NEW YORK — A Texas oilman lost $30 million after financing a botched deal to buy 1,000 pounds (475 kg) of smuggled gold from the Democratic Republic of Congo, according to a report by United Nations investigators.
The transaction ultimately profited a Congolese warlord wanted by the International Criminal Court for recruiting child soldiers, according to the report. The investigation was mandated by the UN Security Council to probe links between mineral trading and illegal armed groups in eastern DRC.
The gold smuggling deal gone wrong is an example of many other deals in which gold and other valuable minerals are illicitly moved out of Congo by warlords, according to human rights groups.
Much of that trade involves General Bosco Ntaganda who was indicted by the International Criminal Court on war crimes charges in 2006 and was also placed under Security Council sanctions. Under a peace agreement, Ntaganda is now a general in the DRC army and has used this clout to expand his control of mines and create alliances with regional dealers selling real and counterfeit gold, the investigators found.
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“Ntaganda’s participation in such deals has not dissuaded gold buyers hopeful of obtaining large profits from buying at low prices,” the investigators state in their 400-page report.
They say that Kase Lawal, CEO of CAMAC oil company in Houston, along with former NBA star Dikembe Mutombo and a US diamond dealer named Carlos St. Mary hoped to make a $10 million profit from the deal.
Kase Lawal, 57, is a Nigerian-born American who propelled CAMAC's rise to a $2.4 billion private company — said to be the second-largest African-American-owned business in the US. Lawal was appointed to a trade advisory post by the Obama administration, and has held similar positions in Rebublican administrations.
The scheme, which was hatched at a New York City hotel in December 2010, according to the report, involved buying the Congo gold in Nairobi, Kenya, circumventing a then-existing ban on exporting minerals from the DRC.
The plan initiated with Mutombo, the investigators state. He reportedly planned to use the profits from the deal to fund his humanitarian activities. The former Houston Rockets player hails from the DRC and has built a hospital and research center in the capital Kinshasa. The Dikembe Mutombo Foundation refused to comment, a spokeswoman said, adding that Mutombo himself plans to address the matter in the near future.
“Lawal agreed to finance the deal, with St. Mary conducting the business in Kenya and the two splitting profits with Mutombo,” the report states. “Throughout the process, Lawal made no inquiries regarding the exact origins of or conditions in which the gold had been extracted and transported from the Democratic Republic of the Congo to Kenya.”
The ban on the mining and export of minerals from the DRC was imposed by Congo President Joseph Kabila in September 2010 with the stated aim of cutting off funding for armed groups in the mineral rich eastern part of the country. But rights groups say it was flouted by armed groups such as Ntaganda's, which controled key border crossings where minerals were transported and which used the ban to consolidate and expand his control of the mineral trade. The ban was lifted in March 2011.
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Some of the alleged participants dispute the details, but the UN's investigation relates the shady, big-ticket cash-for-gold deal in extensive detail.
According to the report, when St. Mary traveled to Nairobi in mid-December 2010 to conduct the transaction, he handed over $4.8 million in CAMAC funds to an intermediary who then disappeared only to later resurface and tell St. Mary that the initial payment was meant for a “general” and the transaction should be completed in Goma, eastern DRC’s biggest city and Ntaganda’s home turf.
In January 2011, St. Mary traveled to Goma with a lawyer he had hired in Kenya along with an employee of the Nigerian-arm of CAMAC to view the gold. They were brought by two colonels of the DRC army to a house that was also guarded by members of the national army. St. Mary said he briefed Lawal on the new developments, according to the report.
“Lawal was reassured, rather than concerned, by the explicit involvement of the Congolese military, perceiving it to be a security guarantee,” the report states.
Lawal then instructed his half-brother Mukaila “Mickey” Lawal, who is vice-chair of CAMAC in Nigeria, to fill two bags with the cash needed to complete the deal and to travel with St. Mary on a CAMAC-leased Gulfstream from Abuja to Goma on February 3, 2011.
When they arrived the pair were brought to a hotel to meet Ntaganda who introduced himself as the true owner of the gold. St. Mary told the investigators that “both he and Mukaila Lawal had informed Kase Lawal about the general’s ownership, providing his name.”
“Nevertheless, Lawal was concerned only to the extent that this presented another twist in the already convoluted deal, but also appeared relieved to finally be engaging directly with the true owner of the gold,” the report states.
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St. Mary told the investigators that he handed Ntaganda a bag containing $3.1 million in cash and he witnessed the general and an aide count the money at Ntaganda’s Kivu Light hotel.
On February 5, metal boxes supposedly containing the gold were loaded onto the Gulfstream and a second bag of cash was handed over to one of Ntaganda’s armed guards by Mukaila Lawal. Immediately after the handover, DRC security forces arrived and arrested St. Mary and Mukaila Lawal along with a CAMAC security agent and the flight crew, accusing them of illegal transportation of minerals.
The passengers were brought to the Congolese central bank to review the contents of the bag of cash given to Ntaganda. That bag now contained $2.8 million in counterfeit notes and a second bag handed to them by Ntaganda contained $3 million in counterfeit notes.
St. Mary, Mukaila Lawal and the security agent were charged with money laundering and illegal transport of minerals. A representative of CAMAC in Nigeria paid $3 million in fines and the three were released on March 25, 2011.
“According to St. Mary, when he had traveled immediately to see Kase Lawal in London, Lawal had told him that he had lost a total of $30 million as a result of the whole ordeal, including transport fees, fines, bribes and the payments made on the gold purchase,” the investigators stated in the report.
Lawal emigrated from his native Nigeria to Texas in the 1970s to attend college and founded CAMAC in 1986. He is a known philanthropist in his adopted city, Houston, where he is also a commissioner with the Port Authority. US President Barack Obama named him to the Advisory Committee on Trade Policy and Negotiations and Lawal was also a member of the Presidential Trade Advisory Committee on Africa during the Bush and Clinton administrations.
In correspondence with the UN Security Council, lawyers for CAMAC said that the individuals arrested in the DRC were “neither employed by or consultants to our organization.”
When contacted by GlobalPost, CAMAC declined to comment. In January the company was quoted by the Houston Chronicle: "CAMAC is a law-abiding company and we disagree with the representations made in the report. We have already answered questions on this and see no reason to address it further."
In an earlier denial, CAMAC said it had done nothing wrong and that it had no financial interest in the gold deal. But the UN report claims that Lawal supplied the money for the gold transaction and was to get 40 percent of the profit when the gold was sold.
Speaking to GlobalPost, St. Mary said that all participants believed they were involved in a legal deal. He said the way the deal was represented to him was that “it was a legal deal to be done out of Nairobi.”
He also said he had never heard of Ntaganda before meeting him in Goma and it was only after doing an internet search that he realized just who he was dealing with. By that stage he said there was no turning back.
“We couldn’t just turn around and jump on the plane because they had our passports,” he said. “Once we were there and they knew we were in their home turf there was absolutely not one thing that could be done from our vantage point.”
He also recounted an eerie exchange with the warlord who during the back and forth over the deal told St. Mary to “trust us.” When St. Mary asked why he should trust them, Ntaganda replied “because you’re still alive.”
The tangle of this bungled deal gives an indication of how Congo's minerals profit warlords like Ntaganda, while miners work in abysmal conditions. Despite its abundance of mineral wealth, the Democratic Republic of Congo and its people remain desperately poor.
The UN report notes that "there are many eager international customers for Congolese gold who ask few questions and sometimes buy knowingly from Congolese armed groups and FARDC forces or the areas controlled by them."
"Some people are attracted by the idea that they can buy cheap gold from a conflict region," the report states.
In their recommendations, the investigators urge future buyers to "support the progressive demilitarization of the mining sector in eastern Democratic Republic of the Congo by remaining engaged in the country and in the regional market while implementing supply chain due diligence."
Human rights activists charge that this deal exposes how mining is funding violent warlords and human rights abuses in Congo.
"This case is a clear example of the pervasiveness of corruption and illegal military involvement in eastern Congo's mineral sector," said Aaron Hall, Congo policy analyst for the Enough Project. "Mutumbo and Lawal aren't that different than many companies and individuals before them in Congo — looking to take advantage of a weak state and make quick profit off what they know is illegally sourced material that benefits warlords and exploits communities."
Hall concluded that "until real transparency and accountability mechanisms are put in place within both Congo and the industries that source conflict minerals from Congo, indicted war criminals like Bosco Ntaganda will continue to flourish — free to fleece naive international profiteers and continue to terrorize local communities."