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 the 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 in profit from a series of business ventures in Liberia, claiming to have got the better of Liberian President Charles Taylor and a fundamentalist Christian organization, 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 with 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 U.S. $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 very 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.
An empire of glossy brochures
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 immigrating to South Africa. A short, stocky man who favors 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 in diamonds, gold, iron ore and timber trade. Of that, Twaddell estimated, Taylor extracted about $75 million in taxes – to fuel the war and to line his own pockets.
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.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.
Taylor also provided covert support for the Revolutionary United Front (RUF), a rebel group in neighboring 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 country had such a bad reputation that respectable companies would not touch it. There was no infrastructure, and its impoverished government – cabinet ministers were paid $15 a month – was notoriously corrupt. 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.
Amalia, a then-newly listed South African mining company, opened its doors in Liberia in 1997, soon after Taylor won 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.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 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.
The church of ponzi
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, they 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 Dec. 4, 1998, letter sent on Greater Ministries stationary 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.
Shefer defended the operation in written comments to ICIJ. He claimed that Greater had serious mining and exploration activities. "The Greater mining group in Liberia invested about U.S. $7 – 10 million over the period, which is not huge in mining terms but sufficient for the objectives," he wrote.
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 very 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" program – 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 U.S. 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 license 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 pajamas. In September 1998, Taylor organized a banquet in Shefer's honor at one of the few restaurants in Monrovia, the Restaurant Beirut, an event for which Shefer donned traditional African regalia. Shefer or his Greater colleagues were frequently accompanied on their car trips around Monrovia by "the Major," a local policeman permanently on hire to Greater. When asked in 1998 about the government in Liberia, Shefer quipped, "We are the government."Monrovia had no electricity at the time, most of the cabling and pylons having been looted during the civil war, and the city's infrastructure was in shambles. The Roberts International Airport, for example, was a ramshackle husk of a building adjacent to a battered concrete apron that, in addition to the odd private plane, was normally home to Taylor's air force: two aging Alpha jets on loan from the Nigerian military. Whenever Shefer arrived at Roberts International, the short wave radios used by Monrovia's elite would crackle with the news that "Great 1" had landed, "Great 1" referring to the license plate of the luxury Isuzu 4x4 that Shefer always used. Upon arrival, Shefer and whichever associates or consultants with whom he was traveling would be escorted to the only air-conditioned room in the airport, while Kramer doled out wads of dollars to immigration and customs officials.
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 Defense Force, who was once the South African defense attaché 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 neighboring Sierra Leone. In 2000, Richard Holbrooke, then U.S. 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 canceled 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 check of the four – for $500,000 – was honored 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 canceled 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 U.S. 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 U.N. 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. Shefer 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."
On to the Congo
Ever since King Leopold of Belgium colonized the Congo in the 19th century, the vast swath 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.
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 U.S. 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.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.
But Kabila proved to be unstable and fickle. In December 1997, for example, he canceled 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 the 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 cell phones 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 U.S. Congress to ban the import 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 canceled the American Mineral Fields 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 the Congo, compared to 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 regularly was 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 the Congo. According to the United Nations, the Zimbabweans put pressure on Kabila to form a joint venture with Bredenkamp's company, Tremalt Limited, 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 Labor 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 U.S. State Department placed Bredenkamp on a list of close associates of Mugabe, barred him from entry to the United States and had his U.S. 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 U.S. 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."
According to the U.N. panel investigating the exploitation of mineral resources in the Congo, Kabila wielded a highly personalized control over state resources, avoiding any semblance of accountability. "Management control over public enterprises was virtually non-existent and deals granting concessions were made indiscriminately in order to generate quickly needed revenues and to satisfy the most pressing political or financial exigencies," the U.N. report found. Kabila was the man granting those concessions.Shefer was neither an arms dealer nor connected to a private army, but he brought other advantages to the table. As in Liberia, he claimed at first to have struck up a relationship with the man in charge, Kabila.
Shefer, an enthusiastic name-dropper, spoke publicly and fondly about his meetings with Kabila, describing him as a down-to-earth, likeable man. But when pressed to elaborate on his contacts with the president, he responded that he had met Kabila for only 10 minutes.
Whatever the extent of their relationship, Shefer managed to get something out of Kabila's government, while persuading one of the world's largest and most prestigious banks to lend its good name to his plans to entice investors to the Congo.
In February 2001, a top banker at HSBC Equator's Johannesburg headquarters was forced to resign after a lengthy investigation showed that he had secretly secured for himself a private stake in a Congolese mining venture that he was supposed to be handling for the bank. Bruce Jewels was one of the bank's rising stars in Africa. After joining HSBC Equator, Jewels had developed an impressive network of contacts in political and business circles on the continent, becoming one of the bank's deal-making maestros. It was Jewels' relationship with Shefer, who arranged his private stake in the mining venture, which led to his downfall at the bank. The former head of HSBC Equator, Frank Kennedy, would say only that the bank had accepted Jewel's resignation after "he chose to subsequently take up a closer association with Mr Shefer." In response to further questions from ICIJ, the bank declined comment, citing the confidentiality of "any business relationships."
Jewels told ICIJ that his departure from the bank was related to his dealings with Shefer, but also claimed that personal reasons played a part. "There were people at HSBC who had it in for me," he said. He denied that he ever worked for Shefer, and said he left HSBC Equator to set up his own consulting company. He admitted, however, that he had run the company from Shefer's offices for the first two months after he left the bank.
Shefer teamed up with Jewels after embarking upon what he described as a commodity-trading venture in various African countries. The gist of the scheme was to sell commodities to African countries with which Shefer was familiar and where, according to his promotional literature, there were "guaranteed" high margins of return. To achieve this, Shefer raised millions of dollars from various investors.
Money would be invested in sales of commodities, like rice, to various African countries. HSBC Equator appears to have been crucial to Shefer's plans as its presence enabled him to tell the investors that a prominent bank was behind the project. Shefer told investors that because of this close relationship with HSBC Equator, there was virtually no risk involved in the commodity transactions. But the scheme never generated the expected returns. Shefer told his investors it was because of unfavorable market, currency and political conditions.
The facts that he outlined in documentation for prospective shareholders explaining the commodity-trading venture suggest it had been anything but risk free from the beginning. The scheme hinged on unconfirmed letters of credit from the central banks of Liberia, Angola and the Congo, none of which were noted for their reliability or stability.
"The buyers range from the strategic reserve in the office of the president of the DRC, the ministry of social welfare in Angola, to private sector companies in the various target markets which have traditionally been dealing with [HSBC] Equator networks in Africa," Shefer wrote in the shareholder documentation. He also said his target markets could "easily sustain $50-million + per month. As an example we cite that the city of Kinshasa alone, with a population of not less than 9 million inhabitants, consumes statistically 76 000 tons/month of rice, amounting to approximately $38-million."
Shefer signed on several groups of investors, who gave him complete freedom to invest the money as he saw fit, and promised them returns of up to 15 percent per quarter. Middlemen companies close to Shefer dealt with the investors, who, according to some documents, numbered about 800. It is not known how much money Shefer collected in total.
One of the key intermediate companies was called Comtrade, which agreed to pay Shefer more than a million dollars. Comtrade tapped a South African police charity to invest. In June 2000, charity officials wrote to Shefer and Comtrade principals, saying that $35,000 had been improperly appropriated and that they wanted the money back.
By the second quarter of 2000, Shefer started sending out signals that investors would not be getting the promised returns and suggested that the investment focus switch to mining. In one letter, Shefer's Pretoria-based lawyer Mark Efstratatiou told investors that the losses would be absorbed by "certain strategic equity acquisitions with substantial mining houses of an international stature."
A letter from Tandan stated that the losses stemmed from "foreign currency shortages and devaluations in the target markets as well as unforeseen political turmoil" and claimed that HSBC Equator was assisting in securing "substantial equity interests in various base metal mining projects of proven stature."
But by the middle of 2000, Shefer's investors were getting itchy – particularly intermediaries like Comtrade, which had to explain to nervous small investors what had become of their money. Shefer leaned on the relationship with HSBC Equator to reassure them, claiming that "our advisory bank (HSBC) concluded that none of these potential losses were due in any way as a result of negligence on our part."
As Shefer informed investors that the commodity venture was failing, he began, with the help of Jewels at HSBC, lining up Congolese mining ventures as alternative investments. At the time, HSBC was consulting for Gecamines, the capital-starved Congolese state mining company, which was looking for partnerships with the private sector.
The concessions in question were the Ruashi and Etoile cobalt tailings reserves — huge piles of leftover scrap from early mining activities, which could be easily reprocessed. The war in the eastern Congo had made it difficult for Gecamines to secure foreign investment, and about 70 percent of the government's revenue came from state mines. Several of the country's other concessions had been ceded to companies connected to the Zimbabwean army as payback for their assistance with the war. The Congolese government viewed any attempt to increase the revenue from the remaining mines to be crucial.
Gecamines was negotiating with Mzi Khumalo, founder and head of Mawenzi Resources, a South African mining house, about taking over some of its ventures, including the Ruashi operation. Khumalo was to provide the mining expertise. Jewels, the banker in charge, lined up Shefer as the financier, in the deal that would prove Jewel's undoing at the bank. But in the middle of the negotiations with Gecamines, Mawenzi Resources ran into financial difficulties, stopped trading and was liquidated. With Jewels' assistance, Shefer took over and secured not only the concessions from Gecamines but also several of Mawenzi's top managers, who joined Shefer at his Houghton offices. In return, Jewels accepted a share in the Ruashi venture. The stake was held with Jewels' brother in England, who ran a law firm.
Jewels denied to ICIJ that he had received a share at that time, though he conceded that subsequently he had acquired a small stake in the company. "Someone who is not a friend, who wanted to make life difficult for me, sent my brother fraudulent documents." He did not elaborate.
Having secured the Congolese deposits, Shefer was now able to dangle something juicy before his investors back in South Africa. He featured the deposits in at least two prospectuses that came out of his Houghton office – for Scimitar Holdings and Adamastor Resources. The latter also promised a stake in a Peruvian mine. But as in Liberia, it soon began to look as if the enterprise had more to do with dazzling investors than mining. Almost three years after Shefer became involved, the project remained undeveloped.
Repeated assurances of wonderful returns placated most of the investors. The angrier among them began to suspect that Shefer was ripping them off, falsely promising fantastic returns from enticing projects through a range of corporate entities he conjured up. Others, who held out hope of returns on their investment, maintained Shefer was a well-meaning financial genius easily maligned because of his stint in jail. For his part, Shefer maintained that all his dealings were in good faith.
A new savior
As Shefer bombarded investors with explanations toward the end of 2000, he told them of yet another deal that would rescue their investments. This time it was with Tony Texeira, a South African businessman of Portuguese descent and a veteran of the African mining scene.
Texeira had achieved a measure of notoriety when he was named by the British Foreign Office Minister Peter Hain in the British Parliament as a trader in illegal Angolan diamonds on behalf of the rebel movement UNITA. He denied the charge and challenged Hain to make it outside the privilege of Parliament, where he would not be protected from any defamation action.
Texeira moved in the same world of African business as Shefer. He acquired a large stake in DiamondWorks, a Canadian-based company that moved into Sierra Leone and Angola after buying up the assets of Branch Energy, the diamond-mining company that had been linked, through cross-ownership, with the mercenary group Executive Outcomes. DiamondWorks was one of the pioneers in the business of providing private security in return for mining concessions.
In July 2000, Texeira visited Shefer's Houghton offices and demanded payment from Shefer for a delinquent debt of $2.4 million. Shefer owed it to a trading company that Texeira purchased from Anglovaal Mining Limited, the South African mining house, according to an affidavit signed by Texeira.
During discussions about that debt, Shefer offered the Ruashi deposit to Texeira. Negotiations on that offer were underway when Texeira started receiving calls from Shefer's investors, who had been told that Texeira would refund their investments, according to a transcript of the meeting obtained by ICIJ.
On Feb. 20, 2001, Shefer's investors met with Shefer and Texeira's lawyer, Jimmy Kanakakis, to discuss the situation. According to a transcript of the meeting, Kanakakis said that neither Anglovaal Mining nor Texeira's company were interested in the problems of Shefer's partners or investors. The gathering established that Shefer's interest in the Cobalt Metals Company – the company which Shefer used to house his stakes in the Congolese mining ventures – was being sold for about $32 million. Payment would come in the form of preferred shares.
This did not go down well with irate representatives of the 800 investors, who wanted cash. According to the meeting notes, Shefer said Texeira had undertaken to give Shefer some cash to help pay off the investors – an assertion not borne out by any of the accompanying documentation, which mentioned the preferred shares.
"It is reiterated by the parties that their interests have not been served," meeting minutes noted. "It is put forward as an absolute necessity to receive cash as payment and not ordinary shares, this is the only method of pacifying outraged investors, as they currently think that the money is stolen, and quite a large number of people are ready to enter litigation and go to the media."
In the middle of the January 2001 imbroglio Kabila was assassinated, and Texeira pulled back. Having committed to starting work on Ruashi at the end of February 2001, he withdrew, saying that the due diligence had not been satisfactory. In May 2001, Texeira's company wrote to Shefer saying the deal was off.
An acrimonious feud then erupted, with both men seeking to smear and drive each other out of business. Shefer had been depending on Texeira to help him placate his angry investors. But Texeira, after being named by Hain, did not want any further negative press coverage as DiamondWorks was about to relist on the Toronto Stock Exchange.
By February 2002, Shefer faced a lawsuit in the Pretoria High Court from his investors whose patience had finally worn out. But that case, which was being pursued by one of the investors, was withdrawn after a brief hearing for reasons that were never made public. "I had no litigation with anyone pertaining to any activities in the [Congo]," Shefer wrote ICIJ in response to questions. "I had a commercial dispute with a business associate of mine (for an amount less than U.S. $30 thousand), which we settled amicably." Once again, Shefer emerged relatively unscathed.
Shefer bought an entire block of modest houses in the trendy Johannesburg suburb of Melville, flattened it, and then built a garish, ultra-modern, residence, complete with an "entertainment" center, including a cinema, for his family. But his opulent mansion – which is heavily fortified and under 24-hour guard – looks out of place, straddling the quaint refurbished Yuppie cottages that once belonged to lower-middle class families.
Shefer recently sold his Houghton headquarters, and has been talking about retiring, though he still brags about his relationship with Africa's great and good and says he advises the South African government about policy in the Great Lakes region.
Articulate and wily, Shefer is a master of keeping himself in the shadows. That may change with the release of an October 2002 U.N. report on the looting of the Congo, which recommends that Shefer face financial restrictions and a travel ban for his activities there. Shefer has also made the most of the numerous corporate structures he sets up for each chapter of his life, juggling company names and directors to disguise his own involvement.
He is also far less expansive about his connections when asked to confirm them on paper. For example, when asked to comment on his relationship with South African President Thabo Mbeki, Shefer wrote in a letter to ICIJ that he had met him only once at a formal banquet, although the list of references that he handed out to prospective business partners had Mbeki's name at the top.
Some of Shefer's erstwhile business partners have fared less well. Charles Taylor, branded an international pariah, is in the middle of a renewed civil war. With the backing of neighboring Guinea, rebels have moved toward the capital, and Taylor has declared a state of emergency.
New entrepreneurs have trickled into Liberia. One is the American evangelist, the Rev. Pat Robertson, whose Freedom Gold Limited, which is registered in the Cayman Islands, cut a deal with Taylor that reportedly gave Taylor and his cronies 10 percent in the mine, as well as royalties and other payments when (and if) the mine ever gets up and running.
After articles exposing Robertson's dealings appeared in The Washington Post, the evangelist wrote an indignant letter to the newspaper, defending Freedom Gold and the government of Liberia. "Freedom Gold has found freedom of religion, freedom of movement, freedom of expression and what appears to be a judiciary dedicated to the rule of law (in Liberia)," he wrote. "Doesn't Mr. [Colbert] King believe that a government collapse would lead to another blood bath in Christian Liberia, which was founded by President James Monroe as a haven for freed American slaves and whose first president was a Baptist pastor from Virginia?"
The admiration Robertson had for Liberia was returned by the country's ruler. Earlier this year, Taylor publicly praised Robertson during a religious day festival.
In the Congo, Kabila handed a monopoly of the country's lucrative diamond trade to an Israeli company, International Diamond Industries, for $20 million. According to the United Nations, IDI's 27-year-old owner, Dan Gertler, agreed to arrange, through his connections with high-ranking Israeli military officers, the delivery of arms as well as the training of Kabila's armed forces. This was a source of great aggravation for Congo's traditional diamond traders, especially members of the local Lebanese population who had dominated the industry during the rule of Mobutu.
By the end of 2001, the United Nations had decided that the war in Congo had a momentum of its own, driven by the scramble for riches. A phony war, with only occasional breaches of the ceasefire, it leaves "the exploitation of the resources as the main activity of the foreign troops as well as the different armed groups." The U.N. report described the rebels as a "controlled military opposition" whose existence was used by the foreign armies to justify their continued military presence in the Congo.Shortly after Kabila's son, Joseph Kabila, assumed power, he ended Gertler's monopoly and then partially reinstated it in April 2002, along with the contract of another Israeli diamond dealer, Lev Leviev.
A fresh round of peace talks in Sun City, South Africa, in 2002, appeared to have established some grounds for a lasting peace, and the foreign troops began to withdraw, but battles were still raging in August 2002.
Explaining why endless rounds of peace talks had so often proved futile, the U.N. report concluded that the primary motive of the war was "extracting the maximum commercial and material benefits. This holds true for both government allies and rebel supporters."
But living on the cusp between war and peace supports only the most primitive of mining operations – digging for coltan or diamonds or stripping forests. Projects that require a modicum of capital and thus an investment in the future, such as Ruashi, languish in mothballs. As Shefer, Texeira and the investors thrash it out in Johannesburg; much of the Congo's riches remained untouched.