Diamond in the Rough

Israeli tycoons are in hot pursuit of diamond riches in Angola, one of Africa's most impoverished, corrupt and war-torn countries. Will Lev Leviev, with a `Russian connection' to the Angolan president, be displaced by his ambitious young Haredi rival, Dan Gertler?

Did Dan replace Lev as Isabel's favorite? Is there a struggle between Dan and Lev? Did Arcadi and Lev have a falling out? Is Isabel trying to push Arcadi out? What is the role of Maurice Tempelsman? And what will Benny do? The answers to these questions - which sound like part of a promo for the next episode of a soap opera - might go some way toward explaining the tangled relations between Israeli and foreign tycoons in Angola. At stake is trade in diamonds, revenues of hundreds of millions of dollars and international intrigue across four continents. Honor, prestige, self-image, ego and roiling passions are the driving forces.

These are the protagonists of the drama now under way between Luanda, New York and Tel Aviv: The central figures are Dan Gertler, an ambitious young diamond merchant, who wants to obtain a slice of the Angolan diamond market; Isabel dos Santos, the daughter of the president of Angola and a sharp, highly influential businesswoman in her country; Lev Leviev, one of the world's biggest diamond tycoons, who until recently was considered the "diamond emperor" of Angola; and Arcadi Gaydamak, a Russian-Israeli-French businessman who also holds an Angolan diplomatic passport and is considered one of the foreign investors with the greatest influence on President Jose Eduardo dos Santos; Benny Steinmetz, an Israeli diamond merchant and businessman who was thrown out of the Angolan diamond market four years ago; and Maurice Tempelsman, a Jewish-American diamond merchant, who was also thrown out of Angola but has recently become active there again.

Dan Gertler is "the new kid on the block." He is seen as a rising star in the Israeli diamond industry - and not only in Israel. Israel has long since become too small for his ambitions. Bold, sophisticated, brutal, he is an adventurer with a short fuse. His ambitions, which have recently focused on an attempt to get into Angola, are making the other businessmen who operate there, notably Lev Leviev, uncomfortable and nervous.

Until about a year ago, Leviev was the undisputed king of the Angolan diamond market. Arcadi Gaydamak has recently tried to act as a mediator between Gertler and Leviev. He believes that instead of fighting over the wealth of diamonds in Angola they should reach an understanding on dividing the area and cooperate. As part of the battle over the diamonds of Angola, those involved have spent quite a bit of their time in the past few weeks doing intensive lobbying in Luanda, the capital. Last week both Gaydamak and Gertler were there, the latter flying in on a private plane leased from the businessman Yossi Maiman.

It's hard to believe that it was mere coincidence that the two were in Luanda at the same time. A more likely conjecture is that they had a meeting there. Three weeks earlier, Leviev, Gertler and Gaydamak were in Luanda. It's not known whether they held a joint meeting, but there is no doubt that they were in contact.

Still only 31

Dan Gertler comes from a well-known, veteran family of diamond merchants that has acquired fame, honor and much property. His grandfather, Moshe Schnitzer, who is considered the "king of Israel's diamond industry," last year received the Israel Prize for his "life achievement - a singular contribution to the society and the state." In their grounds for awarding him the prize, the judges noted that Schnitzer "established the Israeli Diamond Bourse, was its president for many years and served as the president of the World Federation of Diamond Bourses." Dan's father, Asher Gertler, and his uncle, Shmuel Schnitzer, manage the family business. His mother, Hanna Gertler (Moshe Schnitzer's daughter) owns the radio station 99 FM. But instead of slipping smoothly into the family business, Dan Gertler chose a harder route. He preferred to set up his own independent business. His family trades in polished diamonds; he chose to deal in rough diamonds.

Today, through his company, DGI (standing for Dan Gertler Israel), which is headquartered on the 24th floor of the Maccabi Building in the Diamond Bourse in Ramat Gan, he is active around the world. He owns a diamond mine and a large polishing plant and has a franchise to expert diamonds from Congo (formerly Zaire). Recently he acquired another mine in Congo, to extract other raw material. He is considered close to Congo President Laurent Kabila, and together with his aide and confidant Haim Leibowitz, is working to enhance the status and image of the Congo regime in the U.S. administration. This week the two flew in the leased plane to accompany Kabila on a visit to China.

Gertler also owns a complex network of interconnected companies, some of them registered in tax havens, which run businesses and firms in India, Russia, Belgium and the United States. His name was also mentioned about a year ago in connection with the purchase of a diamond mine in the Canadian Arctic Circle. All in all, a very impressive record for a 31-year-old who just began his race for the top a few years ago.

In the diamond industry, Gertler is considered something of an odd bird. He maintains few ties with the other merchants and is not very sociable. Another aspect of his "peculiarity" lies in the fact that about a decade ago, he began to become religiously observant. Alongside his business affairs, most of his energy is channeled into matters of faith. He is a donor to religious institutions and from time to time makes a pilgrimage to the rabbi he most admires, Rabbi David Abuhatzeira, from Nahariya, in order to consult with him and receive his blessing. Gertler is surrounded mostly by religious people and laces his speech liberally with praise to God.

His turn to religion reinforces his recoil from the media. He employs a PR man, Lior Horev, mainly as a buffer between him and the press. He refused to be interviewed for this article and rejected a request to be photographed, even though his photo has been published in the past.

Gertler is apprehensive that an unnecessary word or the wrong kind of publicity will undercut his prospects of entering the Angolan market. The situation there is fluid. Many forces, local and international, are engaged in a bitter struggle for their status in this huge and important diamond market. Every mention - new or recycled - of untoward activity in the past is liable to become ammunition in the hands of his rivals.

"Behind the scenes in Angola, there have been major power struggles, which, it seems are now resolved," says Christine Gordon, an investigative journalist who is one of the world's leading experts on the diamond industry. "But it appears to be more of a reshuffle of business partnerships."

A dollar a day

Angola has the potential to become one of the richest countries in Africa. It has a sparse population of 13 million people who live in a vast area of about 1.25 million square kilometers - 60 times the size of Israel. Angola has almost everything: natural minerals, forests, fertile land and rich fishing. Beneath its land and sovereign waters there is abundant oil. It is Africa's second largest oil producer, after Nigeria. It has diamonds, gold, uranium and iron. But Angola is one of the poorest and most corrupt countries in the world. Two-thirds of its inhabitants live in an income of one dollar a day. However, the country's leaders and senior officials and others who are close to the government are considered exorbitantly rich.

In the past, Western countries launched investigations to find bank accounts held by Angolan officials. Reports of the United Nations and human rights groups found that between 1997 and 2003, about $1 billion a year, originating in oil exports, disappeared from the state coffers and made its way into private pockets. Bribery in Angola is the norm. Without bribery it is impossible to do business in Angola, says Global Witness, an organization that highlights the link between exploitation of natural resources and human rights abuses.

In part, Angola's distress is due to the civil war that raged in the country for 27 years, in which more than a million people died and several million more were wounded. Angola also has the world's largest number of people who have been maimed by land mines, which are strewn indiscriminately around the country. It is common to see dozens of limbless children begging for handouts on the main boardwalk of Luanda or scrounging in garbage cans for scraps of food. The average life expectancy in Angola is 40 years.

In 1975, following a blood-drenched liberation struggle, Angola received its independence from Portugal, which had ruled the country for hundreds of years. The civil war erupted shortly afterward, as three organizations that emerged from the underground fought one another for hegemony. One of them was defeated and became inactive. Power in the capital was seized by MPLA, a Marxist-oriented movement. Since 1979, President dos Santos has been the leader of the movement and of the country.

His rule was challenged by UNITA, a movement led by Jonas Savimbi. During the struggle for independence, UNITA espoused a Maoist line, but quickly adjusted its ideology to the new situation and became a tool of Western interests. UNITA was supported by the United States and South Africa, while the Soviet Union and Cuba backed the dos Santos regime.

The war prevented Angola from extracting the full potential of its natural resources. The little oil that was produced and the few diamonds that were mined went to finance the war effort of both sides. This was the origin of the term "blood diamonds," or "conflict diamonds." During the war period, quite a few diamond merchants were active in the country, buying merchandise from both sides - Belgians, Lebanese, South Africans, Portuguese, French and others. Two of the major merchants were Maurice Tempelsman and Benny Steinmetz.

The president's daughter

Tempelsman, a hefty donor to the Democratic Party in the United States, gained fame as the partner of Jacqueline Kennedy after the death of her second husband, the Greek shipping tycoon Aristotle Onassis. Mainly, though, he is a high-stakes businessman, board chairman of Lazare Kaplan International, the largest diamond company in the United States. Over more than a quarter century, dozens of articles, books and studies have been published about his involvement in the diamond business in Africa. He is said to have assisted the CIA in its project of support for Savimbi. Not surprisingly, he was mentioned in the past as one of the largest buyers of diamonds mined by Savimbi's forces. Tempelsman was also considered the "straw man" of the South African diamond giant De Beers, which had an exclusive hold on the Angolan market. (Tempelsman's office did not respond to a request for a reaction.)

In the diamond industry, Benny Steinmetz is also considered close to De Beers. In 2000 the Angolan government decided to sever its ties with De Beers, which had the collateral effect of severing its contacts with various buyers, among them Tempelsman and Steinmetz. The reason for the move was financial. The dos Santos government received hardly any revenues from diamond mining in Angola and from sales to buyers. It suspected that the buyers were getting a large portion of the merchandise directly from the "diggers" and were smuggling them out of the country behind the government's back.

Instead, the Angolan government set up a special company that received an exclusive franchise to export all the diamonds mined in the country. Known as ASCORP (Angola Selling Corporation), 51 percent of the company was held by Sodium, a subsidiary of the Angolan government's diamond company. Other partners, with 24 percent, were associates of Leviev's, diamond merchants from the Laniado family (Guy and Ehud) and Lucian Goldberg from Belgium. The remaining quarter was held by a Swiss company, which according to reports in the international media was owned by Isabel dos Santos. In other words, Leviev and Isabel dos Santos were partners, according to these reports. Leviev has denied this on several occasions.

Isabel is the daughter of the president's first wife, a Russian woman whom he met while studying in the Soviet Union. For the past decade, Isabel, now 31, has been consolidating her position as a businesswoman with great influence - too much, according to Angolans - on the country's economy and internal politics. She is the owner of restaurants on the Luanda coast as well as a cellular phone company and many other assets. She is known for her extravagant lifestyle. Two years ago, the British press carried reports about the lavish parties she held to mark her birthday and her marriage to a Congolese banker.

The exclusivity in diamond exports granted to Leviev and his partners came as a surprise to many people. De Beers, Tempelsman, Steinmetz and other merchants could not understand the move, and were unforgiving. Their pride was wounded. How could it be that a young diamond polisher who immigrated to Israel from Bukhara had outwitted the firm whose very name was synonymous with diamonds? In earlier interviews with Haaretz, Leviev related that he had done it by resourcefulness and by familiarity with the industry. According to his account, three years before he received the ASCORP franchise - that is, in 1997 - he invested $56 million in the largest diamond mine in Angola, the Catoca mine. In return, he received 18 percent of the ownership of the mine and entered into partnership with a Brazilian engineering firm and with the Russian company Alrosa, today the world's largest producer of diamonds. Leviev said that he broke the ice with the president of Angola by conversing with him in Russian. Since then Leviev has purchased another mine in Angola, in partnership with Angolan companies and businessmen.

Even though Leviev vehemently denies this, everyone in the industry says that the person who opened doors for him in Angola was Arcadi Gaydamak. Gaydamak is a personal friend of the president. From 1992 to 1995, together with his French partner Pierre Falcone, he organized the financing for arms sales from Russia to Angola. Thanks to these weapons, the Angolan government was able to defeat the UNITA rebels and achieve full control of the country. For a time Gaydamak invested in Leviev's Africa Israel Corporation, but about three years ago, according to both partners, he sold his holdings.

A year and a half ago, Leviev discovered that things change. Tempelsman, De Beers and other merchants exerted heavy pressure on the Angolan government to revoke the monopoly granted to Leviev and his associates. For unknown reasons, the relations between Isabel dos Santos and Leviev also soured.

This is how business is done in Angola: From time to time, the business partners are switched in order to remind everyone who's boss. Leviev tried to prevent the move, but unsuccessfully. Probably his falling out with Gaydamak did not help. Still, Leviev continues to be a dominant figure in the Angolan diamond market, and he has told his confidants that he has not yet said his final word on the subject.

More than a year ago, the Angolan government decided to reorganize the country's diamond exports; the market was opened and new-old traders such as Maurice Tempelsman became active in the country again. According to sources in the diamond industry there, Steinmetz is also considering a comeback in Angola. (Steinmetz's office said in response that he has no such intention at this stage.) This was the propitious moment for the hungry young diamond merchant Dan Gertler.

Kidnapping in Tel Aviv

Gertler was born in Tel Aviv in 1974. His parents named him Dan after the alias his grandfather, Moshe Schnitzer, used in the pre-state underground organization Etzel (the Irgun). He grew up in the well-heeled Bavli neighborhood, after which the family moved to the prestigious Tel Baruch neighborhood. Dan and his three sisters had a typical north Tel Aviv childhood. "He was a regular boy, friendly, who liked to have a good time like others his age," his parents said this week. He was active in the local Scouts branch and also, like his father and grandfather, loved soccer.

Moshe Schnitzer is an avid soccer fan who was a supporter of the Beitar Tel Aviv team and still, at age 84, likes to watch games on television. His father, Asher Gertler, was the goalkeeper of Maccabi Tel Aviv in the 1960s. Dan joined Beitar Tel Aviv at a young age and trained religiously on the field next to Ramat Gan Stadium. He played on the children's and youth teams. "Dan was a strong left defender who understood soccer," Yaakov Dangur, the team's manager, recalled this week. "He had the potential to play on the adult team." However, his father says, he had to terminate his career at the age of 17 after suffering two head injuries when he tried to make headers."

Although he had the option of getting a draft exemption for medical reasons, he insisted on serving in the army, where he worked as a computer operator. Afterward he studied business administration at the College of Management and started to work in the flourishing family business. However, he found the comfortable work surroundings unsatisfying and decided to become better informed about the industry. He met with experts and spent long hours in diamond polishing plants, watching the work. "From the start we noticed that finished diamonds for sale did not interest him," Asher Gertler notes. "He showed a great interest in rough diamonds. He learned all the stages of the cutting work. He just fell in love with rough diamonds."

In 1996, when he was 22, Gertler left the cozy family surroundings and went his independent way by founding DGI. "He always was an individualist and very energetic, so we didn't try to stop him," his father says. "And even if we had tried to persuade him, it wouldn't have helped."

In the meantime, the family had been plunged into a crisis. In February 1995, Keren, Dan's youngest sister, now 29, was kidnapped by Avi Sapan, a criminal and former marksmanship champion, who was aided in the grab by his young daughter. Sapan demanded a $2 million ransom for Keren's release. To show he meant business, he also kidnapped Asher Gertler in his car, at gunpoint. While Keren was being held in an apartment in Magdiel, near Kfar Sava. Sapan and her father drove around the streets of north Tel Aviv. Eventually Asher Gertler managed to hit Sapan over the head and escape from the car. Sapan fired one bullet at him, which hit him in the thigh. The police, who were summoned by Hanna Gertler, arrived on the scene and pumped 11 bullets into Sapan.

Three hours later, when Sapan's daughter did not receive the agreed signals from her father, she understood that something had gone wrong and released Keren. She was not arrested until her father's funeral, when the police noticed that she was behaving oddly. She was tried, but because she was underage, her name could not be made public and because she had been orphaned, the court sentenced her to a light punishment of community service.

Getting religion

As Dan Gertler took his first steps in business, his religious faith began to deepen. According to his parents, "It was a gradual process. It started right after his bar mitzvah, under the influence of the teacher who taught him the Torah reading. He continued to put on tefillin [phylacteries] every day." Still, in his second decade of life, Gertler was known as a carouser in north Tel Aviv. At the start of his road to religion, he drove to the Friday evening services in his car. Nevertheless, he stayed on the religious path. Anat, his girlfriend, who was not religious, agreed to become religiously observant as well (though not before they broke up for a time over this issue). They were married in 1997 and have four children, three sons and a daughter. Four years ago they moved out of their home in Givatayim to the largely Orthodox city of Bnei Brak.

Gertler now follows a completely Haredi (ultra-Orthodox) way of life and votes for United Torah Judaism, but still identifies with Likud policies, like his grandfather. He is abroad on business trips nearly every week but spends Shabbat at home in Bnei Brak. He is a regular participant in lessons given by Rabbis Moshe and Haim David Kovalsky. "It is very moving to see how Dan shuts off all his mobile phones at the beginning of the lesson, drops everything and concentrates on the Gemara," Rabbi Haim David Kovalsy says. "The most important thing is that Dan is happy and is in harmony with himself and feels good," his parents say. "We respect him and he respects us and there is no attempt to impose or influence."

Gertler's closest friend is Haim Leibowitz, 34, from the Chabad movement. In the 1996 elections he was the moving spirit behind the aggressive campaign slogan "Netanyahu is good for the Jews." Some analysts maintain that this slogan, which was unveiled not long before voting day, generated a shift in the close race, and led to Shimon Peres' loss. The campaign was funded by the Chabad billionaire from Australia, Joseph Gutnik, who owns gold and diamond mines. Gertler tried to interest Gutnik in a business partnership. Nothing came of this, but Gertler got to know Leibowitz and gained a friend and adviser.

The two are rarely apart. Leibowitz, a perspicacious individual with media connections, protects Gertler whenever necessary. Although he is listed as an employee in one of Gertler's companies, his status is effectively that of a partner. After meeting Benjamin Netanyahu, Leibowitz became a regular fixture in the Prime Minister's Office, where he was especially close to the director general, Avigdor Lieberman. The trilateral relations between Leibowitz, Lieberman and Gertler were thereby greatly strengthened.

From the outset of his business career, Gertler understood that if he remained a diamond buyer and merchant he would be dependent on the good graces of others, especially De Beers. The Gertler-Schnitzer family had a traumatic experience with the South African conglomerate. For many years Moshe Schnitzer was a devoted and loyal client of the company. As such, in the 1990s he refused vehemently to buy rough diamonds that were being offered cheaply in Russia. That stance was exploited well by another diamond merchant, Lev Leviev, in a breakthrough that made him a leading player in the world diamond trade.

However, Schnitzer's loyalty was to no avail. De Beers dumped him, depriving him of its famous diamond allocation; in other words, the company stopped Schnitzer's supply of rough diamonds. Schnitzer's grandson watched and learned the lesson. In the second half of the 1990s he came up with ideas to buy mines in several African countries and looked for leverage that would create shortcuts to the authorities in those countries. However, the ideas were not implemented. In retrospect, Gertler knows that these were youthful caprices, failed adventures and immature plans.

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