Mafia linked to Namibian gems

THE Sicilian Mafia, by using front companies to buy an existing but unused diamond cutting and polishing licence, has allegedly obtained an interest in Namibia’s nascent diamond cutting industry, an 18-month-long investigation reveals.

The licences were obtained with the apparent assistance of former National Central Intelligence Services (NCIS) operator and self-described “business consultant” Zackey Nefungo Nujoma, former President Sam Nujoma’s youngest son. Nujoma Jr has denied knowledge of any organised crime links to either of two off-the-shelf companies, Avila or Marbella.Avila Investments and Marbella Investments (Pty) Ltd – nominally controlled by local lawyer CJ Gouws and Nujoma Jr until recently – are among the eight diamond buyers and 18 diamond cutters licensed by the Ministry in terms of the Diamond Act (Act 13 of 1999).Gouws said his firm had sold the off-the-shelf companies to Nujoma Jr (listed as geologist in company records), who wanted to use themw to apply for unspecified mining concessions.He had not been part of any subsequent transactions, nor did he ever see the ‘Von Palace-Kolbatschenko’ name on any company documentation, Gouws said.The full ownership of these two companies, situated on the third floor in BPI House, Windhoek CBD, was subsequently transferred to a blind, offshore company, Diamond Ocean Enterprises Limited, registered in the British Virgin Islands (BVI), a popular tax haven.It is not known who ultimately controls Diamond Ocean Enterprises, as the BVI’s banking secrecy laws prevents disclosure in this regard.But the appointment of Pietro Palazzolo – also known as Peter von Palace-Kolbatschenko – as one of Avila’s directors suggests that a hidden organised crime interest in Diamond Ocean Enterprises Limited could not be excluded.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 claimed.Asked if he knew who Peter von Palace-Kolbatschenko really was, Zackey Nujoma expressed ignorance.He 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 not willing to meet this week to discuss the matter as he was on his way to Swakopmund.Nujoma Jr however later called again, disputed that Pietro was Vito’s brother and dismissed the Palazzolo’s organised crime link as “…an old CIA story”.Told of the evidence on hand, he threatened: “Go publish and see what happens.”Shown documentary evidence of the link, Namibia Diamond Commissioner Kennedy Hamutenya confirmed Avila and Marbella obtained their licences in 2005 by buying those of Mumbai diamantaire SN Sharma, one of the first six initial Namibian licences issued under the Namibian Diamond Act (Act 13 of 1999).Sharma had become “tired of waiting” for diamonds to become available from Namdeb, and had sold his buying and cutting licence to the Avila/Marbella outfit to recover his initial investment, Hamutenya said.But there had been no indication of Peter von Palace-Kolbatschenko’s name anywhere in the application forms filed by Nujoma Jr in terms of the Diamond Act’s Part IV for transfer of the licences, Hamutenya said.And as far as he knew, neither his office nor the Minister of Mines and Energy, Erkki Nghimtina, had ever given any written approval for the transfer of control or ownership of the licence-holding companies to the BVI company, he said.Sections 21 and 22 of the Diamond Act forbid the transfer of any diamond licence or controlling interests in companies or closed corporations holding such licences without written permission from the Minister, with a N$250 000 fine and/or five years’ imprisonment to be imposed in either transgression in case of a conviction.Furthermore, Section 16 (4) (b) read together Section 5 (g) states that the Minister shall refuse to issue any diamond licence that, “in the opinion of the Minister is or has been involved in activities relating to the unlawful dealing in or possession of diamonds”.(5.(g)).Extracts of company share registers obtained in terms of Section 113 of the Companies Act show that Peter von Palace-Kolbatschenko, listed as a South African with Namibian residency rights, served as Avila’s director from November 29 2005 to June 2 2006.He had replaced Marius Salamon, address given as Suite 310, Diamond Centre, Johannesburg, who with Nujoma Jr had been the first appointed directors of Avila after Gouws resigned as director.Salamon and Nujoma Jr were also the directors of Marbella Investments, records show.Salamon resigned from Avila shortly before Pietro Palazzolo was appointed, who in turn resigned as director after 100 per cent ownership of Avila and Marbella were moved offshore, records show.Nujoma Jr is currently listed as the only local director in both Avila and Marbella Investments.Using off-the-shelf companies is normal business practice.But Pietro Palazzolo is not a normal businessman, but the younger brother of Vito Palazzolo, who was in 1988 convicted of money laundering by a Swiss court for laundering about US$28 million.This was part of the proceeds of a US$750 million drug-smuggling operation in the United States during the 1980s, laundered through a complex web of international banks accounts and front companies, Swiss prosecutors said at the time.The ‘Von Palace-Kolbatschenko’ name – a fake Russian noble title – was adopted in 1987 by Vito Palazzolo after fleeing on a false passport to former SA homeland Ciskei while on a 36-hour parole in December 1986 from a Swiss jail, where he was held awaiting trial at the time.He was in 1998 arrested at his luxurious La Terra du Luc farm in the 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 on 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 South African crack Scorpions police unit, testified in November 2004 that Vito Palazzolo was considered to be the “boss” of a Mafia structure in the Western Cape.The charge was denied, but Palazzolo remains under investigation.Viljoen also testified in November 2004 that Palazzolo allegedly had links with Rasheed Staggie, the recently assassinated Hard Livings drug gang lord.Palazzolo’s consultant, former Gauteng Attorney General Klaus von Lieres und Wilkau, also denied this accusation on behalf of his client in court.While never convicted of money laundering or illegal diamond (or any other crime) in South Africa or Namibia, Vito Palazzolo is currently being tried in absentia in Italy on money laundering and racketeering charges.”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,” the Institute of Security Studies’ organised crime expert Peter Gastrow wrote of Palazzolo’s 1998 arrest in the African Security Review (Vol 8 No 6 of 1999).”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 ‘man’ policemen,” according to Gastrow.While Pietro Palazzolo a.k.a.Peter von Palace-Kolbatschenko appears to have a clean record, he is considered to be part of his brother’s operations by South African, Italian and American law-enforcement agencies, various public and secret documents show.Vito Palazzolo appears to often use his family as a front for his business interests: his son Christopher von Palace-Kolbatschenko was in 2003 charged by the South African police in connection with the golf estate scandal.Charges against the son were later dropped in a plea-bargain arrangement that saw another Palazzol
o associate, his friend the Italian Count Riccardo Agusta, pay an admission-of-guilt fine of R1 million, the South African media reported.Agusta, who was also embroiled in South Africa’s ongoing arms sales scandal for his role in selling 30 Bell-Agusta helicopters to the South African Defence Force, later bought La Terra du Luc and Palazzolo’s Plettenberg Bay properties from him.Both Palazzolo brothers are known to be regular visitors to Namibia and Pietro holds a Namibian residence permit, according to company documentation.His brother Vito is also believed to have the same legal status, but this could not be immediately confirmed.Via their local but unregistered Von Palace-Kolbatschenko Family Trust, they and Israeli diamantaire Gershon Ben-Tovim were at one stage partners in an ostrich venture (NACOCO) on the farm Omburo-Sued, 30 km west of Omaruru.Farmworkers there in 2002 said various high-ranking Government officials – including a top law enforcement official – had over the years been regular visitors to Omburo-Sued, raising the question as to what extent organised crime had penetrated Namibia.Vito Palazzolo is also known to be shopping for a house in Windhoek’s more luxurious suburbs.In 1997, both Palazzolos and Ben-Tovim were introduced to a number of high-level contacts in the US$9 billion a year Angolan diamond business by a well-known local businessman (name withheld), a source familiar with one of those trips said.Any legitimate entry to the diamond industry could afford the Mafia a huge money-laundering opportunity, as the Kimberley Process of certification only covers rough diamonds, anti-corruption campaigning NGO Global Witness’s Alex Yearsley says.Given that the Mafia would be trying to launder proceeds from organised crime, it could offer as much as 30 per cent above the reigning market price for rough diamonds, Yearsley explained.Once rough diamonds have been cut, they would be virtually untraceable among the millions of carats of cut diamonds being traded internationally, he said.The local commercial bank, through which Avila and Marbella 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.Namibia’s Diamond Commissioner said as far as he knew, only the licences issued to De Beers and their local associate companies have been active.Any high 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 in parliament, which law would outlaw such transactions (i.e.those where the real beneficiaries are hidden).Neither she nor her deputy, Uutoni Nujoma, could be reached for comment.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.* John Grobler is a freelance journalist; 081 240 1587Nujoma Jr has denied knowledge of any organised crime links to either of two off-the-shelf companies, Avila or Marbella.Avila Investments and Marbella Investments (Pty) Ltd – nominally controlled by local lawyer CJ Gouws and Nujoma Jr until recently – are among the eight diamond buyers and 18 diamond cutters licensed by the Ministry in terms of the Diamond Act (Act 13 of 1999).Gouws said his firm had sold the off-the-shelf companies to Nujoma Jr (listed as geologist in company records), who wanted to use themw to apply for unspecified mining concessions. He had not been part of any subsequent transactions, nor did he ever see the ‘Von Palace-Kolbatschenko’ name on any company documentation, Gouws said.The full ownership of these two companies, situated on the third floor in BPI House, Windhoek CBD, was subsequently transferred to a blind, offshore company, Diamond Ocean Enterprises Limited, registered in the British Virgin Islands (BVI), a popular tax haven.It is not known who ultimately controls Diamond Ocean Enterprises, as the BVI’s banking secrecy laws prevents disclosure in this regard.But the appointment of Pietro Palazzolo – also known as Peter von Palace-Kolbatschenko – as one of Avila’s directors suggests that a hidden organised crime interest in Diamond Ocean Enterprises Limited could not be excluded. 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 claimed.Asked if he knew who Peter von Palace-Kolbatschenko really was, Zackey Nujoma expressed ignorance.He 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 not willing to meet this week to discuss the matter as he was on his way to Swakopmund.Nujoma Jr however later called again, disputed that Pietro was Vito’s brother and dismissed the Palazzolo’s organised crime link as “…an old CIA story”.Told of the evidence on hand, he threatened: “Go publish and see what happens.”Shown documentary evidence of the link, Namibia Diamond Commissioner Kennedy Hamutenya confirmed Avila and Marbella obtained their licences in 2005 by buying those of Mumbai diamantaire SN Sharma, one of the first six initial Namibian licences issued under the Namibian Diamond Act (Act 13 of 1999).Sharma had become “tired of waiting” for diamonds to become available from Namdeb, and had sold his buying and cutting licence to the Avila/Marbella outfit to recover his initial investment, Hamutenya said.But there had been no indication of Peter von Palace-Kolbatschenko’s name anywhere in the application forms filed by Nujoma Jr in terms of the Diamond Act’s Part IV for transfer of the licences, Hamutenya said.And as far as he knew, neither his office nor the Minister of Mines and Energy, Erkki Nghimtina, had ever given any written approval for the transfer of control or ownership of the licence-holding companies to the BVI company, he said.Sections 21 and 22 of the Diamond Act forbid the transfer of any diamond licence or controlling interests in companies or closed corporations holding such licences without written permission from the Minister, with a N$250 000 fine and/or five years’ imprisonment to be imposed in either transgression in case of a conviction.Furthermore, Section 16 (4) (b) read together Section 5 (g) states that the Minister shall refuse to issue any diamond licence that, “in the opinion of the Minister is or has been involved in activities relating to the unlawful dealing in or possession of diamonds”.(5.(g)). Extracts of company share registers obtained in terms of Section 113 of the Companies Act show that Peter von Palace-Kolbatschenko, listed as a South African with Namibian residency rights, served as Avila’s director from November 29 2005 to June 2 2006.He had replaced Marius Salamon, address given as Suite 310, Diamond Centre, Johannesburg, who with Nujoma Jr had been the first appointed directors of Avila after Gouws resigned as director.Salamon and Nujoma Jr were also the directors of Marbella Investments, records show.Salamon resigned from Avila shortly before Pietro Palazzolo was appointed, who in turn resigned as director after 100 per cent ownership of Avila and Marbella were moved offshore, records show. Nujoma Jr is currently listed as the only local director in both Avila and Marbella Investments.Using off-the-shelf companies is normal business practice.But Pietro Palazzolo is not a normal businessman, but the younger brother of Vito Palazzolo, who was in 1988 convicted of money laundering by a Swiss court for laundering about US$28 million.This was part of the proceeds of a US$750 million drug-smuggling operation in the United States during the 1980s, laundered through a complex web of international banks accounts and front companies, Swiss prosecutors said at the time.The ‘Von Palace-Kolbatschenko’ nam
e – a fake Russian noble title – was adopted in 1987 by Vito Palazzolo after fleeing on a false passport to former SA homeland Ciskei while on a 36-hour parole in December 1986 from a Swiss jail, where he was held awaiting trial at the time.He was in 1998 arrested at his luxurious La Terra du Luc farm in the 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 on 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 South African crack Scorpions police unit, testified in November 2004 that Vito Palazzolo was considered to be the “boss” of a Mafia structure in the Western Cape.The charge was denied, but Palazzolo remains under investigation.Viljoen also testified in November 2004 that Palazzolo allegedly had links with Rasheed Staggie, the recently assassinated Hard Livings drug gang lord.Palazzolo’s consultant, former Gauteng Attorney General Klaus von Lieres und Wilkau, also denied this accusation on behalf of his client in court.While never convicted of money laundering or illegal diamond (or any other crime) in South Africa or Namibia, Vito Palazzolo is currently being tried in absentia in Italy on money laundering and racketeering charges.”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,” the Institute of Security Studies’ organised crime expert Peter Gastrow wrote of Palazzolo’s 1998 arrest in the African Security Review (Vol 8 No 6 of 1999).”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 ‘man’ policemen,” according to Gastrow.While Pietro Palazzolo a.k.a.Peter von Palace-Kolbatschenko appears to have a clean record, he is considered to be part of his brother’s operations by South African, Italian and American law-enforcement agencies, various public and secret documents show.Vito Palazzolo appears to often use his family as a front for his business interests: his son Christopher von Palace-Kolbatschenko was in 2003 charged by the South African police in connection with the golf estate scandal.Charges against the son were later dropped in a plea-bargain arrangement that saw another Palazzolo associate, his friend the Italian Count Riccardo Agusta, pay an admission-of-guilt fine of R1 million, the South African media reported.Agusta, who was also embroiled in South Africa’s ongoing arms sales scandal for his role in selling 30 Bell-Agusta helicopters to the South African Defence Force, later bought La Terra du Luc and Palazzolo’s Plettenberg Bay properties from him.Both Palazzolo brothers are known to be regular visitors to Namibia and Pietro holds a Namibian residence permit, according to company documentation.His brother Vito is also believed to have the same legal status, but this could not be immediately confirmed.Via their local but unregistered Von Palace-Kolbatschenko Family Trust, they and Israeli diamantaire Gershon Ben-Tovim were at one stage partners in an ostrich venture (NACOCO) on the farm Omburo-Sued, 30 km west of Omaruru.Farmworkers there in 2002 said various high-ranking Government officials – including a top law enforcement official – had over the years been regular visitors to Omburo-Sued, raising the question as to what extent organised crime had penetrated Namibia.Vito Palazzolo is also known to be shopping for a house in Windhoek’s more luxurious suburbs.In 1997, both Palazzolos and Ben-Tovim were introduced to a number of high-level contacts in the US$9 billion a year Angolan diamond business by a well-known local businessman (name withheld), a source familiar with one of those trips said.Any legitimate entry to the diamond industry could afford the Mafia a huge money-laundering opportunity, as the Kimberley Process of certification only covers rough diamonds, anti-corruption campaigning NGO Global Witness’s Alex Yearsley says.Given that the Mafia would be trying to launder proceeds from organised crime, it could offer as much as 30 per cent above the reigning market price for rough diamonds, Yearsley explained.Once rough diamonds have been cut, they would be virtually untraceable among the millions of carats of cut diamonds being traded internationally, he said.The local commercial bank, through which Avila and Marbella 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.Namibia’s Diamond Commissioner said as far as he knew, only the licences issued to De Beers and their local associate companies have been active.Any high 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 in parliament, which law would outlaw such transactions (i.e.those where the real beneficiaries are hidden).Neither she nor her deputy, Uutoni Nujoma, could be reached for comment.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.* John Grobler is a freelance journalist; 081 240 1587