Post link 06 October 2016, 3:00
Gertler Earns Billions as Mine Deals Leave Congo Poorest
Dan Gertler’s bearded face lights up as he looks out the helicopter window. Below, an installation twice the size of Monaco rises from a clearing in the central African forest, where it transforms ore mined from the ochre earth into sheets of copper.

Dan Gertler the Jew that made billions on Blood Diamonds & DR Congo's mineral
Billionaire Dan Gertler

“Look at it, look at it,” the Israeli billionaire, 38, shouts through the headset above the thrum of rotors. “This is what life is all about,” Gertler says as the chopper lands in the scorching, dry afternoon heat of the Democratic Republic of Congo.

“Everyone comes with dreams and illusions and promises. Everyone wants quick deals. They don’t want to invest. We are real.”

Wearing a black suit by French fashion house Zilli, ritual white tassels hanging off both hips and a black-velvet yarmulke, Gertler hops out into the dust of Mutanda, a mine controlled by his partner, Glencore International Plc, that holds cobalt and some of the highest-grade copper in the world, Bloomberg Markets magazine reports in its January issue.

He climbs into an air-conditioned Toyota Land Cruiser to tour the mine, tapping messages into one of his three BlackBerrys, whose batteries, like those of smartphones and laptops everywhere, often depend on cobalt to keep their charge.

Gertler has stakes in companies that control 9.6 percent of world cobalt production, based on U.S. Geological Survey data and company figures.

Diamonds and Gold

That’s just the beginning of Gertler’s influence in Congo, the largest country of sub-Saharan Africa, with the world’s richest deposits of cobalt and major reserves of copper, diamonds, gold, tin and coltan, an ore containing the metal tantalum, which is used in consumer electronics. His Gibraltar-registered Fleurette Properties Ltd. owns stakes in various Congolese mines through at least 60 holding companies in offshore tax havens such as the British Virgin Islands.

Gertler, whose grandfather co-founded Israel’s diamond exchange in 1947, arrived in Congo in 1997 seeking rough diamonds. The 23-year-old trader struck a deep friendship with Joseph Kabila, who then headed the Congolese army and today is the nation’s president. Since those early days, Gertler has invested in iron ore, gold, cobalt and copper as well as agriculture, oil and banking. In the process, he’s built up a net worth of at least $2.5 billion, according to the Bloomberg Billionaires Index.

Roster of Critics

He’s also acquired a roster of critics. Many of the government’s deals with Gertler deprive Congo’s 68 million people of badly needed funds, according to the London-based anticorruption group Global Witness and lawmakers from Congo and the U.K., the country’s second-biggest aid donor after the U.S.

“Dan Gertler is essentially looting Congo at the expense of its people,” says Jean Pierre Muteba, the head of a group of nongovernmental organizations that monitor the mining sector in Katanga province, where most of Congo’s copper is located.

“He has political connections, so state companies sell him mines for low prices and he sells them on for huge profits. That’s how he’s become a billionaire.”

In the eight months preceding November 2011 elections, in which Kabila won a second five-year term, companies affiliated with Gertler bought shares in five mining ventures from three state-owned firms, according to minutes of board meetings, company filings and documents published later. The state companies didn’t announce the sales.

‘Lies Are Screaming’

In at least three of the cases, prices paid were below valuations of the projects made by analysts at Deutsche Bank AG, London-based Numis Securities Ltd. and Oriel Securities Ltd. and Atlanta-based consulting firm Golder Associates Inc.

Gertler denies that he purchased companies at below-market rates or that any of his deals have involved kickbacks.

“The lies are screaming to the heavens,” he says in his native Hebrew in a June interview, during three days Bloomberg reporters spent with him in Congo and Israel.

He returns from Congo to his home in Bnei Brak, an ultra-Orthodox suburb of Tel Aviv, each week to spend the Sabbath with his wife, Anat, and their nine children.

Dan Gertler the Jew that made billions on Blood Diamonds & DR Congo's mineral
Dan Getler

Congo has a history of making deals out of the public view. The International Monetary Fund this month halted a $532 million loan program with the country. The IMF said the government didn’t adhere to its demand to publish the full details of a 2011 mining deal between a state-owned miner and a company that two people familiar with the matter say is affiliated with Gertler.

Losing Disbursements

Congo will lose out on three loan disbursements worth a total of about $225 million, according to Oscar Melhado, the IMF’s resident representative in Congo.

The Washington-based lender already froze payments to Congo in December 2011, because a lack of transparency made it hard to track whether funds from mineral deals were flowing into state coffers, Antoinette Sayeh, director of the IMF’s African Department, said in March 2012.

“Given the significance of natural resources in this economy and the huge impact that natural resources can have, we think it’s very important to help DRC improve in terms of its governance,” she said.

As the country’s mineral wealth is developed, the lot of Congo’s people isn’t improving. Congo remains the world’s most-destitute nation, according to the UN Development Programme’s measure of health, education and income. Most of the country lives without electricity or running water, and one in five children dies before his or her fifth birthday. Armed groups continue to destabilize the country.

Election Irregularities

Congo’s per capita income of just $280, in 2005 dollars, is below what it was in 1960, when the country -- formerly called Zaire -- gained independence from Belgium. The World Bank ranks Congo No. 181 out of 185 in its Ease of Doing Business Index for 2013, down from No. 180 a year earlier.

Kabila’s re-election was marred by irregularities and violence, according to observers from Congo’s Catholic Church and the European Union. Kabila’s opponent, Etienne Tshisekedi, contested the 49 percent-to-32 percent vote, charging it was fraudulent. The Congolese Supreme Court ruled it valid.

In August, U.S. Senator Tom Coburn, an Oklahoma Republican, wrote to Meg Lundsager, the U.S. representative to the IMF, demanding better oversight of the loan program in Congo. “Billions of dollars of state assets have been transferred for a fraction of their value to nebulous international firms on the IMF’s watch,” Coburn wrote in the letter, a copy of which was obtained by Bloomberg News. The U.S. gave $268.2 million in aid in 2011.

Part two of this video on page 2

Glencore’s Role

Lawmakers from the U.K. are demanding that aid to Congo be slashed because the country can’t show that earnings from its mines are benefiting its people.

Global Witness has called on Glencore and FTSE 100 Index-listed Eurasian Natural Resources Corp., two companies involved in the pre-election deals with Gertler, to publish details of the transactions and dispel the anti-corruption group’s suspicions that Congolese officials received kickbacks in return for selling assets to Gertler.

“Offering, paying, authorizing, soliciting or accepting bribes is unacceptable to Glencore,” company spokesman Charles Watenphul said in an e-mail. ENRC declined to comment.

Gertler says disclosing the deals to the public is the Congolese government’s responsibility, not his. “We’re a private company. Why should we announce?” he says.

“I should get a Nobel Prize,” adds Gertler, who paces around and waves his arms as his demeanor swings between anger and boyish charm during interviews.

“They need people like us, who come and put billions in the ground. Without this, the resources are worth nothing.”

‘Braved the Hurricane’

The government insists it’s following the rules of the IMF agreement, which calls for it to disclose deals for its natural resources. And Kabila, 41, defends Gertler as a man who staked his fortune on Congo at a time when the country was wracked by war and in desperate need of cash.

“The truth is, during our very difficult times, there were investors who came and left and others who braved the hurricane,” he said of Gertler in a brief interview at his riverside palace in December 2011. “He’s one of those.”

The bond between the two men is so strong that Kabila at times uses Gertler as a special diplomatic envoy, including in 2002, when the Israeli businessman met with then-U.S. National Security Adviser Condoleezza Rice in Washington to ask for help ending Congo’s war with its neighbors.

Secular Upbringing

Diamonds have been a backdrop to Gertler’s life since his childhood in affluent northern Tel Aviv, where he had a secular upbringing. His mother ran a pop-music radio station, and his father was a goalkeeper for Maccabi Tel Aviv, a top-division pro soccer team, before becoming a diamond dealer.

As a youth, Gertler got up at 5 a.m. to learn how to polish gems before heading to school. He joined his grandfather, Romanian emigre Moshe Schnitzer, at business meetings to watch him negotiate diamond deals. When Schnitzer died in 2007, Benjamin Netanyahu, who’s now Israel’s prime minister, gave a eulogy.

Gertler, sitting below a stained-glass dome at his office in one of the Israel Diamond Exchange’s four towers in Ramat Gan, just east of Tel Aviv, turns wistful when he talks about Schnitzer. He recalls a business lesson his grandfather imparted: “He told me: ‘Dan, you meet your bankers and you ask for credit only when you don’t need it. Just to secure it. Because when you need it, it is too late.’”

‘Guy Has Guts’

At age 22, Gertler started buying rough diamonds so he could work with larger volumes, he says. Gertler flew between war-torn nations such as Liberia and Angola and the major diamond centers in the U.S., India and Israel, buying and selling gems, he says.

“From the beginning, he went his own way,” says his uncle, Shmuel Schnitzer, 63, who was president of the World Federation of Diamond Bourses from 2002 to 2006.“The guy has guts. This is the basic thing about him.”

Dan Gertler the Jew that made billions on Blood Diamonds & DR Congo's mineralJoseph Kabila and Rabbi Shlomo Bentolila

Gertler broke with his family’s secular tradition when he and Anat decided to adopt an ultra-Orthodox lifestyle. They’ve banned television and computers from their five-story, terraced house in Bnei Brak, whose crisp stone finishing and verdant shrubbery lining each floor contrast with the neighbors’ concrete apartment buildings.

Charitable Giving

Today, Gertler donates to Jewish charities in Israel, including Migdal Ohr, which runs boarding schools for indigent children and orphans. He also helped finance a Jewish bone-marrow registry at the Ezer Mizion medical charity in Tel Aviv, which says it’s the largest in the world of its kind.

In Congo, he supports the Chabad-Lubavitch center, which provides religious and educational services to Jews throughout Africa. Gertler’s family foundation also contributes to charities operating in Congo, including health centers and Operation Smile, which performs surgery on children born with cleft palates. He has also put $12 million into building an agricultural academy on the outskirts of Kinshasa, the capital, that co-founder Gil Arbel likens to a “Congolese kibbutz.”

Gertler’s love affair with Congo began in 1997, when the country was one of the top five producers of diamonds in the world. In May of that year, insurgents led by Laurent Kabila, the father of the current president, overthrew the corrupt regime of Mobutu Sese Seko, a U.S. ally who had ruled for 32 years. After taking Kinshasa on May 17, Laurent Kabila declared himself president and renamed the country Democratic Republic of Congo.

Befriending Kabila

A few days later, Gertler’s plane touched down. Shlomo Bentolila, chief rabbi of Kinshasa’s Chabad-Lubavitch center, arranged for the young diamond merchant to meet Kabila’s son Joseph, the new army chief, at the InterContinental hotel, Gertler says.

The two clicked immediately, Gertler recalls. Both carried a heavy responsibility at a young age: Kabila was the commander of tens of thousands of troops, and Gertler was trading $2 billion of diamonds annually, he says.

For the next year, they would often get together before sunrise at Kabila’s compound. One day, Kabila suggested that Gertler meet the president. Laurent needed money to fight his war and wanted to offer Gertler a monopoly on Congo’s diamond sales, Gertler says. Kabila asked for $20 million in cash, Gertler says. Gertler agreed.

A few days later, he was back in Israel, still celebrating the deal, when the Congolese president called. He needed the money immediately.

Grandfather’s Teachings

At 8 a.m., Gertler called Union Bank of Israel Ltd., where he successfully put his grandfather’s teachings on building bankers’ trust to the test. Using a combination of bank credit, inheritance, cash reserves and liquidated stocks, Gertler scraped together the payment and sent it to the Swiss account of Congo’s central bank, he says. Gertler had bet his fortune on a president at war.

The risks he faced became evident in January 2001, when a bodyguard shot Laurent Kabila dead and his son took power. To Gertler’s surprise, his friend canceled his diamond monopoly and never explained why, Gertler says. Rather than hold a grudge or sue, Gertler sold diamonds without the monopoly and maintained his ties to Kabila, whom he refers to as “my friend Joseph.” TO PAGE 2

You Lie Because You Are Scared