Author Topic: Cablegate - Never Mined: Illegal Trafficking Arrests Rock Kimberley Process  (Read 2380 times)

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Never Mined: Illegal Trafficking Arrests Rock Kimberley Process
OriginEmbassy Brasilia (Brazil)
Cable timeMon, 27 Feb 2006 16:48 UTC

E.O. 12958: N/A
¶1. (SBU) Summary: Six people, including one GoB official, were
arrested February 10 in a sting operation to stop the trafficking of
illegally certified diamonds in Brazil. The gang is accused of
illegal mining, document fraud, money laundering, tax evasion, and
possible blood diamond trade. The Brazilian authorities are still
pursuing a number of others including their primary target, Hassan
Ahmad, a naturalized Brazilian of Lebanese descent, reported by the
press to have links to international terror groups, including
Al-Qaeda. In response to the arrests, the Ministry of Mines and
Energy, which certifies Brazilian diamonds for export under the
Kimberley Process, has suspended all exports, revoked the previously
issued certificates for three companies involved, and replaced the
arrested official Luiz Eduardo Machado de Castro. MME will also
review the issuance of Kimberley Certificate number 64, which was
the focus of a damning indictment by a watchdog NGO of the entire
Kimberley Process in Brazil. Despite assurances to us by the General
Coordinator for International Affairs at MME, Samir Nahass, that the
Kimberly Review scheduled for the week of April 24 will not be
postponed, Post believes the GoB ultimately will do so when the
investigation forces it to face up to its broken Kimberley
certification mechanism. End Summary.
¶2. (SBU) On February 10, after an extensive sting operation, the
Federal Police arrested 6 people under suspicion of trafficking in
illegal diamonds. Prominent among the arrested parties were Luiz
Eduardo Machado de Castro, the state of Minas Gerais' Superintendent
of the National Department of Mineral Production (DNPM) and Viviane
Albertino Santos. Castro was responsible for the Kimberley
certification process in that state, including issuance of origin
certificates and verification of licenses. Santos is the
owner/operator of Viviane Santos Classificacao de Pedras Ltda., one
of the largest diamond export companies in the state of Minas
Gerais. The arrested persons are accused of participating in a fake
certification scheme that included falsification of public and
environmental documents, tax evasion, money laundering, exchange
rate fraud, gang activity and corruption.  The one-and-a-half year
sting operation was a taskforce effort of the Federal Police (the
equivalent of the FBI), the tax authority and the Federal Public
Ministry (i.e. prosecutor's office).  The Federal Police is seeking
cooperation from overseas financial institutions (in the US and
Europe, primarily) since there is evidence that the parties involved
laundered their money through international banks.
The Ones That Got Away
¶3. (SBU) The task force is troubled by the escape of its primary
target Hassan Ahmad, owner of Minas Gerais' largest diamond
exporter, Primeira Gema Comercio Importacao e Exportacao Ltda.
Ahmad is thought to be the head of the illegal diamond cartel.  In
2004 Ahmad was responsible for a reported 83% of Minas Gerais
diamond exports, but as of the end of 2004, Primeira Gema had all
but disappeared in the legal diamond trade, and has not filed any
export license applications since that time.  Brazilian authorities
have openly appealed to international authorities, banks, law
enforcement to help capture Ahmad, a naturalized Brazilian citizen
of Lebanese descent, born in Sierra Leone and bearer of a Belgian
passport. Ahmad's father, Said Ali, and his brother Ali Ahmad, were
implicated by a 2003 U.N. Security Council report as money
launderers and traders in conflict diamonds from Sierra Leone and
the Congo.  Ali Ahmad (the brother) manages the Belgian diamond
house Asa Diam, the primary importer of the Primeira Gema exports
and a company also implicated in the UN report. Belgian police and
European intelligence agencies have accused Asa Diam as having ties
to Al-Qaeda and the Lebanese mafia, according to some press reports.
¶4. (SBU) Another escaped target of the investigation is Paulo
BRASILIA 00000410  002 OF 003
Traven, owner of Mato Grosso-based Traven Comercio Importacao e
Exportacao Ltda. Traven stands accused of trading in illegally mined
diamonds from the interior of Mato Grosso, Minas Gerais and the
Cinta Larga Roosevelt Indian Reserve in Rondonia.  Notably, in April
2004 the Cinta Larga people killed 29 illegal miners on their
230,000 hectare reserve. Traven is thought to have laundered much of
his earnings through real estate deals throughout Brazil.
A Reckoning: The Kimberley Process in Brazil?
¶5. (SBU) As a result of the arrests, the Ministry of Mines and
Energy (MME) suspended exports of all diamonds from Brazil and has
no immediate plans to recommence exports.  MME has also cancelled
certificates previously issued to Primeira Gema Comercio Importacao
e Exportacao Ltda. and Vivianne Santos Classificacao de Pedras
Ltda., the first and second largest exporters of raw diamonds in
Minas Gerais, and to Traven Comercio Importacao e Exportacao Ltda.
It does not plan to issue any new certificates in the near future,
according to Nahass. Meanwhile, Jose Eduardo Alves Martins has taken
over as the DNPM superintendent for Minas Gerais.  Nahass also said
that while the MME is proceeding with planning for its Kimberley
Review the week of April 24, a final date has not yet been
confirmed. Econoff asked whether the Kimberley Process in Brazil
would change as a result. Nahass, clearly bothered by the
implication, adamantly characterized the Kimberley Process as
working just fine, though in need of minor adjustments.  Nahass
could/would not elaborate on what shape those minor adjustments
should take.
Kimberley Certificate Number 64 to be Re-verified
--------------------------------------------- ----
¶6. (SBU) Nahass admitted that the MME will review the process by
which Brazilian Kimberley Certificate Number 64 was issued, since it
was certified by Luiz Eduardo Machada de Castro, the recently
arrested ex-DPNM chief. This particular Kimberley Certificate was
the focus of controversy when watchdog group Partnership Africa
Canada (PAC) enumerated irregularities with the certification of the
6876.92 carats worth of diamonds. Their report questioned, based on
geological limitations, how 100 hectares could yield such a large
weight of diamonds over the course of a reported seven days. The PAC
investigators concluded that the diamonds exported were not from the
Brazilian concessions, which they said were not operational and had
not ever been, but rather were from a completely unknown source.
Many of the actors involved, including Hassan Ahmad, were
participants in the deal. If any irregularities are revealed, said
Nahass, Brazil will issue an abject apology and assume full
responsibility. Luiz Eduardo Machado de Castro authorized and
certified a report refuting the PAC allegations.
¶7. (SBU) Despite Nahass' statement that the review will go forward,
Post fully expects the MME ultimately will postpone the April
Kimberley Review. Despite evidence to the contrary, MME appears to
be blind to the serious holes in its Kimberley Process system.  With
reported links to international terror groups, implications of blood
diamond trading, exploitation of Indian reserve land, and money
laundering, the recent arrests reveal a systemic corruption that
cannot be handled by unspecified small adjustments. Revealing,
however, is the review of Certificate number 64, which indicates
that the GoB is more than a little suspicious that its (and the
international community's) worst fears about their Kimberley Process
are true. The involvement of a GoB official only adds fuel to a
highly political fire. Post also expects that the GoB will soon make
specific requests through law enforcement channels for information
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from U.S. and European banks to further pursue investigation of the
money laundering aspect of this case. End Comment.

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