahu, including former Israeli ambassador to the U.S. Ron Dermer and the head of the Israeli spy agency Mossad, Yossi Cohen, reportedly intervened on Gertler’s behalf. Opponents of the decision have difficulty believing their arguments.

“No one has ever given me a coherent, much less convincing, theory of how Gertler in the present day is of any value to the United States,” Pham said.

“This action itself really compromises America’s credibility globally on anti-corruption,” said Cardin, co-author of the Global Magnitsky Act, in an interview days before the license was revoked. “To the international community, [it looks like] there was a corrupt process that led to Mr. Gertler receiving relief from the sanctions.”

Risking It All

It is still unclear what Gertler, who has reportedly already taken significant steps to try to free himself of restrictions, might do now. “He’s always one step ahead,” Franz Wild, a former Bloomberg reporter who covered Congo for more than a decade, told me. “He’s always working some kind of angle, and that is something that has helped his longevity.”

Though the license granted to Gertler has now been rescinded, he could have used the brief window of opportunity the Trump administration gave him to transfer significant financial assets out of the United States. And Gertler is already trying to scrub his image clean, announcing a new project, Yabiso, to sell 30 percent of the royalties he receives from Metalkol, one of the largest copper and cobalt mines in Congo, back to the country’s people in small shares.

“Brothers and sisters Congolese, I was praying and waiting for this day more than 20 years,” Gertler said of Yabiso in a video. “We can share together the wealth of the copper and cobalt mines of the DRC.”

In Congo, the sting of Gertler’s past deals is still deeply felt. When one mine, Kingamyambo Musonoi Tailings, was forced to close in 2009, 700 workers lost their jobs overnight. Kabila’s government had unlawfully revoked the license of the company that owned the mine, Quantum Minerals, affecting not only the mine employees, but thousands of people who benefitted from the company’s mandated environmental projects, provision of clean water and education services.

Months after KMT shut its gates, the Congolese government reportedly sold the mine to Gertler for $60 million, who in turn allegedly flipped it to Eurasian Natural Resources Corporation for an estimated $685 million, making a profit of hundreds of millions of dollars, according to the U.K. NGO Rights and Accountability in Development, or RAID.

“If you go there, there are lots of people that don’t have access to water. They don’t have access to jobs,” Umpula, the head of African Resources Watch, said of the villages around KMT. “They don’t even have access to food.”

Gertler’s apparent attempts to evade sanctions reveal the limits of the Magnitsky Act.

Congo’s annual budget is approximately $7.2 billion for a nation of 87 million people, most of whom live on $1.90 a day. Many link endemic poverty to the graft of the Kabila years, and to figures like Gertler.

“There are no roads that connect Kinshasa to the east of DRC because of corruption,” said Jean Pierre Okenda, a human rights defender and researcher of extractive industries. “Corruption is the key issue.”

Worse still, those combatting corruption in Congo put their lives on the line. The whistleblowers Koko and Malela, for example, have been sentenced to death in absentia, lawyers for Afriland First Bank announced at a February press conference, convicted of stealing and forging documents. This came as shock to the pair, who found out about the verdict via social media, and had not been aware of a hearing. They had only publicly revealed their identities days before. “It was obviously obtained fraudulently,” Koko said of the death sentence.

“Gradi [Koko] and Navy [Malela] risked everything … because they believed that U.S. sanctions are a tool for good,” Gabriel Bourdon-Fattal, a human rights lawyer and project manager at PPLAAF added. “They have been sentenced to death as a result. The U.S. should do everything to stand behind them, to ensure that people who are accused of wrongdoing are held fully accountable.”

The U.S. government may well be moving in this direction. At a recent congressional hearing on the future of the Global Magnitsky Act, which will expire in 2022, Gertler’s name came up many times. The now-revoked license was described as a misstep narrowly avoided. But with Gertler still in business, albeit hampered, and a death sentence hanging over the heads of the whistleblowers who helped expose his alleged wrongdoing, the difficulties ahead are clear.

Gertler’s apparent attempts to evade sanctions reveal the limits of the act, as well. Despite having his name on a sanctions list, Gertler’s wealth and influence brought him close to the D.C. elite. And while he may again be barred from the U.S. banking system, Gertler continues to receive mining royalties from the Swiss commodities trader Glencore, which pays him in Euros to avoid running afoul of sanctions. As a result, he even indirectly benefits from a deal between Glencore and the U.S. behemoth Tesla, which sources its cobalt from Glencore mines.

Browder readily acknowledges this international loophole. “My hope is that you end up having Global Magnitsky conferences between countries and coordination, where they effectively harmonize their sanctions lists,” he said. “If somebody does something bad that is deserving of Global Magnitsky sanctions, they could effectively find themselves frozen out of the entire world from a travel and financial perspective.”

Whether this will happen to Gertler remains to be seen, as do the next steps in an uphill battle against kleptocracy. Sanctions themselves are only one part of this effort, and in Congo, where anti-corruption reforms under President Felix Tshisekedi are still in the early stages, there is little framework to prevent others from making the same sorts of shady business deals that Gertler allegedly did.

Congolese activists are nonetheless committed to quashing corruption. The whistleblower Malela was emphatic when asked if he has any regrets about his decision to expose Gertler, given the risks involved.

“I believe in showing patriotism and courage, not to betray your country,” he said. “If given the chance, we would do it again and again.”

Sophie Neiman is a freelance reporter and photojournalist, covering politics, conflict and human rights in East and Central Africa. Her work has appeared in numerous outlets, including African Arguments, The Christian Science Monitor and The New Humanitarian.

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