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  1. How to Con Greedy Investors





    In the second instalment of the Centre for Public Integrity's International Consortium of Investigative Journalists' global research series co-ordinated by PHILIP VAN NIEKERK, former editor of the Mail & Guardian of Johannesburg, we look into the operations of an international criminal purporting to deal in genuine mining ventures, with the collaboration of African heads of states and warlords Niko Shefer leaned forward and explained the competitive advantage small entrepreneurs enjoy over corporate multinationals when doing business in war-ravaged countries like Liberia and the Democratic Republic of Congo. "I move with cash. I can buy the president a Mercedes 600. How can a normal company justify that? How do they explain that to the shareholders? I do not need board meetings. I am the board."

    Shefer was in an expansive mood. It was December 1999, and he had just earned millions of dollars from a series of business ventures in Liberia, claiming to have got the better of Liberian President Charles Taylor and a fundamentalist Christian organisation known as Greater Ministries of Tampa, Florida.

    Four years earlier, Shefer had emerged from a South African jail, where he served time for perpetrating one of the country's biggest bank frauds. Shefer had defrauded a South African bank of more than $10 million before fleeing to Switzerland. He was tracked down, extradited to South Africa, tried, convicted and sentenced to 14 years in prison. He served only six.

    After his release, Shefer did not wait long before launching new business operations in Africa. According to an information booklet on one of his companies, Tandan, he started out in a field in which he'd had some personal experience: operating prison shops across South Africa. At the end of 1995, the document said, he sold the business to the South African government for $1.3 million and then moved into trading and mining in Liberia and Sierra Leone.

    By the end of 1999, Shefer was on the road to respectability. He had insinuated himself into the company of some of the most influential members of the ruling African National Congress. A list of personal references he handed out to prospective business partners included South African President Thabo Mbeki, several Cabinet ministers, and senior members of the South African police force.

    Shefer also had a brief, and ultimately unfruitful, contact with Mark Thatcher, son of the former British prime minister, over potential business deals in the Congo, and had dined with Dame Margaret herself, at Johannesburg's plush Westcliff Hotel. Thatcher could not be reached for comment.

    Shefer even had friends in the South African intelligence community.

    When HSBC Equator Bank, part of one of the world's largest banking groups, was contemplating working with him in 1999, it raised concerns about his record and his dealings in Liberia. In response, Shefer brought with him to the bank an official from South Africa's National Intelligence Agency. Colleagues from the bank later wrote an internal memorandum on the meeting: "Niko was accompanied by C.T. Beea, who is the Director General of South African National Intelligence for the province of Gauteng. Mr Beea explained the historical relationship with Niko and the fact that a number of people [including the former apartheid regime] had tried to discredit Niko. For this reason, the National Intelligence Unit had investigated every accusation thoroughly and was happy to report a clean slate. Beea explained that Niko had been imprisoned in South Africa by the previous regime because of his close association with many of the ANC leaders.

    "Beea confirmed that Niko enjoys an excellent relationship with many of the current Cabinet ministers and in particular with Thabo Mbeki."

    The May 1999 memo added that Shefer was "currently assisting the government in unravelling some of the complicated structures used by the former regime" and that "the National Intelligence Unit is thoroughly satisfied in Niko's integrity and by way of reference invited us to speak to a number of Cabinet ministers."

    The bank and its executives, like other associates, would later regret going into business with Shefer.

    FROM A hilltop complex of mansions and elegant gardens in the wealthiest section of Johannesburg's northern suburbs, Shefer runs an array of companies, including several divisions of the Tandan group, the Cobalt Metals Company, Scimitar Holdings and Adamastor Resources. The range of documents and promotional literature for companies with letterheads emanating from that address suggest a major corporation. In fact, they are all the work of a lone man in a top-floor office of a mansion.

    Shefer, an Israeli national who was born in Ecuador, is fluent in several languages, including French and Spanish. He claims to have worked in the Middle East for the Israeli intelligence service Mossad before emigrating to South Africa. A short, stocky man who favours white safari suits and gold chains, Shefer has an agile mind and natural charm. He likes to call people "my brother" and dole out quantities of dollar bills, and once said offering money to African potentates was a "sign of respect." More than anything, Shefer is one of a new breed of adventurers and opportunists who have the acumen and the ruthlessness to profit from Africa's war zones.

    "The key to these countries," Shefer said in an interview with ICIJ several years ago, "is to know when to get out. No business can survive long in the context of the obscene corruption of these guys - you can survive for a limited period of time, so you have to be able to be involved for a limited period of time. The time to do it is in that period. And then do it again when the next guy comes along."

    In 1997, the war-torn country of Liberia held a presidential election that was supposed to end the country's civil war. One of the candidates for the country's highest office, Charles Taylor, had previously escaped from a Massachusetts jail while awaiting extradition to Liberia on an embezzlement charge. In 1989, he launched an insurrection from the Ivory Coast and fought a six-year bush war, pillaging timber and diamonds to buy arms, and in the process amassing a personal fortune.

    William Twaddell, a State Department official, testified before Congress in 1996 that while heading a rebel force operating from the Liberian countryside, Taylor controlled the lion's share of the country's more than $421 million a year trade in diamonds, gold, iron ore and timber. Of that, Twaddell estimated, Taylor extracted about $75 million in taxes - to fuel the war and to line his own pockets.

    Though he stood accused of having destroyed his country and of murdering many of its citizens, Taylor was elected president in 1997 - a reflection of the desire by many Liberians to put an end to the bloodshed, which they believed could be achieved only by giving Taylor the power he wanted.

    As president, Taylor presided over the continued economic stagnation of Liberia, while ignoring the agony of the people. In June 1999, Taylor reacted angrily to mounting criticism of the absence of any basic services, such as electricity. "If you in Monrovia want light then buy your own generators," he told a local radio station.

    Taylor also provided covert support for the Revolutionary United Front (RUF), a rebel group in neighbouring Sierra Leone that was waging a particularly nasty war to gain access to that country's diamonds. Weapons came to the RUF via the Liberian capital of Monrovia and so-called "blood diamonds" exited to the markets of Europe. Liberia's diamond sales rocketed in the 1990s as Sierra Leone's diamonds were laundered through Monrovia.

    In Liberia itself, the economy was shattered by the war. The war had cost tens of thousands of lives and shut down most economic activity, including the giant Firestone rubber plantation that was once one of the largest employers in Liberia.

    Only a few foreign investors dared venture into Taylor's Liberia. Shefer was one of them.

    Liberia was a country ripe for the picking. Shefer says he became involved after a business associate introduced him to Jenkins Dunbar, the mines and energy minister in Liberia's interim government in the run-up to the 1997 election. Shefer flew Dunbar and several of his colleagues to South Africa and drafted a scheme to transfer Liberia's untapped mineral wealth into a private company in which the government-to-be would be a partner with private businessmen. Dunbar could not be reached for comment.

    Amalia, a then-newly listed South African mining company, opened its doors in Liberia in 1997, soon after Taylor won the election, with Shefer promising that it would develop the country's gold and diamond wealth. In response to questions from ICIJ, Shefer denied reports that Amalia had bankrolled Taylor's campaign in return for exclusive access to the minerals. "I did not personally provide Taylor with any assistance during his 1996 election campaign, or before, or thereafter," he wrote. "What assistance Amalia may have provided, if any, would be a matter for Amalia to respond to."

    Taylor did appoint Shefer Liberia's honorary consul in Johannesburg.

    Amalia did not last long. After raising millions of dollars from shareholders on the Johannesburg Stock Exchange, revelations that the company had done nothing with its Liberia concessions caused a major stock exchange scandal. Instead of going to develop mines, shareholder funds ended up in a bewildering network of offshore companies, controlled by Amalia's directors, that was difficult to penetrate.

    The Johannesburg Stock Exchange investigated Amalia's principals on suspicion of fraud, but did not charge them with any wrongdoing. Some of the company's executives, however, blamed Shefer for having engineered the collapse of the company in order to take it over, a charge that Shefer rejected as absurd. "I had nothing to do with Amalia other than having introduced them, as I did other companies also, to the mining authority in Liberia at that time," he said in response to questions from ICIJ. Shefer was never implicated in the investigation and emerged from the scandal unblemished. The company was liquidated and removed from the stock exchange. Shareholders lost millions of dollars.

    SHEFER REMAINED in business and found his next partner for Liberian ventures in Tampa, Florida - Greater Ministries. Even by Liberia's standards, it was an unusual partnership - Shefer, an Israeli citizen and secular Jew, and Greater Ministries, a fundamentalist Christian church.

    Through Shefer's influence with Taylor, Greater Ministries managed to secure the rights to essentially the same mining concessions in the West African country that had been held but lost by Amalia.

    In the sixth chapter of the Gospel of Luke, Christ instructs his followers, "Give, and it shall be given unto you," Greater Ministries told its followers, adding that if they gave to the church, it would double their money in 17 months or less. With this pitch, Greater Ministries collected hundreds of millions of dollars from its followers.

    Eventually, the Ponzi scheme was exposed, and the church's leader, Gerald Payne, received a 27-year prison sentence after a lengthy fraud investigation and trial in Florida. Like Shefer and Taylor, Payne and most of his associates had previous criminal records.

    It is unclear precisely what Greater Ministries intended to achieve in Liberia. In the heady atmosphere of Monrovia in the late 1990s, everything seemed possible. In December 1998, Greater Ministries and Shefer proposed to the Liberian government a scheme to manufacture $5 billion dollars' worth of Liberian bank notes, according to a December 4, 1998 letter sent on Greater Ministries stationery and signed by Shefer.

    That venture never came to pass. The church won mining rights but, like Amalia, Greater Ministries did little with the concessions it secured. The one ostensible mining operation was about an hour's drive from Monrovia, on the Lofa River. It was there that guests were taken and shown mounds of gravel being sorted by church employees under temporary awnings and buildings. Diamond experts who visited the mine said there was nothing of interest there and that any stones put on display most likely came from other diamond buyers. One veteran diamond dealer said he believed the operation was a front, set up expressly for senior representatives of Greater Ministries when they visited Liberia.

    As it sucked dollars from its followers, Greater Ministries told them that it had access to unimaginable mineral wealth in places like Liberia, and that they would shortly be blessed with huge returns. Greater Ministries Pastor Don Hall sought to pacify nervous church members with boasts of mineral wealth. "Hang on, stay in the boat," Hall was quoted in The Tampa Tribune as telling his flock as he detailed a Liberian mine with $40 billion in gold only 15 feet below the surface. In fact, apart from a marginal diamond operation, the church and Shefer did little that was remunerative with their Liberian concessions.

    The church, together with Shefer, also started building a bank in Liberia. Shefer said that apart from wanting to mine, Greater Ministries also wanted to create an independent enclave in Liberia and set up a bank to process the millions of dollars it collected from devout followers. (Contacted later by ICIJ, Shefer would claim that he had no knowledge of Greater Ministries' activities beyond their mining and agricultural operations.) Greater Ministries dispatched some employees to Liberia, where they embarked on small-scale humanitarian work. But, as with the church's mining, it never amounted to much.

    Shefer ran Greater Ministries' Liberian operation for what he bragged was a $50,000 monthly salary and benefited from the church's "gifting" programme - a plan under which the church got donors in the United States to help feed Africa's starving poor. Shefer's right-hand man in Monrovia, Felix Kramer, concentrated on the day-to-day business. Shefer took care of the politics.

    Greater Ministries' representative company in Liberia was Greater Diamond, which was based in the Mamba Point quarter of Monrovia, a coastal promontory that is also home to the US embassy. Scores of Liberian officials, anxious to benefit from Shefer and his company, would navigate Monrovia's potholed streets in luxurious SUVs to meet with Shefer in his ground floor office. One regular was Reginald Goodridge, the presidential press secretary, who had the easily identifiable licence plate "Media 1." Goodridge could not be reached for comment.

    During his trips to Monrovia, Shefer would spend many hours at Taylor's residence, where he said Taylor sometimes received him in pyjamas. When asked in 1998 about the government in Liberia, Shefer quipped, "We are the government."

    But given the low level of services that the government - or the private sector it supposedly oversaw - could offer, Shefer often turned to others to facilitate his dealings in Liberia. For example, the Gulfstream turbo props that Shefer and Greater used to shuttle between Johannesburg and Liberia belonged to a company owned by Fred Rindel, a former colonel in the South African Defence Force, who was once the South African defence attach in Washington. Rindel had worked with South African geologists in Liberia and had then struck up a relationship with Taylor. The Liberian president subsequently employed Rindel to train his Anti-Terrorist Unit, Taylor's special elite corps that has been linked to the rebel fighters and the war in neighbouring Sierra Leone. In 2000, Richard Holbrooke, then US ambassador to the United Nations, told the Security Council that Rindel supported the RUF. After Rindel denied links to the RUF, the United Nations printed his denials in a subsequent report and never produced evidence confirming the original allegations. In the wake of the controversy, Rindel cancelled the contract to train Taylor's Anti-Terrorist Unit and left Liberia.

    Shefer enjoyed the Gulfstreams, which he leased from Rindel on the understanding that he would buy one of them. In September 1998, he even told people that one of the Gulfstreams, registration N8E, was his. It was equipped with a small kitchenette, television and video recorder, with a sleeping section that Shefer would retire to on night flights. On one trip from Monrovia to Johannesburg, the video played a journalist's tape of the June 1989 public execution of the former president, Samuel Doe, by the warlord Prince Johnson, a former Taylor lieutenant. Taylor's sister, on her way to Johannesburg for a shopping spree, was on the plane with Shefer and his team and watched the video.

    In the end, Shefer did not follow through on his agreement with Rindel to buy the plane. On April 9, 1999, Rindel wrote to Gerald Payne, the head of Greater Ministries in Tampa, expressing his frustration. "We have reached a point where it is no longer possible to continue with the vague, misleading and sometimes outright lies we have received." The letter recapped how Shefer and Jabil Nabbar, the finance chief of Greater Ministries, had undertaken to buy the plane, and had then sent Rindel and a colleague on a wild-goose chase with various bank money orders for the first payment, which bounced. Only one cheque of the four - for $500,000 - was honoured by the bank. "This has led to the strangest of circumstances... as the Greater Group has gone ahead and flown in excess of 150 hours while we were fed one far-fetched story after the other," Rindel wrote. The letter, which cancelled the sale, said that Shefer subsequently gave the pilots notice and refused to answer their calls. Rindel said he ended up going to Monrovia himself to fly the planes back.

    It was around this time that the partnership between Greater Ministries and Shefer frayed as the church became the target of a US criminal investigation. In Tampa, Payne and his cohorts were arrested, and Greater Ministries' assets were seized.

    Shefer said the church's relationship with him collapsed when its representatives in Liberia sought to seize some of the excavating equipment as they prepared to flee the country. The Greater Ministries employees were jailed, released after a week and fled the country.

    "In Liberia," Shefer once said, "it is a question of who is a better con - me or them. Taylor is good. I am better." By December 1999, Shefer had grown contemptuous of Taylor, recounting how the president and his cronies wiled away the muggy afternoons in Monrovia playing tennis at the presidential mansion.

    But apart from some scathing articles in Internet-based Liberian discussion groups, Shefer received little attention for his Liberian foray. A UN report from October 2000 noted: "Niko Shefer is a businessman located in South Africa, and was chairman/CEO of the Greater Diamond Company (Liberia) Ltd, a subsidiary of Greater Holdings.

    "Shefer denies diamond dealings in Liberia and Sierra Leone, except for two exploration agreements with the Liberian government for concessions in Mano and Lower Lofa." The report added, "In the end, Shefer's explorations were unprofitable and were abandoned. The American partners in Greater Diamonds were at that time under investigation by American authorities for tax evasion and money laundering, using assets in Liberia."

    After Shefer had quit Liberia and his Greater colleagues were facing jail terms, he offered his own appraisal of the church's stint in Liberia. "They were real right-wing nutters - completely off the field," Shefer recalled. He later claimed that he learned of Greater's dubious activities and subsequent collapse through the press.

    "I asked myself, what was a nice Jewish boy like me doing with these guys?" he continued. "When I used to come into their house in Monrovia, they would stand in a circle and touch me and pray. I only managed to keep a straight face by keeping my mind on the money they always brought with them from America."

    EVER SINCE King Leopold of Belgium colonised the Congo in the 19th century, that vast swathe of land at the heart of the African continent has attracted adventurers seeking its fabled wealth. In 1997, as Laurent-Desire Kabila marched toward the capital, Kinshasa, to overthrow the dictator Mobutu Sese Seko, he unlocked a fresh scramble for the riches of the Congo.

    The scramble actually began even before Mobutu fell. Investors feted the portly Kabila before his campaign had succeeded. Nicholas Davenport, a senior official of the De Beers diamond company that had long supported and backed Mobutu, visited Kabila at his headquarters in Goma, the Mail & Guardian newspaper in South Africa reported at the time. De Beers' spokesman Tom Tweedy initially told ICIJ that the meeting represented "sound commercial sense" because it was clear that Kabila would play a leading role and "we needed to speak to the people who would be running the country in future. No assistance was offered or given." Tweedy later said the meeting had never taken place.

    According to Forbes Magazine, Kabila was transported around the Congo in the Lear Jet of American Mineral Fields, a mining company then based in Hope, Arkansas.

    The company brought a delegation of US investors and analysts to meet Kabila a week before Mobutu was deposed. Dollars and Sense reported that Bechtel, the engineering and construction group, devised a master development plan for the country's resources, and commissioned and paid for NASA satellite studies of the Congo pinpointing its mineral potential.

    But Kabila proved to be unstable and fickle. In December 1997, for example, he cancelled his contract with AMF. Of greater consequence to the people of the Congo, he brushed aside the Rwandan and Ugandan armies that had put him in power and unleashed a fresh wave of ethnic bloodletting in the east of the country. The Rwandan Tutsi leaders, whose people had just been the victims of genocide, were outraged because they had helped Kabila overthrow Mobutu to prevent such a recurrence.

    One year after Kabila came to power, war erupted again. This time Rwanda and Uganda turned against Kabila. They found themselves and their rebel allies in the east up against the armies of Angola, Namibia and Zimbabwe, which were brought in to rescue Kabila. Much of the payback for the military services of these African armies came in the form of mineral concessions, which went to politicians and top military officers.

    The United Nations, which examined the exploitation of mineral wealth in Congo in 2001 and 2002, reached the bleak conclusion that the effective collapse of all state institutions and structures in the country offered "significant rewards to unscrupulous elements operating under the garb of various governments, businesses, mafias, individuals, etc."

    In the rebel-held east, the Rwandans and Ugandans had been engaged in mining and timber clearance since 1998. A metal ore known as coltan, an excellent conductor and a component of cellphones and other high-tech equipment, sparked a latter-day gold rush in eastern Congo.

    The ore, which resembles black mud, is mined under the auspices of the Rwandan army and shipped through Kigali. According to the United Nations, it was being sold to American companies, such as Kemet Corporation and Cabot Corporation, until late 2001, and to a Belgian corporation, Sogem, which stopped dealing in the ore in late 2000. However, following a blaze of publicity, legislation was introduced in the US Congress to ban the importation of coltan from eastern Congo, and most of the international companies withdrew.

    The Ugandan army is involved in gold mining. In the west, Zimbabwean military officers and politicians have aggressively accumulated concessions in diamonds and timber.

    Kabila alienated many of the established mining and engineering companies. Robert Stewart, the American businessman who developed the Bechtel plan for rebuilding the country and was a former chairman of American Mineral Fields, linked up with opposition politicians calling for the removal of Kabila. Stewart complained that Kabila had cancelled the AMF deal because they wouldn't pay bribes.

    "The country's dead as long as he's running it," he told a press conference at the Non-Aligned Movement summit in Durban in 1998. "Every mining project in the country is stalled."

    The departure of bigger companies opened the way for businessmen such as Shefer, who entered the fray in 1998. Shefer, who had been a big fish in Liberia, was a much smaller player in Congo, compared with some of the other businessmen he encountered, such as John Bredenkamp, who, according to a member of Britain's parliament and media reports, is an arms dealer, tobacco magnate and confidant of Zimbabwe President Robert Mugabe.

    Bredenkamp, a former rugby star who was regularly listed among Britain's wealthiest individuals, had respectability Shefer could only envy. His company had managed the financial affairs of the golfer Ernie Els and owned exclusive game parks in the Southern African bush. Bredenkamp had built his fortune in the tobacco industry and then in arms and was a leading sanctions-buster for Ian Smith's white minority regime in then-Rhodesia during the liberation war in the 1970s.

    Bredenkamp saw the potential of cashing in on Zimbabwe's military support in Congo. According to the United Nations, the Zimbabweans put pressure on Kabila to form a joint venture with Bredenkamp's company, Tremalt Ltd, to mine copper and cobalt.

    Despite his connections, Bredenkamp's support for the Mugabe regime in Zimbabwe and weapons supplies to Kabila was controversial. In Britain, Paul Farrelly, a Labour Member of Parliament, told the House of Commons in November 2001: "Although he denies it, Bredenkamp is one of the major suppliers of arms to Mugabe. His companies are reliably believed to have supplied arms and equipment used by the Zimbabwean army, the Interahamwe [as the militia force responsible for the genocide in Rwanda is known], and the Mai-Mai tribesmen in eastern Congo.

    "Many of those arms subsequently have found their way back to war veterans, and have been used in attacks on white-owned farms. In return, Mr Bredenkamp has been a major beneficiary of Mugabe's largesse in Zimbabwe and the Congo. He is a major mover and shaker in southern Congo, and he has been awarded valuable diamond, cobalt and other mineral concessions."

    In a statement to ICIJ, Bredenkamp accused Farrelly of making "manifestly false and maliciously defamatory allegations under the cloak of parliamentary privilege." He said he had complained to the British government and challenged Farrelly to repeat the allegations outside of parliament.

    After controversial Zimbabwean elections in March 2002, the US State Department placed Bredenkamp on a list of close associates of Mugabe, barred him from entry to the United States and had his US bank accounts frozen. A United Nations investigative panel, in an October 2002 report on the looting of the Congo, recommended that a travel ban and financial restrictions be placed on Bredenkamp.

    "The US Department of State has tried me and judged me in a manner which affects my fundamental rights as an individual," Bredenkamp said. "The basis on which this judgment has been made has not been shared with me and I have been given no opportunity to be heard in this matter."

    Next instalment: We continue serialising the scramble for mining concessions in African conflict zones


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