The Financial Times has reported that Dan Gertler, a businessman close to the Congolese president, is one of the main partners in two offshore companies that obtained oil blocks in northeastern Democratic Republic of Congo in controversial circumstances.
The article, published on Monday, follows the publication of Global Witness briefings highlighting corruption risks associated with offshore companies that have gained access to lucrative Congolese mining assets in opaque deals. Many of the offshore companies concerned are linked to Mr Gertler. Global Witness has called for full transparency over the deals and their beneficiaries to guard against corruption risks.
The Financial Times quotes Congo’s oil minister, Crispin Atama Tabe Mogodi, as saying that Mr Gertler is “in the team of Caprikat”, one of two offshore companies that obtained blocks 1 and 2 in Congo’s Lake Albert basin in 2010. The two companies, Caprikat and Foxwhelp, obtained their licences after the government cancelled licences for the same blocks that had been attributed to other firms. Caprikat and Foxwhelp have no known track record in the oil industry. Registered in the British Virgin Islands, a tax haven, the “beneficial” (or real) owners and directors of the companies are secret.
Global Witness has raised a number of concerns related to Mr Gertler’s involvement in the secret sales of prize mining assets in Congo, and his business relations with FTSE-100 mining companies Glencore and ENRC. Focusing on deals done since early 2010, Global Witness has pointed to what it regards as danger signs of possible corruption, including that mines were sold off in secret without tenders and that they were sold at far below commercial valuations. Global Witness is also concerned that Mr Gertler may have benefitted from his friendship with President Joseph Kabila to obtain the mining assets.
Glencore, ENRC and a spokesman for Mr Gertler, have all strongly denied any involvement in corruption. A spokesman for Mr Gertler’s companies has also said that his friendship with the Congolese president has “put more liability on us and we never enjoyed free rides”. On Tuesday, the oil minister said in a statement that development of the oil blocks controlled by Caprikat and Foxwhelp “is at its planned stage” and that the two companies “have made significant investment into R&D and seismic investigations and have invested heavily in social welfare projects in the area”.
The revelations in the Financial Times highlight that potential corruption risks in Congo extend beyond the mining sector. Global Witness believes the secretive and controversial nature of the deals done by Caprikat and Foxwhelp demonstrate similar danger signs that could mean they have obtained their assets via corrupt means. Although Caprikat and Foxwhelp were attributed the assets through a presidential decree published in the country’s Journal Officiel on 22 June 2010, it is unclear why previous licences to the blocks were cancelled and why these two previously unknown companies were chosen as the new licence-holders (see “notes to editors”, below).
A spokesman for Mr Gertler declined to comment on the content of the Financial Times article and said inquiries regarding Caprikat and Foxwhelp should be addressed to the company operating their oil blocks, Oil of DR Congo. By the time this statement was published, Oil of DR Congo had not replied to e-mailed questions from Global Witness.
Global Witness believes that there must be full disclosure of the beneficiaries of Caprikat and Foxwhelp to address concerns over possible corruption. Comprehensive details about how and why they were awarded blocks 1 and 2 should also be released. In the absence of the provision of these details, the possibility that the blocks were obtained by corrupt means cannot be ruled out. On this basis, it also cannot be ruled out that corrupt officials could benefit from any onward sale of these assets.
Given these concerns, Global Witness believes that companies should refrain from doing business with Caprikat and Foxwhelp until there is full disclosure of their beneficiaries and comprehensive details are released about how and why they were awarded their oil blocks.
Daniel Balint-Kurti, +44 (0) 207 492 5872 and +44 (0) 7912 517 146, [email protected]
Notes to editors:
1. The Financial Times article says: “According to Mr Atama Tabe and other industry sources, one of the principal partners in Caprikat and Foxwhelp is Dan Gertler, an Israeli businessman who has built a reputation as one of Congo’s most prominent deal makers.”
2. Company control of the oil blocks: Tullow Oil and Heritage Oil were awarded blocks 1 and 2 in July 2006. According to news reports, the licences were then cancelled on the following grounds: payment had only been made for one of the two blocks; the awarding of the contract did not follow international standards; and the 2006 contract was signed by the then vice-minister, against the will of the minister at the time. Tullow reportedly reacted by offering to double its signing bonus to $1m and arguing that the vice-minister was legally entitled to sign the contract in the place of the minister and that it also obtained the signature of an official with state oil company Cohydro and of the then-Minister of Finance. In 2008, South African company Divine Inspiration Group signed a competing contract for block 1. Tullow launched legal proceedings seeking to regain control of blocks 1 and 2 but eventually discontinued these actions, “given the expense of further proceedings and the difficulty in enforcing any award against the DRC even in the event of success” (see http://www.tullowoil.com/files/reports/ar2010/index.asp?pageid=148, last consulted 27 June 2012). Global Witness is of the opinion that serious questions still hang over the process through which licences to blocks 1 and 2 were repeatedly attributed and cancelled. For key details regarding the cancellation of the licences in 2007, see: Bloomberg, “Tullow Oil's Congo exploration pact to be cancelled (Update3)”, 17 August 2007. It is worth noting that Caprikat and Foxwhelp were both incorporated on 24 March 2010 in the tax haven of the British Virgin Islands – barely three months before they acquired the rights to blocks 1 and 2.
3. Prior to the Financial Times article of 25 June, although Dan Gertler’s name had been associated with Caprikat and Foxwhelp in news articles, Mr Gertler’s involvement had not been officially recognised. Indeed, a representative of Mr Gertler appeared to deny this (see point 4). Instead, news articles linked Caprikat and Foxwhelp to a nephew of South African President Jacob Zuma, as in a Bloomberg article of 25 June 2010 (“Oil Firms of South Africa Leader Nephew to Start Congo Exploration in 2012”), which said the companies were owned by Khulubuse Zuma.
4. On 14 July 2010 the newsletter Africa Energy Intelligence was contacted by Dan Gertler’s DGI Group and then published a clarification. “Contrary to what we reported, DGI was not the partner of Caprikat and Foxwhelp and had no connection to the companies”, the clarification said. The original article, published on 30 June 2010, headlined “Gertler’s shadow over Lake Albert”, had said: “A nephew of the South African president and leading stakeholder in Caprikat and Foxwhelp, Khulubuse Zuma made extensive use of his address book to cut the deal. But he was also backed by diamond trader Dan Gertler, the Western businessman with the closest ties to president Joseph Kabila.” The article gives further details regarding Mr Gertler and Caprikat and Foxwhelp, and is available in issue 631 of Africa Energy Intelligence on its pay-per-view site: http://www.AfricaIntelligence.fr.
5. In an article of 30 July 2010, “Zuma Inc's DRC oil coup (and the Tokyo factor)”, South Africa’s Mail & Guardian newspaper linked Caprikat and Foxwhelp to South African businessman and politician Tokyo Sexwale and an associate of his, Mark Willcox. Both men denied any link to the companies.
6. As detailed in Global Witness’s March 2012 briefing, Agenda for Reform, Global Witness is urging Congolese legislators to include key anti-corruption and transparency measures in new mining and hydrocarbons codes. These are expected to be passed into law during the current mandate of parliament, which runs until 2016. The new codes should oblige the state to hold open tenders when selling oil and mining rights. They should also stipulate that the beneficiaries of companies must be publicly declared. Global Witness’s “Agenda for Reform in the Natural Resources sector of the Democratic Republic of Congo”, can be found at http://www.globalwitness.org/campaigns/conflict/conflict-minerals/democratic-republic-congo.
These measures, if implemented, could help avoid the kind of controversy seen in recent years in Congo’s mining and oil sectors. International donors to Congo should require these measures to be incorporated into the new codes as conditions for non-humanitarian support.
7. Mr Gertler’s Fleurette Group holding company has proposed to Global Witness a joint audit of the beneficial owners of companies associated with Mr Gertler that are operating in Congo. Global Witness hopes to discuss this offer further with Mr Gertler’s officials.