Five Reasons Why Biden’s Move Against Corrupt Billionaire Dan Gertler Matters
By: The Sentry
Tags: Drc, Dan Gertler, Rdc, Corruption

By John Prendergast and Sasha Lezhnev

Simon Dawson/Getty Images.

In an important move for combating global corruption, the United States today revoked the last-minute license given by the Trump administration to corrupt tycoon Dan Gertler. Following years of investigations by Bloomberg, Global Witness, PPLAAF, The Sentry, and other groups, Gertler and his network of companies were sanctioned by the United States in 2017 for their involvement in grand corruption in the Democratic Republic of Congo (DRC), with further companies being sanctioned in 2018. Gertler had “amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of Congo (DRC),” according to the Department of the Treasury. Importantly, Gertler was sanctioned under the Global Magnitsky sanctions program as part of the first-ever use of this landmark bipartisan anti-corruption and human rights tool.

The restoration of the sanctions on Gertler and dozens of his companies is significant on multiple levels. Here we outline five major impacts and three recommendations for next steps to achieve even greater results.

1. The revocation of the license enables critical Congolese and US anti-corruption efforts in the DRC to get back on track.

Gertler has been at the heart of a kleptocratic system that has perpetuated poverty in the DRC, where 72% of the population lives on less than $2 per day despite an estimated $24 trillion in natural resource reserves. Countering that looting machine through accountability and reforms is essential to making progress on security, governance, and human rights in the country. The DRC lost over $1 billion in revenue because of Gertler’s illicit mining and oil deals, and he is the reported inspiration for the movie Blood Diamond. A Congolese civil society leader has called him the “gravedigger of the Congolese economy.”

Gertler was then-DRC President Joseph Kabila’s biggest business partner, allegedly paying millions of dollars in bribes to Kabila and his inner circle over the years. A major part of Gertler’s insider strategy involved asset flipping, as he obtained mining and oil concessions from Kabila’s cronies for extremely low prices and then sold them for massive profits with minimal or no investment. For example, he reportedly purchased one mine for $60 million and then sold it for $680 million; he also reportedly made a 29,900% profit in an oil deal. The network sanctions imposed by the Treasury Department on Gertler and 33 of his companies were instrumental in influencing Kabila to not seek an unconstitutional third term, which likely would have led to mass violence.

Given Gertler’s influence in the DRC, the license effectively gutting the sanctions threatened to set back Congolese efforts to build a cleaner government and business environment, just as new President Félix Tshisekedi was starting to sideline Kabila and negotiate the formation of a new government. Tshisekedi has made several embryonic but important strides in fighting corruption since he came to power in January 2019, but there is still a long way to go to truly shift incentives away from the kleptocracy. Having the money of Kabila’s biggest backer circulating in Kinshasa threatened to tilt the balance of power in Kabila’s favor and make nascent reform efforts much more complicated. According to a former Kabila minister, Gertler’s money helped Kabila win previous elections and stay in power. Furthermore, the US government has been focusing on supporting anti-corruption and governance reform in the DRC, and the license was a major blow to those efforts.

2. The action restores the credibility of a major anti-corruption tool, the Global Magnitsky sanctions program.

If left unchallenged, the midnight move to effectively nullify the sanctions would have significantly damaged the Global Magnitsky program sanctions program and undermined US anti-corruption efforts. “GloMag,” as it’s called for short, is a very important and unique foreign policy tool that allows the United States to sanction anyone globally involved in corruption or human rights abuses. The fact that the cancellation was done through a specific license — rather than by publicly delisting or issuing a general license — threatened the integrity of US sanctions administration as a whole.

3. It helps create a deterrent against tycoons who facilitate corruption.

If left active, the license would have sent a message to business tycoons who facilitate grand corruption in Africa and elsewhere that they could continue doing so with impunity. It would also have sent signals that international facilitators of corruption could effectively undo US sanctions with a bit of lobbying. Corruption, profiteering, and state capture are drivers and incentives for conflict, human rights abuse, and human suffering. Today’s action sends an important message that the facilitators of grand corruption will face consequences for their actions.

4. The revocation highlights the importance of sanctions against entire networks, not just one person.

Significantly, the Treasury Department had employed network sanctions in this case by targeting Gertler’s entire business empire, sanctioning Gertler, one of his main business partners, and 33 of his companies. Despite some of Gertler’s evasive maneuvers, the sanctions had an important impact in the DRC, which never would have been the case without designating his global corporate network. By sanctioning Gertler’s network, the Treasury Department helped curtail his ability to move and launder mining revenues, which the Treasury’s Financial Crimes Enforcement Network (FinCEN) describes in a June 2018 Advisory.

5. The action illustrates how NGO advocacy and Congressional attention matter.

“GertlerGate,” as some have called it, generated significant attention from Congolese and international NGOs, Congress, and the media over the past month. Senators Cory Booker (D-NJ), Dick Durbin (D-IL), and Ben Cardin (D-MD) released a letter to Treasury Secretary Janet Yellen that urged her to “immediately and publicly rescind the license, making it clear to Gertler and other sanctioned individuals that the Biden administration will uphold the spirit and the letter of the Global Magnitsky Act.” A day later, House Foreign Affairs Committee Chair Gregory Meeks (D-NY), Africa Subcommittee Chair Karen Bass (D-CA), and National Security Subcommittee Chair Jim Himes (D-CT) wrote a scathing letter, pointing out that Gertler risks becoming “a case study in how to circumvent American sanctions.” Then two weeks ago, Senator Cardin urged Deputy Treasury Secretary nominee Wally Adeyemo to review the license at the latter’s confirmation hearing.

Additionally, 30 Congolese and international NGOs, including The Sentry, sent a letter to the Biden administration that echoed those messages from Congress, highlighting that the sanctions against Gertler “attest to the fact that the US is ready to take concrete and effective action against those who deprive the Congolese people of the means to rebuild the country” and therefore must be put in place again. A group of influential NGOs then wrote to banks, advising them not to unfreeze the accounts of Gertler and his companies. Media attention was also important. The story received front-page coverage by the New York Times, as well as stories by Reuters, Bloomberg, The Economist, Al Jazeera, Congolese media, and others. Today’s action demonstrates how advocacy and attention can create pressure for change.

What is needed now?

Reversing this eleventh-hour maneuver is an important necessary step, but more action is needed to close the loopholes for kleptocrats. First, the Treasury Department should proactively tighten gaps that allow Gertler to circumvent some of the sanctions, and tighten US sanctions by designating his new companies and those of his close business associates. Such action has been supported by bipartisan calls from Congress. A letter last year from former Senate Foreign Relations Committee Chairman Jim Risch (R-ID), then-Ranking Member Bob Menendez (D-NJ), and seven other Senators called for the US government to “consider measures to address already-designated individuals who are circumventing sanctions through the establishment of new companies.”

Second, since Gertler made post-sanctions deals payable in euros, Secretary of State Tony Blinken should also encourage the European Union (EU) to sanction Gertler’s entire network. This could be done by adding corruption as a criterion for sanctions either under the new EU Magnitsky Act or under the EU’s DRC sanctions program. A group of members of the European Parliament recently called on the European Union to take action on this.

Finally, the State Department should double down on fighting corruption in the DRC and the region. This should include adopting a regional policy strategy on combating corruption and appointing a high-level, well-resourced special envoy to the Great Lakes region. Priority reforms should include ensuring that state-owned mining companies (which Gertler, Kabila, and others manipulated for corrupt purposes) undergo transparent financial audits, taking anti-money laundering actions against banks that facilitate the laundering of the proceeds of corruption, placing US sanctions on networks that trade in conflict gold, and establishing an accountability mechanism to investigate and prosecute those most responsible for widespread human rights abuses.

John Prendergast is Founding Director of The Sentry, where Sasha Lezhnev is Deputy Director of Policy.