Disappearing Diamonds

This private Airbus, known as VP-BEX, was a monthly visitor to Zimbabwe, and is believed to have carried out millions of dollars in undeclared diamonds from the Marange mine.
This private Airbus, known as VP-BEX, was a monthly visitor to Zimbabwe, and is believed to have carried out millions of dollars in undeclared diamonds from the Marange mine.
This private Airbus, known as VP-BEX, was a monthly visitor to Zimbabwe, and is believed to have carried out millions of dollars in undeclared diamonds from the Marange mine.

By Khadija Sharife
Exclusive to 100Reporters

From time to time, a VIP-configured Airbus jetted into Lanseria International Airport, a small and privately-owned base facility near Johannesburg, South Africa. The plane, an Airbus 319CJ, also stopped at Zimbabwe’s Harare airport. It carried important people and was widely believed to ferry some precious—and illicit–cargo: Zimbabwe’s conflict diamonds.

The diamonds came from one of the largest diamond troves in history: Marange. Spanning 173,000 acres and priced at $800 billion in rough diamonds, Marange’s concentration of treasure is eight times higher than average, at more than 1,000 carats per hundred tons.

The plane, first identified in report by the British nonprofit organization Global Witness, has been used to move diamonds out of Zimbabwe. Money from their export has gone to cement the hold of President Robert Mugabe, and finance Zimbabwe’s notorious secret police—responsible for killing, raping and maiming hundreds of artisanal miners in an operation to clear out Marange in 2008.

An examination of purchasing documents, corporate records and interviews with relevant officials by 100Reporters has, for the first time, parted the curtain on the plane’s ownership to reveal links between the mysterious jet, Zimbabwe government officials, law firms and investors with holdings across the globe, from the UK to China, Angola to Bermuda to Wall Street.

Flight logs for the plane, registered as VP-BEX, disclose frequent trips to Singapore, Hong Kong, Tanzania and Angola, among others. The Airbus appears to enjoy a remarkable lack of scrutiny, seemingly flying in a perpetual no-oversight zone. In the South African airport that was the plane’s home base, unless cargo and goods were self-declared, the plane and its passengers were not normally subject to inspection by customs, police or civil aviation authorities.

Farai Maguwu, an award-winning human rights activist and Zimbabwe’s leading researcher of the diamond trade, said, “We don’t know where the plane goes, what the routes are, or even who is involved. But we know that VP-BEX A319 was identified as playing an important role in facilitating this secretive system that is causing Zimbabweans to lose diamond revenue.”

[kml_flashembed publishmethod=”static” fversion=”8.0.0″ movie=”http://100r.org/media/2013/02/121121_interactive_map_v9.swf” width=”620″ height=”516″ targetclass=”flashmovie”]

Get Adobe Flash player


The Wrong Horse

Until 2006, De Beers, one of the world’s leading diamond producers, held the rights to Marange. But common to diamond majors, De Beers appeared to lock down the concession rather than exploit it, possibly as a means of controlling supply. A British-registered company called African Consolidated Resources had acquired concessions from De Beers.

When the De Beers’ concessions expired in 2006, Mugabe’s ruling party, ZANU-PF, swooped in.  Zimbabwean government officials had tired of De Beers’s failure to exploit the mines, said one source, speaking on condition of anonymity. Another source cited De Beers’s failure to “marry” the Zimbabwean government into the company’s existing business models, as it had in Botswana and Namibia. There, the government formed public-private partnerships with the company. Meanwhile, Supa Mandiwanzira, a representative of Zimbabwe’s Diamond Consortium, threatened that Zimbabwe had “the potential to destroy the whole industry” by flooding the markets.

A 120-carat diamond from Zimbabwe. / PHOTO TENFORD CHITANANA

Africa Consolidated had acquired a smaller claim to mine diamonds in Marange. But its shareholders included a rival within ZANU vying to oust Mugabe – the now dead General Solomon Mujuru. “The company bet their money on the wrong political horse,” a high-level source told 100Reporters. General Mujuru died under suspect conditions, and Africa Consolidated’s rights were quickly terminated by the regime. Before long, Africa Consolidated found itself sidelined for ZANU-approved partners, primarily South African and Chinese companies, such as New Reclamation and the China International Fund (CIF).

Operation Hakudzokwi—or “You Will Not Return”—opened the way for Mugabe’s exploitation of the mine with a small group of select and largely secretive partners. One watchdog group, estimating that $2 billion in undeclared precious stones have left Zimbabwe, has called the takeover  “perhaps the biggest single plunder of diamonds since Cecil Rhodes.”

Hadkuzowki set new standards for brutality in forcing out thousands of itinerant miners who had flocked to Marange. When the BBC’s Panorama interviewed paramilitary forces and police involved in the assault three years later, soldiers were apparently wracked with guilt. They reported that people were killed, “like flies.”

“There was no way out,” said one soldier. Panorama’s interviews with soldiers revealed that the military laid a string on mines, stationed armored vehicles, mounted soldiers “and an infantry battalion in a circular pattern around the 2.5 kilometer area.”

The government justified Hakudzokwi as a necessary move to ensure the country’s minerals are used for national purposes. But according to Zimbabwean Finance Minister Tendai Biti, millions of dollars in diamond revenues that should have been deposited in Zimbabwe’s national treasury are being secreted elsewhere.

“A Flying Hotel Room”

The most frequent passenger on the Airbus, identified by its tail code VP-BEX, has been Xu Jinghua, a Chinese businessman also known as Sam Pa, who visited Zimbabwe once a month and was believed to carry out diamonds, according to watchdog groups. Pa has been accused of providing $100 million and a fleet of Nissan pickup trucks to Zimbabwe’s feared secret police, according to Global Witness and other nonprofit organizations that monitor extractive industries. Pa has denied the accusations.

The Airbus, a corporate ultra-long jetliner, is smaller and lighter than its commercial counterpart. The private version of the 319CJ hosts an average of 18 or more seats, with luxury compartments. Writing on an aviation forum, one enthusiast who claimed to have entered a Planair 319CJ described the interior as “a flying hotel room.”  The plane has all the perks of a commercial jet in terms of speed, range, and reliability. The corporate version, hosting a small passenger base, is capable of flying 6,000 nautical miles non-stop.

But the plane has one added perk: while the VP-BEX – a VIP-configured jet – can carry cargo, there are no real systemic checks on the material it may be transporting through South Africa, as the plane did not generally declare any cargo and diamonds are small enough to escape scrutiny.

One pilot formerly operating from Lanseria alleged that security was often “slack” at the airport. “Passengers don’t need to carry their illicit goods with them,” he told 100Reporters. “If a company has, for example, leased a hangar, the plane can taxi down to the hangar, and the goods are left inside. An hour or two later, the goods can be picked up.” While customs officials randomly check the bags of international passengers arriving on commercial airliners, those flying in on private jets are seldom checked, the pilot said. “One plane in 30, and 99 percent of the time, it would be due to a tip-off,” said the pilot.

Gavin Sayce, Lanseria’s airport manager, did not respond to interview requests.

Until September 2012, the plane was registered in Bermuda to Planair, a shell company registered in Bermuda, which operated it on behalf of the China International Fund, a Hong Kong-based private company. In September, the plane was registered under Hong Kong Jet (Bermuda), which belongs to a Chinese Fortune 500 company, the HNA Group.

China International is often described as Zimbabwe’s largest investor at US$8 billion—though there is little evidence that the company has yet made good on its pledges of vast infrastructure development.

Godwills Masimirembwa, chairman of Zimbabwe’s Mining Development Corporation, has maintained that the army had every right to mine diamonds. “There should not be boundaries. If the army uses its stake to finance its activities, then that’s good and we will remain with the peace that we are enjoying in this country,” he said during a meeting at the Mutare Press Club this month.

Masimirembwa denied misuse of funds from looted diamonds or diamond revenue, and cited U.S. Army involvement in “economic and industrial activities” as best practice. He challenged Biti to prove that diamond companies were not remitting revenue to the government.

Zimbabwe’s Blood Diamond Jet

The plane was purchased new in mid-June 2006 by Angola’s Sonangol State Corporation, a secretive entity with a long history of off-books sales of petroleum, according to the International Monetary Fund and other sources. A December 2011 IMF report, for example, cited $32 billion discrepancy in revenue from Angola’s public accounts between 2007 and 2010, largely connected to the quasi-fiscal activities of Sonangol.

Sonangol is interlocked with the China International Fund through multiple known and unknown subsidiaries. In Zimbabwe, China International’s diamond-related legal forms include the Hong Kong-incorporated Sino-Zim Diamonds Ltd., headed by nominee lawyer Jimmy Zerenie and Eliezer Nefussy, reportedly the longtime right-hand man to diamond magnate Lev Leviev in Namibia. Leviev significantly broke the global De Beers stronghold, beginning with Russia, before entering Angola’s diamond industry.

Leviev’s brother, Moshe, was named by Global Witness as a director of LLD Asia, a tentacle of Sino-Zim’s complex multi-corporate structure, primarily registered in the British Virgin Islands (BVI). LLD Asia, advertises itself as one of the largest dealers of Angolan, Namibian, Russian and other diamonds, selling to buyers in the United States, Italy, Belgium and Hong Kong. Masimba Kamba, an individual connected to Zimbabwe’s Central Intelligence Organization, the secret police, is also connected to Sino-Zim, as a director, and to a related company in the British Virgin Islands (Strong Achieve Holdings).

Also involved in China International Fund are Lo Fung Hung, Sam Pa and Alain Fanaie, who doubles as the  Chief Executive Officer of China Sonangol. Following a U.S.-China Economic & Security Review Commission (USCC) report, the Hong Kong-based China International Fund, based at  27/F Two Pacific Place, 88 Queensway, Hong Kong, would become known as the 88 Queensway Group, due to its physical address.

The USCC report identified Leviev, a real estate billionaire and major diamond supplier in New York, Dubai, London, Singapore and Cannes, as a key figure in China International Fund.

Much like Hong Kong, Singapore and the British Virgin Islands are also secrecy jurisdictions, peddling sovereign-protected spaces of legal and financial opacity to international companies seeking to hide assets or conceal the identities of their beneficial owners.

“It all sounds depressingly familiar,” said Ronen Palan, a professor at the University of Birmingham and author of Tax Havens: How Globalization Really Works. “Why are complex overlapping corporate structures used? I cannot see any reasons for such complexity besides concealing financial activities, lowering taxation, and creating distance from ownership in case the airplane is used for illegal business. There are clearly no societal advantages to such structures,” he said.

The controlling face of the 88 Queensway empire is Lo Fung, while Pa has been identified as more of a behind-the-scenes operator.

In 2007, Pa, formerly a military comrade of Angola’s lifetime dictator, José Eduardo dos Santos, valued his Angolan business deals at $30 billion. Global Witness has described him as a monthly visitor on board VP-BEX to Harare. According to a Zimbabwean source, who spoke on condition of anonymity, Pa is perceived as one the Central Intelligence Organization’s most important allies.

The 88 Queensway group has used some of its wealth to make its mark in New York real estate. It bought the JP Morgan Chase building at 23 Wall Street for $150 million, paid $150 million for a 49.9 percent stake in the Madison Avenue Clock Tower, and another $50 million (along with the assumption of half the building’s $720 million in debt) for a 49 percent stake in the former New York Times building at 229 West 43rd Street, according to the USCC report.

Neither the China International Fund, China Sonangol nor Sonangal responded to repeated requests for comment. LLD Asia could not be reached for comment.

[Since publishing this report, 100Reporters has received comments from China Sonangol disputing the corporate relationsh