/ 23 March 2007

Mob moves into Namibia

Senior members of the Italian Mafia have obtained an interest in Namibia's nascent diamond-cutting industry, using front companies to buy an existing but unused diamond-cutting and polishing licence, an 18-month-long investigation has revealed. Company documents show that the Italian criminal syndicate appears to have been aided and abetted in obtaining their licences by Sam Nujoma's youngest son.

Senior members of the Italian Mafia have obtained an interest in Namibia’s nascent diamond-cutting industry, using front companies to buy an existing but unused diamond-cutting and polishing licence, an 18-month-long investigation has revealed.

Company documents show that the Italian criminal syndicate appears to have been aided and abetted in obtaining their licences by former National Central Intelligence Services (NCIS) operator and self-described ”business consultant” Zackey Nefungo Nujoma, former president Sam Nujoma’s youngest son.

Two shelf companies — Avila Investments and Marbella Investments (Pty) Ltd. — nominally controlled by local lawyer CJ Gouws and Nujoma — are among the eight diamond buyers and 18 diamond cutters currently licensed by the ministry in terms of the Diamond Act (Act 13 of 1999).

Pietro Palazzolo — also known as Peter von Palace-Kolbatschenko — the brother of wanted crime boss Vito Palazzolo, was one of Avila’s directors, suggesting that there may be a hidden organised crime interest. Vito Palazzolo, often referred to as the Mafia’s banker, has been involved in massive money-laundering schemes, as well as drug smuggling and immigration fraud. He is currently being tried in absentia in Italy for money laundering and racketeering.

Nujoma has denied any know-ledge of any organised crime links to either Avila or Marbella.

Gouws said his firm had sold the off-the-shelf companies to Nujoma, who is listed as a geologist in the company records, and who wanted to use them to apply for unspecified mining concessions.

Full ownership of these two companies was subsequently transferred to a blind, off-shore company, Diamond Ocean Enterprises Limited, which is registered in the British Virgin Islands (BVI).

It is not known who ultimately controls Diamond Ocean Enterprises, as the BVI’s banking secrecy laws prevent disclosure in this regard. Several sources spoken to were of the firm opinion that the licence belonged to the alleged Mafia kingpin. ”It’s not Pietro, it is [Vito] Palazzolo himself,” one well-placed source said.

Nujoma denies knowing who Von Palace-Kolbatschenko really is and also declined to discuss who the real owners of Diamond Ocean Enterprises were. ”I do not have any reason to tell you … why should I tell you?” he said. He was also unwilling to meet this week to discuss the matter.

Shown documentary evidence of the link, Namibia Diamond Commissioner Kennedy Hamutenya confirmed that Avila and Marbella obtained their licences in 2005 by buying them from Mumbai diamantaire SN Sharma, the holder of one of the six initial Namibian licences issued under the Namibian Diamond Act (Act 13 of 1999).

But neither the names Pietro Palazzolo nor Peter von Palace-Kolbatschenko have appeared anywhere in the application forms filed by Nujoma in terms of the Diamond Act for transfer of the licences, Hamutenya said.

And as far as he knew, neither his office nor the Minister of Mines and Energy, Errki Nghimtina, had ever given any written approval for the transfer of control or ownership of the licence-holding companies to Diamond Oceans Enterprises, he said.

Sections 21 and 22 of the Diamond Act forbid the transfer of any diamond licence or controlling interests in companies or close corporations holding such licences without written permission from the minister. Transgressions of the law are met with a R250 000 fine and/or five years imprisonment.

Furthermore, the Diamond Act states that the minister shall refuse to issue any diamond licence to an individual or entity which, ”in the opinion of the Minister is or has been involved in activities relating to the unlawful dealing in or possession of diamonds”.

Extracts of company share registers obtained in terms of Section 113 of the Companies Act showed that Pietro Palazzolo, listed as a South African with Namibian residency, served as Avila’s director from November 29 2005 to June 2 2006.

Records show that Palazzolo resigned as director after 100% ownerships of Avila and Marbella were moved off-shore. Nujoma is currently listed as the only Namibian director in both Avila and Marbella Investments.

While Pietro Palazzolo appears to have a clean record, various public and confidential documents indicate that South African, Italian and American law-enforcement agencies consider him to be part of his brother’s operations.

Both Palazzolo brothers are known to be regular visitors to Namibia. Via their local unregistered Von Palace-Kolbatschenko Family Trust, they and Israeli diamantaire Gershon Ben-Tovim were at one stage partners in an ostrich venture on the farm Omburo-Sued, situated 30km west of Omaruru.

In 2002, workers at the farm said that various high-ranking government officials — including a top law-enforcement official — had over the years been regular visitors to Omburo-Sued, raising the question to what extent organised crime had penetrated the Namibian state.

Vito Palazzolo is also known to be currently shopping for a house in Windhoek’s more luxurious suburbs.

In 1997, a well-known Namibian businessman introduced the Palazzolo brothers and Ben-Tovim to a number of high-level contacts in the Angolan diamond industry, a source familiar with one of the trips to Angola said.

Any legitimate entry into the diamond industry would afford the ”Mob” a huge money-laundering opportunity, as the Kimberley Process of certification only covers rough diamonds, anti-corruption campaigning NGO Global Witness’s Alex Yearsley said.

Given that the Mob would be trying to ”clean” proceeds from organised crime, it could offer as much as 30% above the reigning market price for rough diamonds, Yearsley explained.

Angola remains the major source of illicit rough diamonds in the region, followed by the Democratic Republic of Congo. But because the Mafia would likely be looking to launder money through the purchase of diamonds, it would be willing to pay up to 30% more than the market price, making them very attractive as customers. The Angolan diamond industry is dominated by President Eduardo dos Santos’s daughter Isabella dos Santos, and international anti-corruption NGOs such as Global Witness and Fatal Attractions believe that Palazzolo has direct links to her.

Once rough diamonds have been cut, they would be virtually untraceable among the millions of carats of cut diamonds being traded internationally, Yearsley said.

FNB Namibia, through which Avila and Marbella have brought ”millions of US dollars” into Namibia from a bank in Hong Kong, said the Bank of Namibia had approved all the paperwork and there ”was nothing we could do”, according to its senior South African manager, Leonard Hayes.

Namibia’s diamond commissioner said that as far as he knew, only De Beers and their local associates in the diamond-cutting industry have been actively cutting diamonds. Any increased level of financial activity in either the Avila or Marbella bank accounts could therefore indicate money-laundering activity, he conceded.

Namibia’s Justice Minister and Attorney General Pendukeni Ithana-Iivula is still to table the Organised Crime and Money Laundering Bill, which would outlaw transactions where fronting is involved, in Parliament. Neither she nor her deputy, Uutoni Nujoma — Zackey Nujoma’s older brother — could be reached for comment in this regard.

Hamutenya made it clear that his ministry would not allow any individual to bring Namibia’s diamond industry into disrepute. ”The [Diamond Act] also allows for such a licence to be taken away — if they break the law,” he said.

The adventures of Vito Palazzolo

In 1998, Vito Palazzolo was convicted of money laundering by a Swiss court for laundering $28-million. The $28-million was a fraction of the proceeds of a $750-million drug-smuggling operation run by Palazzolo in the United States during the 1980s. The profits from the operation were laundered through a complex web of international bank accounts and front companies, Swiss prosecutors said at the time of Palazzolo’s conviction.

The Von Palace-Kolbatschenko name — a fake Russian aristocratic name — was adopted by Palazzolo in 1987 after he fled Switzerland to former South African homeland Ciskei. Palazzolo escaped while he was on 36-hour Christmas parole from a Swiss jail, where he was awaiting trial.

He was again arrested in 1998 at his luxurious La Terra du Luc farm in Western Cape on a Swiss extradition warrant, and eventually served a few months in a Swiss jail before returning to South Africa.

Since then, he has beaten various criminal charges, including lying about his original South African citizenship application and bribing two former New National Party politicians to approve a controversial golf-course development in the ecologically sensitive Plettenberg Bay area.

Captain Piet Viljoen, a detective with the Scorpions, testified in November 2004 that Palazzolo was considered to be the ”boss” of a mafia structure in Western Cape. The charge was denied, but Palazzolo remains under investigation in this regard.

Viljoen also testified in November 2004 that Palazzolo allegedly had links with Rashied Staggie, the Western Cape drug-lord now serving a sentence for various offenses. Palazzolo’s lawyer, former Gauteng attorney general Klaus Lieres von Wilkau, denied this accusation in court.

In 1998, the Institute of Security Studies’s organised crime expert Peter Gastrow wrote of Palazzolo in the African Security Review: ”A man of considerable wealth, the police found some R500 000 worth of diamonds, and documents indicating that he had invested more than R25-million in various companies in South Africa and Namibia.

”Palazzolo never ‘gets his hands dirty’ but is said to be a master at corrupting government officials, and is believed to have suborned an ANC Cabinet Minister, a security force general, a top immigration official and ‘many’ policemen,” according to Gastrow.