Tough Sanctions, Then a Mysterious Last-Minute Turnabout

Tough Sanctions, Then a Mysterious Last-Minute Turnabout

WASHINGTON — In early December, an Israeli billionaire named Dan Gertler made an unusual request to the Treasury Department.

A mining magnate who had been accused for years of corruption in deals he struck with leaders of the Democratic Republic of Congo, Mr. Gertler had been slapped with stiff sanctions by the Trump administration in 2017, effectively cutting off his access to the international banking system and freezing money held in U.S. banks.

He had unsuccessfully tried since then to get the sanctions rolled back by hiring high-powered lobbyists and lawyers, including Alan Dershowitz, who had represented President Donald J. Trump in his first impeachment trial, and the former F.B.I. director Louis Freeh.

But with time running out on the Trump administration and the incoming Biden administration unlikely to give his pleas much of a hearing, Mr. Gertler put one last offer on the table: He would agree to have outside monitors track his business and submit regular reports on his financial transactions if the United States would lift the sanctions.

The response came in mid-January, with only days left in Mr. Trump’s term: Treasury Secretary Steven Mnuchin granted Mr. Gertler much of what he wanted, signing off, without any public announcement, on a one-year arrangement that gave him access to money frozen in U.S. banks and allowed him once again to do business with financial institutions worldwide.

The decision stunned and angered American diplomats in Washington and Africa and government officials and human rights activists in the Democratic Republic of Congo, where Mr. Gertler had been accused years earlier by the United Nations and other groups of working with the then-ruling family on deals that looted the nation’s mineral wealth and propped up a corrupt regime.

And it has left the Biden administration scrambling to determine how Mr. Gertler managed to pull it off — and whether it can be reversed.

The episode has echoes of Mr. Trump’s last-minute grants of clemency to political and personal allies and people with connections to him, including the involvement of Mr. Dershowitz. It also highlighted Mr. Gertler’s use of high-powered connections in Israel, including people with ties to Prime Minister Benjamin Netanyahu, and an effort to win support from the U.S. ambassador to Israel.

But the outcome was also distinguished by the secrecy of the process, which cut out the American diplomats most directly responsible for dealing with Congo and fighting corruption in Africa and appeared to have been handled largely at the level of Mr. Mnuchin and Secretary of State Mike Pompeo. The decision became public only after Mr. Trump had left office.

The abrupt reversal of policy toward Mr. Gertler was extraordinary in a number of ways, an investigation by The New York Times found.

Among the findings:

Senior State Department officials in the Trump administration — including Michael Hammer, the U.S. ambassador to Congo; J. Peter Pham, a special envoy; and Tibor P. Nagy, the assistant secretary of state for African affairs — were not informed ahead of time of the move to grant Mr. Gertler the license, contrary to normal practice.

“Here you have one of the most poverty-stricken nations, with a population that has suffered incredibly over the last several decades, and we have worked to turn that around, so why do this?” said Mr. Pham, who until Jan. 20 served as a senior State Department adviser on Africa.

Mr. Gertler arrived in Congo in 1997 as a 23-year-old diamond dealer, determined to challenge the global giant in supplying raw diamonds, the South African-based De Beers.

One of his first big breaks came about three years later, when Laurent Kabila, then the president of Congo, needed weapons to wage a war that would last for more than a decade.

Offering monopolies to foreigners looking to tap into Congo’s rich mineral resources was a way for Mr. Kabila to raise cash needed to fight the war. Among them was a deal to export diamonds with Mr. Gertler, who was considered an appealing intermediary because of his ties to generals in the Israeli Army that could help Congo procure weapons, according to two reports issued by the United Nations in 2001. (Mr. Gertler disputed the findings.)

But the U.N. concluded that Mr. Kabila used money gained selling access to the nation’s mineral wealth — including his deal with Mr. Gertler — to expand the Congolese military forces, a move that helped popularize the terms “conflict diamonds” and “blood diamonds.”

“He played a very pivotal role in not only advising Kabila, but also sort of speaking with authority and definitely carrying the United States’ message,” Jendayi E. Frazer, who then served as an adviser to Mr. Bush for African affairs, said in an interview.

Mr. Gertler’s work helped lead to a peace deal in 2003. And it also cemented his relationship with Joseph Kabila. The Congolese government began to grant new deals to Mr. Gertler and his growing empire of companies, which expanded from diamonds into copper, cobalt, oil, gas and gold.

In just five deals negotiated between 2010 and 2012 to sell copper and cobalt through offshore companies linked to the Fleurette Group, which is controlled by Mr. Gertler and his family, the citizens of Congo lost an estimated $1.36 billion because the nation’s resources were being sold at one-sixth of their value, according to a report prepared in 2013 by Kofi Annan, the former U.N. secretary general, and other prominent African officials.

The forgone revenues to Congo from the deals “were equivalent to more than double the combined annual budget for health and education,” the report concluded.

In Congo, over 70 percent of the population lives in extreme poverty, with an income of less than $1.90 a day. But the profits generated for Mr. Gertler were extraordinary, averaging 512 percent, according to the study, turning him into one of the 29 youngest billionaires in the world, according to Forbes.

It was not just Mr. Gertler who was reported to be becoming tremendously wealthy through these deals.

The sanctions on Mr. Gertler severely constrained his ability to do business around the world by cutting off his access to the United States banking system and limiting his access even to non-U.S. financial institutions concerned about running afoul of the American law.

But less than a year after the sanctions were imposed, Mr. Gertler began his campaign to roll them back.

The push started with a seemingly innocuous request: Grant Mr. Gertler permission to use some of his money to make charitable donations to hospitals, libraries and schools in Congo.

But even that plan drew concern from some State Department officials, who were worried that the donations would allow Mr. Gertler to bolster his standing in Congo and help supporters of Mr. Kabila, by then out of office, challenge efforts by the new, democratically elected president, Félix Tshisekedi, to assert control.

By last year, Mr. Gertler was also battling to rebut a report by two human rights groups citing what they said was evidence that he was evading the sanctions by using a network of shell companies, frontmen and proxy bank accounts to move millions of dollars in and out of Congo and even to acquire new mining rights there.

Mr. Gertler sued both the human rights groups and the Israeli newspaper Haaretz, which published reports detailing the allegations. Lawyers working for Mr. Gertler and a bank in Congo claimed the reports were based on documents that were stolen and then tampered with. The paper and the human rights groups have defended the accuracy of their reporting.

Instead of supporting Mr. Gertler’s bid for permission to make charitable donations, State Department officials responsible for Africa pressed the Treasury Department to expand the sanctions.

But by the end of 2019, key players at the Treasury, including Ms. Mandelker, had started to leave the Trump administration, and State Department officials like Mr. Pham said they found it more difficult to get new Magnitsky sanctions imposed.

The officials turned to the Senate Foreign Relations Committee for help in keeping up the pressure on Mr. Gertler. In August, members of the committee sent the Treasury Department a bipartisan letter that did not mention him by name but carried a clear message.

To help build democracy and fight corruption in Congo, the letter said, the United States “should designate additional officials and companies responsible for or complicit in high-level corruption, including the misappropriation of state assets, for targeted financial and travel sanctions.”

But Mr. Gertler’s team, including Mr. Dershowitz and Mr. Freeh, had a different message. They had solicited a letter from Ms. Frazer attesting to Mr. Gertler’s role in the peace negotiations nearly two decades earlier and distributed it to Trump administration officials. As far back as 2019, they set up meetings with State Department officials, making the case that his activities had helped the interests of the United States.

“His first effort was a lobbying effort,” Mr. Shaviv said of Mr. Gertler’s campaign.

But Treasury rules state that “professional services such as lobbying, public relations, government affairs, consulting and business development are not legal services, and are generally not covered” by an exemption that allows people under sanctions to hire lawyers.

Mr. Dershowitz said the meetings were permitted because he did not lobby the White House or others on this matter.

“My role was purely limited to the legal issues,” Mr. Dershowitz said.

But with time running out on Mr. Trump’s tenure and the sanctions still not lifted, Mr. Gertler decided to make a strategy shift. While not admitting any past wrongdoing, Mr. Gertler’s lawyers told the Treasury Department in early December that he was prepared to take any reasonable steps to assure the United States that he would abide by the law, including hiring outside monitors and submitting detailed periodic reports on financial transactions.

“Our entire approach was to assure them that going forward, there would be no problem,” Mr. Shaviv said.

At the same time, assertions were being made that Mr. Gertler had been of value to U.S. intelligence agencies.

“It’s absolutely the case that the national security interests of both Israel and the United States were implicated in this,” Mr. Dershowitz said, although he and others declined to provide any specifics. Mr. Shaviv declined to discuss whether Mr. Gertler had undertaken any such activities, but said that if they did take place, they would be described as “services rendered to the United States of America.”

Whatever Mr. Gertler did that benefited the United States was sensitive enough that Israeli officials said they were aware of it but declined to comment on its nature. Two Israeli officials told The Times that the United States had informed Israel that in line with a decision by Mr. Mnuchin and Mr. Pompeo, the terms of the sanctions imposed on Mr. Gertler would be eased “out of reasons of American national security.”

But several former State and Treasury Department officials said that while as a foreigner operating in Congo Mr. Gertler might have had information the United States considered valuable, keeping him on the sanctions list also had a value to Washington by helping to promote the anti-corruption effort.

“The only value to national security that Gertler has comes from him being placed in the box that he was put into with the sanctions,” Mr. Pham said.

Activists in Congo were not impressed.

“How can someone who has done so much harm to Congo for 20 years suddenly say he’s an angel?” said Jimmy Kande, a leader in the nonprofit group Congo Is Not for Sale. “If Congolese authorities would finally look at Gertler’s past, he shouldn’t have much of a future in Congo.”

Kenneth P. Vogel, Lara Jakes and Julian E. Barnes contributed reporting.




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