By RAID

 - April 15, 2016

RAID recently lost the first round of a court case concerning freedom of information and sanctions against Zimbabwe. At first sight, and set against other momentous news and disclosures, this ruling on a point of law appears to have little consequence. However, the current furore over the ‘Panama Papers’ underlines its far-reaching significance.

Over a decade ago, a devastating war over natural resources raged in the Democratic Republic of Congo (DRC), but it is only over the last couple of weeks that a few more vultures have come home to roost.

In the feeding frenzy over the documents leaked from the Panamanian law firm Mossack Fonseca, the names of notorious business men who profited from deals done in the Congolese war and its aftermath – Dan Gertler, John Bredenkamp, Billy Rautenbach – began to emerge. RAID has tracked these individuals and their companies for some considerable time.

In the US, the bones of some of the same deals are being picked over. In breaking news, Och-Ziff Capital Management Limited, the giant US hedge fund, is reportedly (see Wall Street Journal, Reuters) on the verge of pleading guilty to bribing government officials in Africa after a criminal investigation by the US Department of Justice. Rarely has such enforcement action been taken. Och-Ziff could also incur up to a $400 million fine by market regulators. RAID submitted detailed reports on Och-Ziff’s questionable deals across Africa to US authorities back in 2013 and 2014.

But Och-Ziff isn’t the only financial firm to come to the attention of US law enforcement. In February this year, the US Treasury’s Office of Foreign Assets Control (OFAC) issued an enforcement notice against Barclays: ‘Barclays Bank Plc (“Barclays”), a financial institution headquartered in London, United Kingdom, has agreed to remit $2,485,890 to settle its potential civil liability for 159 apparent violations of § 541.201 of the Zimbabwe Sanctions Regulations, 31 C.F.R. part 541 (ZSR).’ This notice immediately struck a chord: it parallels RAID's experience of how it has been left to the US authorities to pursue UK companies over sanctions violations when the UK government has done nothing. But while Barclays has been fined and Och-Ziff may be brought to book, many others have so far escaped sanction over events that they must have thought long buried.

In the DRC, at the start of the new millennium, the government of former rebel leader Laurent Kabila signed over mineral concessions worth hundreds of millions of dollars to allied governments and their middle men in return for soldiers and military hardware. In Zimbabwe, in April 2008, Robert Mugabe clung onto power after torturing and killing opponents in the aftermath of disputed presidential elections. A few weeks earlier, Och-Ziff’s London office bankrolled UK-listed Central African Mining and Exploration Company (CAMEC), chaired by former England cricketer turned wheeler-dealer, Phil Edmonds. In South Africa, in 2009, Billy Rautenbach reached a plea bargain on 326 counts of fraud and paid a substantial fine.

How are these events, involving different individuals and entities, occurring in different countries at different times, connected? We can give you an answer of sorts – see our report Och-Ziff, Mugabe’s “Bagmen” and the Underpricing of African Assets – but what we can’t do is tell you what role another party – the UK government – played in all of this. And the reason we can’t tell you brings us back to RAID’s recent court case.

In a memorandum to the Treasury, we'd asked for official information that would not only shed light on what happened, but would also confirm what the UK authorities knew and did about the deals that gave rise to these events. But the UK government is refusing to tell us anything, silent behind its interpretation of an obscure article buried in an EU regulation that it says prevents disclosure.

In a January 2016 ruling, a court in the UK upheld a decision that the Treasury was entitled to withhold information on its implementation of sanctions against Zimbabwe. RAID had sought answers under the Freedom of Information Act (FOIA), in order to establish how much the UK Government knew about, or even approved, a deal by CAMEC to buy a platinum mine from the cash-strapped Mugabe regime just before the 2008 elections.  Despite the existence of sanctions, the deal went through, payments went to Mugabe, and the terror began. With the cash flowing again, it was Rautenbach – described by the US as a ‘Mugabe crony’ – who provided trucks to deliver ZANU-PF thugs to mete out the violence to subvert the election. The money from Och-Ziff, it turned out, had enabled CAMEC to do the deal.

RAID asked the UK government whether it had been consulted over or even licensed the platinum deal. But the government, backed by the Information Commissioner, retreated behind an exemption (section 44) under FOIA which prohibits disclosure:  the UK has signed up to EU sanctions and, in the UK government’s  view,  a certain Article 8 of Council Regulation (EC) No.314/2004 of 19 February 2004, implementing restrictive measures in respect of Zimbabwe, prevents the disclosure of any information gathered. And not only does the same prohibition appear in sanctions against other countries, but the FOIA exemption under which it is cited is absolute, meaning consideration of the public interest doesn’t even figure.   In other words, the UK would breach its treaty obligations with other EU member states if it started disclosing information that the rules say should be kept secret. But that presupposes that all other EU states would agree with the UK’s interpretation of the regulation in question: can it really be the case that there is, in effect, a European-wide blanket-ban on the release of any information concerning sanctions?

Fast-forward from thwarted elections in Zimbabwe to Rautenbach’s South African home-coming in September 2009. Rautenbach could afford to pay his fine for fraud because he had suddenly received a windfall from selling shares in a UK mining company, which had been the target of a take-over by the then FTSE 100-listed Eurasian Natural Resources Corporation (ENRC itself was soon to bring London’s main stock market into disrepute and is being investigated by the Serious Fraud Office).

Needless to say, the mining company concerned was the same CAMEC that had dealt not only in Zimbabwean platinum, but also in mines illicitly transferred to Rautenbach in return for Zimbabwe’s military assistance in the bloody conflict in neighbouring DRC. RAID warned the UK authorities back in 2011 about CAMEC (see Asset Laundering and AIM), but nothing was done. Because Rautenbach was on the sanctions list, RAID asked the UK government if it had licensed the sale of his shares and had allowed him to use the proceeds to pay his fine and legal fees. The Treasury refused to answer, citing Article 8.

Most of the evidence produced by the Treasury in RAID’s court case was presented in confidential files and considered in closed session, which we were not allowed to attend because the information we were after was being discussed. However, the way this particular court operates also means that we weren’t represented in the closed session. So, unusually and worryingly for a UK court, no one was present to argue on behalf of the plaintiff.

What was said in open court  nevertheless gives some rare insights into the inner workings and mind-set of government, here represented by  Peter Maydon, the head of HM Treasury’s Sanctions and Counter-Terrorist Financing Unit. It was claimed that disclosing information on particular deals or individuals would result in financial institutions –already hypersensitive about safeguarding their reputations – withholding information in case it became known that they acted for those on the sanctions list. To withhold such information is a criminal offence, but Mr Maydon admitted that financial institutions were ‘savvy’, knowing that the government is unlikely to pursue such cases because this would damage the ‘goodwill’ upon which the Treasury depends when seeking information in the first place. Yet in the US, the authorities do make certain disclosures, without diminishing their ability to get banks to cooperate.

Mr Maydon also confirmed that Treasury staff knew that their decisions on sanctions matters were unlikely to be disclosed because of exemptions under FOIA. Mr Maydon went as far as to say that questioning such decisions undermined public confidence in the implementation of sanctions. RAID’s view is precisely the opposite, that it is undisclosed, unaccountable decisions behind closed doors that undermine confidence, especially when, as in the CAMEC case, there is a perception that sanctions were breached and that those on the sanctions list profited. The Treasury’s logic is that withholding information on the implementation of sanctions is always preferable to releasing it, even if that means that there is either no accountability when the Treasury has made a mistake or no correction to the perception that the Treasury has acted wrongly, even when it has not. But is it right in a democracy that there is a wall of silence that prevents us from knowing the truth? And is such a wall really necessary?

RAID’s answer to the first question is to appeal the lower court’s decision on a point of law: we do not agree that the EU regulation has been properly interpreted and that member states across Europe would be happy to see it override all disclosure laws and perhaps even prevent the release of information in criminal proceedings. But legal action is expensive, time constraints exist, and success through the courts cannot be certain and we may not be granted leave to appeal.

RAID’s answer to the second question on the necessity of withholding all information is to point across the Atlantic to OFAC, the US counterpart for enforcing sanctions. When asked in court about OFAC’s practice of releasing information on licensing, Mr Maydon dismissed such disclosure as confined to ‘a few cases’ and asserted that the UK needn’t, in any case, follow the Americans’ lead. In fact – though still not going as far as RAID would like – OFAC has posted databases detailing its licensing in thousands of sanctions cases. Moreover, as confirmed in an article in the Wall Street Journal, the US authorities are investigating Och-Ziff’s role in the Zimbabwean platinum deal. It is impossible to know, on Zimbabwean sanctions per se, what conclusion the US will reach or how much information will come to light, but – if the newspaper reports about Och Ziff's guilty plea prove accurate – the action taken against one of America's own leading investment institutions would be almost unprecedented.

Given that sanction targets are publicly known, and the business dealings of Mr Rautenbach have been widely reported in the media, Mr Maydon was asked whether there was any danger to individuals should the Treasury corroborate facts that are already in the public domain. Mr Maydon replied that, in general, corroboration of existing, known facts was  not a danger, but this did not apply in the current case, something that he would discuss further only in closed session. This is yet another hint that there is more to this case than meets the eye. Is the UK government protecting CAMEC and Rautenbach from scrutiny, and, if so, why? There is no doubt that Article 8 is proving to be very convenient.

But as the content of the Panama papers filters out (on Bredenkamp and Rautenbach in The Guardian, on Gertler in le Monde) and action is taken in the US, certain UK companies and the position of the UK authorities may become increasingly exposed: confidentiality under Article 8 may be upheld, but much of the information the Treasury has sought to conceal may emerge anyway. The key question is this: having failed to act upon RAID’s repeated calls for action against those who have apparently breached sanctions or flouted market rules, can the UK continue to shelter the vultures without causing lasting damage to its reputation?

It is shameful and embarrassing for accountability in this country that we in the UK are reliant upon scraps from the US table to even begin to fathom how a UK company was allowed to do a deal with a murderous regime, to the ultimate advantage of a Mugabe crony needing to settle a fine for fraud, all seemingly with the approval of the UK government. 

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