Tough sanctions, then a mysterious last-minute turnabout

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 Congo, 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 US 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 Trump in his first impeachment trial, and former FBI Director Louis Freeh.

But with time running out on the Trump administration, 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 Trump’s term: Treasury Secretary Steven Mnuchin granted 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 US banks and allowed him once again to do business with financial institutions worldwide.

The decision stunned and angered US diplomats in Washington and Africa and government officials and human rights activists in Congo, where 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 Gertler managed to pull it off — and whether it can be reversed.

The episode highlighted 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 US ambassador to Israel.

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

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

Among the findings:

— The rapid decision to grant Gertler much of what he wanted defied Treasury Department norms, according to three former agency lawyers, effectively rolling back sanctions with no public documentation justifying the move and without broadly consulting officials at the State Department or the National Security Council. Only last year, some US diplomats and members of Congress in both parties were seeking to expand the sanctions on Gertler.

— Gertler tested the limits of federal law by hiring lawyers who also worked as lobbyists in Washington to push his case, including Dershowitz, who was instrumental in winning clemency from Trump for an array of clients, and Freeh. Treasury rules generally prohibit people under sanctions from spending money on lobbyists in the United States.

— The Treasury Department’s decision to grant Gertler a special license was based in part on an assertion that there was a “national security interest” for the United States in Gertler’s business dealings in Africa, lawyers involved in the effort and Israeli officials said. But some State Department officials were skeptical that his security value could outweigh the human, economic and moral damage contained in the allegations against him. It is also unclear how the balance could have shifted since sanctions were imposed in 2017.

— Pressure also came from Israel, where Gertler is represented by prominent lawyers including Boaz Ben Zur, whose client list also includes Netanyahu. David M. Friedman, then the US ambassador there, was targeted in the push, and then notified Mnuchin and Pompeo that he supported the sanctions relief Gertler wanted, assuming the Treasury Department could work it out.

“I am astounded by this,” said John E Smith, who served as the director of the Treasury Department’s Office of Foreign Assets Control at the time the sanctions were imposed on Gertler. “It appears to be an abuse of the process.”

Mnuchin and Pompeo, who was also said to be supportive of the decision, both declined to comment.

Gertler, in a statement, said the decision was not a result of any special influence campaign in Israel or the United States, but instead his promise to be more transparent about his business operations worldwide.

Senior State Department officials in the Trump administration — including Michael Hammer, the US 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 Gertler the license, contrary to normal practice.

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 Kabila to raise cash needed to fight the war. Among them was a deal to export diamonds with 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. (Gertler disputed the findings.)

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

Gertler was also indirectly accused, in a Justice Department court filing in 2016, of paying more than $100 million in bribes to government officials in Congo on behalf of a company named Och-Ziff “to obtain special access to and preferential prices for opportunities in the government-controlled mining sector.”

A spokesperson for Gertler, Aron Shaviv, said Gertler was never interviewed or charged in the case and he denied any wrongdoing.

“He did buy cheap and he may sell at a much, much higher price because he made the investment when no one else did, no one else would dare go to Congo,” said Shaviv, a political consultant who served as Netanyahu’s campaign manager in 2015.

Gertler first came onto the radar of White House officials in 2002, when Joseph Kabila, who took over the nation after his father was assassinated the prior year, sent a letter to President George W Bush, looking for help to end the war.

“Please accept my appointed emissary, Mr Dan Gertler, a respected and well-known international businessman, to speak on my behalf for the needs of the Democratic Republic of Congo,” Kabila wrote in the April 2002 letter to Bush, a copy of which was obtained by The New York Times.

“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 Bush for African affairs, said in an interview.

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 Gertler and his growing empire of companies, which expanded from diamonds into copper, cobalt, oil, gas and gold.

The corruption and exploitation inherent in these types of deals were just the sort that a new appointee at the Treasury Department named Sigal P Mandelker was determined to confront when she was confirmed as the top official in charge of sanctions enforcement in 2017.

“Our objective is to change behaviour, inspire democracy and freedom, and disrupt the ability of kleptocrats, human rights abusers and others from stealing the wealth of their country,” Mandelker said in a 2019 speech.

Mandelker drew bipartisan praise for her effort to take advantage of new authority Congress granted to the Treasury in 2016. The Global Magnitsky Human Rights Accountability Act, as the law is known, is named after a Russian tax lawyer, Sergei Magnitsky, who died in a Moscow prison in 2009 after he exposed corruption by Russian officials.

The new law allowed the Treasury to freeze the assets of individuals or businesses operating anywhere in the world that were engaged in “gross violations of internationally recognized human rights.”

Working with the State and Justice departments, Mandelker’s team included Gertler in the first round of individuals penalized in December 2017. A second round of sanctions in 2018 targeted more companies affiliated with Gertler.

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

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

Instead of supporting 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 Mandelker, had started to leave the Trump administration, and State Department officials like 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 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 Gertler’s team, including Dershowitz and Freeh, had a different message. They had solicited a letter from Frazer attesting to Gertler’s role in the peace negotiations nearly two decades earlier and distributed it to Trump administration officials.

But with time running out on Trump’s tenure and the sanctions still not lifted, Gertler decided to make a strategy shift. While not admitting any past wrongdoing, 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.

The Treasury Department traditionally agrees to revoke sanctions only after individuals have proved they have already changed their behavior, not simply agreed to make such changes in the future, said Smith, the former head of the sanctions unit, who is now a national security lawyer at the law firm Morrison and Foerster. Gertler had not previously provided the United States such evidence.

“This is a unique, one-of-a-kind response that you don’t see with the United States government,” Smith said of the so-called specific license that Gertler received. “It is the most shocking license I have ever seen in a few decades of working on economic sanctions.”

c.2021 The New York Times Company