Tough Sanctions, Then a Mysterious Last-Minute Turnabout

WASHINGTON — In early December, an Israeli billionaire named Dan Gertler made an unusual request to the Treasury Department.

A mining magnate who had been accused for years of corruption in deals he struck with leaders of the Democratic Republic of Congo, Mr. Gertler had been slapped with stiff sanctions by the Trump administration in 2017, effectively cutting off his access to the international banking system and freezing money held in U.S. banks.

He had unsuccessfully tried since then to get the sanctions rolled back by hiring high-powered lobbyists and lawyers, including Alan Dershowitz, who had represented President Donald J. Trump in his first impeachment trial, and the former F.B.I. director Louis Freeh.

But with time running out on the Trump administration and the incoming Biden administration unlikely to give his pleas much of a hearing, Mr. Gertler put one last offer on the table: He would agree to have outside monitors track his business and submit regular reports on his financial transactions if the United States would lift the sanctions.

The response came in mid-January, with only days left in Mr. Trump’s term: Treasury Secretary Steven Mnuchin granted Mr. Gertler much of what he wanted, signing off, without any public announcement, on a one-year arrangement that gave him access to money frozen in U.S. banks and allowed him once again to do business with financial institutions worldwide.

The decision stunned and angered American diplomats in Washington and Africa and government officials and human rights activists in the Democratic Republic of Congo, where Mr. Gertler had been accused years earlier by the United Nations and other groups of working with the then-ruling family on deals that looted the nation’s mineral wealth and propped up a corrupt regime.

And it has left the Biden administration scrambling to determine how Mr. Gertler managed to pull it off — and whether it can be reversed.

The episode has echoes of Mr. Trump’s last-minute grants of clemency to political and personal allies and people with connections to him, including the involvement of Mr. Dershowitz. It also highlighted Mr. Gertler’s use of high-powered connections in Israel, including people with ties to Prime Minister Benjamin Netanyahu, and an effort to win support from the U.S. ambassador to Israel.

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

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

Among the findings:

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

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

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

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

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

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

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

“We will be adopting and implementing the most stringent anti-bribery and anti-corruption policies and measures across all our global practices,” Mr. Gertler said.

But diplomats and human rights activists said they could see no justification for giving a break to Mr. Gertler, who was described by the Treasury Department in 2018 as “engaged in the looting of natural resources and the humanitarian consequences” that followed in poor, strife-torn Congo.

Senior State Department officials in the Trump administration — including Michael Hammer, the U.S. ambassador to Congo; J. Peter Pham, a special envoy; and Tibor P. Nagy, the assistant secretary of state for African affairs — were not informed ahead of time of the move to grant Mr. Gertler the license, contrary to normal practice.

“Here you have one of the most poverty-stricken nations, with a population that has suffered incredibly over the last several decades, and we have worked to turn that around, so why do this?” said Mr. Pham, who until Jan. 20 served as a senior State Department adviser on Africa.

Mr. Gertler arrived in Congo in 1997 as a 23-year-old diamond dealer, determined to challenge the global giant in supplying raw diamonds, the South African-based De Beers.

One of his first big breaks came about three years later, when Laurent Kabila, then the president of Congo, needed weapons to wage a war that would last for more than a decade.

Offering monopolies to foreigners looking to tap into Congo’s rich mineral resources was a way for Mr. Kabila to raise cash needed to fight the war. Among them was a deal to export diamonds with Mr. Gertler, who was considered an appealing intermediary because of his ties to generals in the Israeli Army that could help Congo procure weapons, according to two reports issued by the United Nations in 2001. (Mr. Gertler disputed the findings.)

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

“Conflict diamonds are exchanged for money, weapons and military training,” a U.N. report describing Mr. Gertler’s work said.

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

A spokesman for Mr. Gertler, Aron Shaviv, said Mr. Gertler was never interviewed or charged in the case and he denied any wrongdoing. Instead, Mr. Shaviv said, Mr. Gertler’s companies have directly invested more than $1.5 billion in Congo, becoming one of the nation’s largest employers and taxpayers, starting when no other foreigners were willing to take the risk of doing business in the middle of a war.

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

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

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

“He played a very pivotal role in not only advising Kabila, but also sort of speaking with authority and definitely carrying the United States’ message,” Jendayi E. Frazer, who then served as an adviser to Mr. Bush for African affairs, said in an interview.

Mr. Gertler’s work helped lead to a peace deal in 2003. And it also cemented his relationship with Joseph Kabila. The Congolese government began to grant new deals to Mr. Gertler and his growing empire of companies, which expanded from diamonds into copper, cobalt, oil, gas and gold.

In just five deals negotiated between 2010 and 2012 to sell copper and cobalt through offshore companies linked to the Fleurette Group, which is controlled by Mr. Gertler and his family, the citizens of Congo lost an estimated $1.36 billion because the nation’s resources were being sold at one-sixth of their value, according to a report prepared in 2013 by Kofi Annan, the former U.N. secretary general, and other prominent African officials.

The forgone revenues to Congo from the deals “were equivalent to more than double the combined annual budget for health and education,” the report concluded.

In Congo, over 70 percent of the population lives in extreme poverty, with an income of less than $1.90 a day. But the profits generated for Mr. Gertler were extraordinary, averaging 512 percent, according to the study, turning him into one of the 29 youngest billionaires in the world, according to Forbes.

It was not just Mr. Gertler who was reported to be becoming tremendously wealthy through these deals.

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

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

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

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

Working with the State and Justice Departments, Ms. Mandelker’s team included Mr. Gertler in the first round of individuals penalized in December 2017, citing his record of “opaque and corrupt” mining and oil deals in Congo. A second round of sanctions in 2018 targeted more companies affiliated with Mr. Gertler.

The sanctions on Mr. Gertler severely constrained his ability to do business around the world by cutting off his access to the United States banking system and limiting his access even to non-U.S. financial institutions concerned about running afoul of the American law.

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

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

But even that plan drew concern from some State Department officials, who were worried that the donations would allow Mr. Gertler to bolster his standing in Congo and help supporters of Mr. Kabila, by then out of office, challenge efforts by the new, democratically elected president, Félix Tshisekedi, to assert control.

By last year, Mr. Gertler was also battling to rebut a report by two human rights groups citing what they said was evidence that he was evading the sanctions by using a network of shell companies, frontmen and proxy bank accounts to move millions of dollars in and out of Congo and even to acquire new mining rights there.

Mr. Gertler sued both the human rights groups and the Israeli newspaper Haaretz, which published reports detailing the allegations. Lawyers working for Mr. Gertler and a bank in Congo claimed the reports were based on documents that were stolen and then tampered with. The paper and the human rights groups have defended the accuracy of their reporting.

Instead of supporting Mr. Gertler’s bid for permission to make charitable donations, State Department officials responsible for Africa pressed the Treasury Department to expand the sanctions.

But by the end of 2019, key players at the Treasury, including Ms. Mandelker, had started to leave the Trump administration, and State Department officials like Mr. Pham said they found it more difficult to get new Magnitsky sanctions imposed.

The officials turned to the Senate Foreign Relations Committee for help in keeping up the pressure on Mr. Gertler. In August, members of the committee sent the Treasury Department a bipartisan letter that did not mention him by name but carried a clear message.

To help build democracy and fight corruption in Congo, the letter said, the United States “should designate additional officials and companies responsible for or complicit in high-level corruption, including the misappropriation of state assets, for targeted financial and travel sanctions.”

But Mr. Gertler’s team, including Mr. Dershowitz and Mr. Freeh, had a different message. They had solicited a letter from Ms. Frazer attesting to Mr. Gertler’s role in the peace negotiations nearly two decades earlier and distributed it to Trump administration officials. As far back as 2019, they set up meetings with State Department officials, making the case that his activities had helped the interests of the United States.

“His first effort was a lobbying effort,” Mr. Shaviv said of Mr. Gertler’s campaign.

But Treasury rules state that “professional services such as lobbying, public relations, government affairs, consulting and business development are not legal services, and are generally not covered” by an exemption that allows people under sanctions to hire lawyers.

Mr. Dershowitz said the meetings were permitted because he did not lobby the White House or others on this matter.

“My role was purely limited to the legal issues,” Mr. Dershowitz said.

But with time running out on Mr. Trump’s tenure and the sanctions still not lifted, Mr. Gertler decided to make a strategy shift. While not admitting any past wrongdoing, Mr. Gertler’s lawyers told the Treasury Department in early December that he was prepared to take any reasonable steps to assure the United States that he would abide by the law, including hiring outside monitors and submitting detailed periodic reports on financial transactions.

“Our entire approach was to assure them that going forward, there would be no problem,” Mr. Shaviv said.

At the same time, assertions were being made that Mr. Gertler had been of value to U.S. intelligence agencies.

“It’s absolutely the case that the national security interests of both Israel and the United States were implicated in this,” Mr. Dershowitz said, although he and others declined to provide any specifics. Mr. Shaviv declined to discuss whether Mr. Gertler had undertaken any such activities, but said that if they did take place, they would be described as “services rendered to the United States of America.”

Whatever Mr. Gertler did that benefited the United States was sensitive enough that Israeli officials said they were aware of it but declined to comment on its nature. Two Israeli officials told The Times that the United States had informed Israel that in line with a decision by Mr. Mnuchin and Mr. Pompeo, the terms of the sanctions imposed on Mr. Gertler would be eased “out of reasons of American national security.”

But several former State and Treasury Department officials said that while as a foreigner operating in Congo Mr. Gertler might have had information the United States considered valuable, keeping him on the sanctions list also had a value to Washington by helping to promote the anti-corruption effort.

“The only value to national security that Gertler has comes from him being placed in the box that he was put into with the sanctions,” Mr. Pham said.

In any case, the decision to grant him the one-year license was unusual in a number of respects, they said.

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

Furthermore, if Mr. Gertler’s assets in U.S. banks were going to be unfrozen and his corporate entitles allowed to once again do business with United States financial institutions, as the license allowed, that kind of deal would almost certainly need to be made public, not issued in secret as this one was. This kind of review also typically takes months of effort, not the six weeks that it took in this case.

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

When word of the decision to grant Mr. Gertler the one-year license eventually trickled out after Mr. Trump left office, it set off a firestorm of criticism from officials who said it would undercut efforts by the United States to fight corruption.

Mr. Hammer, the U.S. ambassador to Congo, was at first ​so ​confused at the news, according to one State Department official briefed on the matter, ​​​that he​ called officials in Washington to figure out if ​a ​mistake had been made.

“This has made my job much tougher​​,” an angry Mr. Hammer told colleagues.​​​

House and Senate Democrats fired off letters to the Treasury and State Departments. A coalition of 30 Congolese and international human rights groups assailed the move, with one of the letters calling the move a “terrible blow to the heart of one of the most lauded and effective anti-corruption programs of the last decade.”

The Biden administration is now investigating why the license was issued, and if it could be revoked, although Mr. Gertler’s team said that it would have no justification to take such a step.

Mr. Gertler, meanwhile, has begun a campaign to rehabilitate his image in Congo, releasing promotional videos detailing his work to support local hospitals and schools there and calling the citizens of Congo “brothers and sisters.” He also started a plan to allow residents of Congo to invest in one of his new mining projects.

Activists in Congo were not impressed.

“How can someone who has done so much harm to Congo for 20 years suddenly say he’s an angel?” said Jimmy Kande, a leader in the nonprofit group Congo Is Not for Sale. “If Congolese authorities would finally look at Gertler’s past, he shouldn’t have much of a future in Congo.”

Kenneth P. Vogel, Lara Jakes and Julian E. Barnes contributed reporting.