From The Guardian, November 5:
Leaked files reveal for the first time how the secretive firm enlisted a controversial diamond tycoon – ignoring ‘red flags’
A secretive multinational company worth billions, whose founder turned fugitive was pardoned by a president.
An Israeli diamond tycoon, rumoured to be the inspiration for a Hollywood blockbuster.
And a struggling African nation, blessed and burdened by natural resources, riven by war and corruption.
Behind the black letters of the Paradise Papers lies a world of extraordinary colour.
Obtained by the German newspaper Süddeutsche Zeitung, and shared with the International Consortium of Investigative Journalists, the Guardian and more than 90 media partners across the globe, the Paradise Papers reveal the reality of the arcane world of offshore tax havens and global finance.
And they raise serious questions about the conduct of the commodities multinational Glencore and the Israeli mining billionaire Dan Gertler in Africa.
They show that in 2009, Glencore, the world’s biggest mining company, gave a secret $45m loan to Gertler’s company after it enlisted him to secure a controversial mining agreement in the Democratic Republic of the Congo.
Over hundreds of pages, the papers expose in forensic detail how Gertler, whose previous diamond monopoly in DRC was described by the UN as a “disaster” for the country, held Glencore’s imprimatur as key negotiator with Congolese authorities.
The ‘nightmare’ diamond deal
In 1997, the 23-year-old scion of one of Israel’s most famous diamond trading families landed in Kinshasa, the dusty capital of DRC, seeking rough stones and a fresh fortune.
The African nation, bitten as hard as any by the resource curse of the developing world, had just emerged from a military coup, which changed the name of the country from Zaire and put Laurent-Désiré Kabila in control.
It was the self-declared president Gertler befriended, a move that would prove politically and commercially astute.
In Kinshasa, Gertler first met the president’s son Joseph and then the president. A friendship had begun and, according to a 2001 UN investigation, a deal was struck: $20m in cash from Gertler that Kabila would use to buy weapons and fund his war against rebels to consolidate his grip on power.
In exchange, Gertler’s company IDI was granted a monopoly on the DRC diamond trade, worth hundreds of millions a year. The deal was a “nightmare” for the country, the UN report found.
Gertler’s lawyers said he denied all allegations in the UN report and was not given an opportunity to comment before publication. The UN has not cited him “in any negative context” since 2001, his lawyers said.
The diamond deal would be the first of many. In the nearly two decades since, Gertler has become an unofficial gatekeeper in dozens of mining deals across DRC – a country the size of western Europe with a surfeit of natural resources.
But those valuable resources have not uplifted the country from poverty. Instead, they have brought war and exploitation. DRC remains one of the least developed nations. Devastated by long-running conflict and famines, it remains a place of chronic communal and state violence, where infants die at almost the world’s worst rates and nearly half of all children are stunted by chronic malnutrition.
According to the 2013 estimate of the Africa Progress Panel, headed by the former UN secretary general Kofi Annan, the unique ability of companies linked to Gertler to win cut-price mining licences and agreements in DRC cost the country more than $1.3bn, almost twice the nation’s combined health and education budgets, in one three-year period alone. Gertler’s lawyers said his companies “categorically refute” the allegations in the 2013 report, which they were not given an opportunity to respond to.
While DRC has suffered, Gertler – speculated in media reports to have been the loose inspiration for the Leonardo DiCaprio film Blood Diamond – has amassed a fortune. Forbes values his wealth at $1.22bn.
A broad, bearded man, Gertler is described as an “adventurer with a short fuse”. Fiercely private, he is shown at mines in most of the extant public photos, wearing a high-vis vest over a suit and, on his head, a helmet or yarmulke.
Gertler was raised in a secular household but in adulthood has grown increasingly religiously observant. He typically spends his working week in Africa, but flies home for the sabbath in Israel with his family.
He has brought some development to DRC, building a 1,500-acre kibbutz-style farm to help address chronic food insecurity. And, in a country where sexual violence is systematically used as a weapon of war, the Gertler Family Foundation supports teenagers who become mothers after being raped, one of 50 programmes benefiting “tens of thousands of Congolese every year”, according to his lawyers.
But the Paradise Papers cast new light on background dealings between Gertler and Glencore that appear to have saved them hundreds of millions of dollars – money lost to DRC and its people.
The Glencore room
The Paradise Papers are an insight into the inner machinations of Appleby, one of the “magic circle” of leading offshore investment firms.
Glencore is one of Appleby’s most important clients. So central, in fact, has the company been that at one time, on the second floor of Appleby’s Bermuda headquarters, was the Glencore room.
Across the hall from the women’s bathroom, it was nondescript and rarely used. Glencore executives never visited. It contained no more than a filing cabinet, computer, telephone, fax machine and chequebook.
But the room gave Glencore a “robust footprint”, in the words of one Appleby MD, in the zero-tax island of Bermuda: a helpful asset in the event of any taxation investigation.
The files that are likely to have once lived in that room, and the contents of which were known only to a handful of people, are now globally exposed by the Paradise Papers.
The papers reveal some of the complexity of Glencore’s global operations and the breadth of its reach. Glencore is the largest commodity trader in the world and the biggest supplier of zinc and cobalt. The fruits of its products are used every day by millions, including anyone who drives a car or makes a call on a smartphone.
And Glencore is a company with an extraordinary history, founded in 1974 as Marc Rich and Co.
Rich, a former child refugee who became a naturalised US citizen after fleeing Nazi-occupied Belgium with his family, led his eponymous firm for two decades....MUCH MORE
