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The young president needed friends: When he took over, vast swaths of the country were under the control of rebel factions backed by neighboring Uganda and Rwanda.

Dan Gertler the Jew that made billions on Blood Diamonds & DR Congo's mineralRole as Envoy

Kabila asked Gertler to help woo support from the U.S., which had been suspicious of his father’s Marxist pedigree -- Che Guevara fought alongside Laurent in Congo in 1965 -- to bolster his position as leader and help start peace negotiations with his neighbors.

In April 2002, Gertler says, he secretly shuttled between Washington, Kinshasa and Kigali, Rwanda, relaying letters between Kabila and Rice. Jendayi Frazer, a former special assistant to then-President George W. Bush, says she met with Gertler several times, both with Rice and on her behalf. Gertler’s intervention was instrumental to talks that resulted in a peace accord, says Frazer, who now teaches international politics at Carnegie Mellon University in Pittsburgh. “He was serious and credible,” Frazer says of Gertler. “He wasn’t just trading on his friendship with Kabila.”

By the time the peace deal was signed between the government and rebel factions in 2002, millions of people had died in Congo -- if not from bullets or machete blows, then from the breakdown of health services and sanitation.

Diamond Sales

Gertler, meanwhile, won back a near monopoly of Congo’s diamond trade. One of his companies, Canada-based Emaxon Finance International Inc., paid $15 million in cash and loans to the country’s state-owned diamond miner, known as MIBA, for a four-year contract to sell 88 percent of its production.

Congo was desperate for investment at the time, Frazer says. “It’s not like he crowded out a lot of other investors,” she says. “There weren’t many.”

Kabila, who had formed a government in which former rebel chiefs were cabinet ministers as part of the peace deal, tried to kick-start Congo’s economy. The ministers signed dozens of deals to exploit the country’s natural resources with foreign companies, many of them at prices that undervalued the assets, according to reports by the World Bank and the Congolese Parliament.

In 2006, Kabila’s People’s Party for Reconstruction and Development, with a platform of rebuilding the country’s war-ravaged infrastructure, was elected in Congo’s first free elections in four decades, certified by the UN.


Part one of this video on page 1

Mining Review

Kabila promised to tackle corruption and launched a review of mining contracts, observed by several Congolese organizations as well as the Atlanta-based Carter Center, the human rights group founded by former U.S. President Jimmy Carter.

The backroom deals continued, says Peter Rosenblum, a professor of law at Columbia University who headed the Carter Center’s mission to observe the mining review. “What happened in 2008 and 2009 really proved that the Gertlers of the world would win by doing business the way they’d been doing it all along,” Rosenblum says. Today, Transparency International ranks only a dozen countries below Congo in its Corruption Perceptions Index.

As Kabila cemented his hold on power, Gertler expanded beyond diamonds into mining of other minerals and metals, forging ventures with government firms and foreign partners. Gertler also controls companies that won the rights to two oil blocks along the Ugandan border on Lake Albert, according to three people familiar with the matter.

Charm and Aggression

When asked whether his companies have stakes in the blocks, Gertler replies, “If there is the right opportunity for us to have a big oil play in Congo or somewhere else, we will definitely go for it.”

Six mining executives who have done business with Gertler say he mixes charm and aggressiveness to make deals. During negotiations, which are often in French -- a language Gertler only partially understands -- he will be hunched over his BlackBerry, seemingly oblivious to the debate, says Pieter Deboutte, the Belgian who runs Gertler’s business in Congo.

Dan Gertler the Jew that made billions on Blood Diamonds & DR Congo's mineralThen, suddenly, he’ll catch everyone off guard by interjecting, “Stop, wait a bit!” and launch into a list of orders in English to his staff, Deboutte says.

Big Profits

Gertler’s dealings can be wildly profitable. In one case, he earned a 500 percent return in just six months without risking a single penny as the middleman in a deal for Societe Miniere de Kabolela & Kipese SPRL, or SMKK, which owns a copper and cobalt deposit in the heart of Katanga’s richest mining zone.

In 2009, SMKK was half-owned by the state’s Gecamines, short for La Generale des Carrieres & des Mines, and half-owned by ENRC, the Kazakh-founded mining company that’s listed on the London Stock Exchange. ENRC wanted to acquire all of SMKK but didn’t exercise its right of first refusal to buy the government’s stake, according to the joint-venture agreement.

Instead, ENRC made a deal with a company controlled by Gertler’s family trust -- Emerald Star Enterprises Ltd., based in the British Virgin Islands. On Dec. 21, 2009, ENRC paid the Gertler firm $25 million for an option to buy the remaining 50 percent stake of SMKK, according to filings ENRC made with the London Stock Exchange.

Gertler didn’t even own the asset he was selling the option on -- at least not yet.

‘Maximize Value’

In February 2010, Gecamines agreed to sell its shares in SMKK to Gertler’s Emerald Star for $15 million, according to the sales agreement published by the mines ministry.

Four months later, ENRC completed the transaction by buying Gertler’s Emerald Star for $50 million -- paying a total of $75 million, or five times the price Gertler paid for the asset. Gertler says it’s not his fault if the government didn’t get a good price for its SMKK holding.

“That is what we know how to do better than anyone else: We know how to maximize value for our projects,” he says. “If the government would like to hire my services to maximize value for their stake, they should approach me. No problem.”

Gecamines’ current managers declined to comment because, they said, they took over the company after the transaction, which was detailed in an ENRC earnings report released in May

2010. ENRC declined to comment.

Copper’s Attraction

Copper is what attracts most miners to Congo, Gertler says. The metal traded at $7,991 a ton in London on Dec. 5, more than double its price of $3,190 on Jan. 5, 2009. The belt of earth that stretches from northern Zambia into southern Congo holds one of the world’s biggest reserves of copper.

About 37 miles from SMKK, Gertler has a copper and cobalt joint venture with ENRC known as Comide SPRL. Touring around the mine, Gertler jumps behind the wheel of a small bus. While his associates laugh nervously, Gertler almost crashes into two parked helicopters and then speeds around the mounds of ore, sending his passengers reeling across their seats.

“He’s like a kid,” Yariv Bahat, Gertler’s exploration manager, yells, sweat streaming down his face. Gertler says he hasn’t had a driver’s license for years.

Gertler increased his stake in the mining property in 2011 -- one of at least six assets the state sold to him that year, according to company documents obtained by Bloomberg.

A company based in the British Virgin Islands, Straker International Corp., bought state-owned Gecamines’ 25 percent stake in the Comide project in 2011, according to Comide board minutes from June 29, 2011. Gertler controls Straker, according to two people familiar with the matter.

Unannounced Deal


The full details of the sale weren’t published, in breach of the terms of the IMF’s loan agreement with Congo, resulting in the Fund’s decision this month to cancel its program with the country, the IMF says. Gecamines Chairman Albert Yuma says he wasn’t aware of the sale. Gertler refuses to discuss it.

In another deal, in June 2010 and March 2011, state-owned miner Societe de Developpement Industriel & Minier du Congo, or Sodimico, sold more than 30 mining licenses, including those for two copper projects, to Gertler-linked companies based in Hong Kong and the British Virgin Islands for a total of $60 million. Numis Securities and Oriel Securities estimated the two projects to be worth $1.6 billion, though their valuations included ore-processing plants as well as the licenses.

Sodimico didn’t even get to keep all of the money it made from Gertler’s companies, Laurent Lambert Tshisola Kangoa, its chief executive officer, told Bloomberg News in July 2011. He said the mines ministry demanded he give $10 million to the country’s general election fund.

‘Not Economic’

“It was not an economic decision by Sodimico,” he said of the sale. Gertler’s joint venture relinquished the rights to the biggest of the mines, Frontier, according to the mines ministry. In July 2012, Congo sold ENRC the license for Frontier, which in 2009 had been the country’s biggest taxpayer, for $101.5 million.

“When you see similar things with slightly different variations happening again and again, you have to stop and think, ‘Obviously something is going wrong,’” Daniel Balint-Kurti, chief researcher at Congo for Global Witness, told the U.K. Parliament’s International Development Committee in 2011.

At the Mutanda project, too, Gertler paid far less for his 20 percent than his partner, Glencore International, paid for similar assets. Gertler’s stake came to light only in May 2011 - - months after it was purchased -- when Glencore spelled out the mine’s ownership deep in the 1,637-page prospectus for its initial share sale.

Stake’s Value

Glencore’s outside consulting firm valued the entire mine at about $3 billion. Based on net present value calculations using figures from Glencore’s May 2011 prospectus, Gertler’s stake, including royalties and other payments, was worth $849 million at the time.

One of Gertler’s British Virgin Islands-based companies bought the stake from Gecamines for $120 million in March 2011, according to a copy of the contract Gecamines published under pressure from the IMF. About a year later, in May 2012, Glencore paid $340 million, plus $140 million in assumed debt, for 20 percent of the mine, increasing its holding to 60 percent. Gertler says Glencore’s 20 percent purchase was worth more than his because it gave them control of the company.

Glencore CEO Ivan Glasenberg says Gertler has played an important role in Congo.

‘Supportive Shareholder’

“His involvement has helped to attract much-needed foreign investment to the DRC,” Glasenberg says. “He has been a supportive shareholder with us in our largest operation in the country, Katanga,” he says, referring to Katanga Mining Ltd., a nearby copper producer that they co-own.

Surveying the land around one of his cobalt mines, Gertler says he will stick by Congo. “I took a decision that I wanted to be a long-term player in Congo,” he says, adding that his aim is to help develop Congo as well as to enrich himself and his family. “At the end of the day, yes, I’m looking to create a lot of wealth.”

Gertler dismisses critics who say he’s amassed a fortune at the expense of the world’s poorest people. “Our deals and performance speak for themselves,” he says. “And whoever doesn’t feel comfortable investing with us will not.”



Franz Wild, Michael J. Kavanagh and Jonathan Ferziger
Bloomberg Markets Magazine
December 5, 2012 — 10:00 PM GMT


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