Via BusinessWeek, an interesting look at Mugabe’s bailout of a hedge fund investment in Zimbabwe:

At 6 feet 2, James McGee announces his military background through his bearing. His hair is now platinum, his shoulders often thrust back. Raised during the 1950s and ’60s in the shadow of the steel mills of Gary, Ind., McGee served in Vietnam, often sitting in the back of a World War II-era cargo plane stuffed with electronics. As a member of a U.S. Air Force intelligence unit, he listened through headphones for enemy signals or friendly distress calls so he could triangulate their positions. Almost four decades later, as the U.S. ambassador to Zimbabwe, he again found himself trying to make sense of signals in hostile territory.

In March 2008, McGee met secretly with a member of the political machine of Robert Mugabe, the president of Zimbabwe and Africa’s most notorious living despot. In 1979, Mugabe had led one of two guerrilla groups that liberated the former Rhodesia from a white-minority regime, a conflict that left an estimated 30,000 dead. Mugabe won democratic elections in 1980 but soon consolidated his power. He unleashed his North Korean-trained Fifth Brigade on a rival guerrilla force, killing an estimated 20,000, including thousands of civilians. The world was slow to react, but finally, in 2003, the U.S. levied sanctions against Mugabe and his cohorts, threatening any U.S. individuals or companies that backed them. By 2008, when McGee was ambassador, Mugabe and his ruling party had wrecked Zimbabwe’s economy and were on the brink of losing power.

McGee was deeply skeptical of his informant during their first meeting, but he found one of his tips plausible: The dictator was about to lose a first round of elections, and Mugabe knew it. The regime was cash-starved; its currency was virtually worthless outside the country, with Zimbabwe’s central bank printing money 24 hours a day. Inflation had hit an estimated 500,000 percent. The total value of all the currency in the economy was estimated at just $100 million. The election was five days away; defeat for Mugabe posed a viable threat to his rule for the first time.

The informant was right: Mugabe lost that first round to Morgan Tsvangirai. Two weeks after the loss, McGee spoke to the insider again. “He told us the regime was preparing for war,” he recalls. Mugabe’s men were setting up command centers for torture and killing in areas that voted for the opposition, the man told McGee, and regional party leaders like him were told to draw up lists of people to target. The ambassador learned that Mugabe’s government had landed critical funding, totaling $100 million, only days after the vote. The regime even provided hundreds of trucks and other vehicles to ferry militias to regions that favored Tsvangirai.

Reports of violence across the country soon poured into McGee’s embassy as Mugabe’s militias sought to punish opposition activists, drive their supporters from their homes, and intimidate the rest into backing Mugabe in the next round of elections. So he recruited the gardener at the ambassador’s residence in Harare as a body double and sent him out behind the tinted windows of the embassy limousine one dawn. Mugabe’s intelligence agents dutifully fell in line, on a parade to nowhere. About an hour later, McGee climbed into another limo and met diplomats from the U.K., European Union, and other allied missions waiting outside town.

They headed to an old sawmill turned torture center. There, in a local village and at two hospitals, McGee and his entourage, which included journalists, interviewed and photographed victims of the violence. Along the way, McGee barreled past Zimbabwean police trying to stop his tour. Finally, Mugabe’s security services blocked the ambassador’s convoy just outside Harare. When he and others refused to unlock their doors, citing diplomatic immunity, McGee says, some of the officers threatened to burn the diplomats alive in their parked vehicles.

McGee left his SUV and demanded the name of one threatening officer; the man retreated behind the locked door of his own vehicle. So McGee leaned on the dusty hood, pulled out his phone, and started taking pictures of the man through the windshield. “None of them turned out,” he says, “but he didn’t know that.” After about 90 minutes, the convoy was freed.

McGee had witnessed just a fraction of the violence aimed at swinging the second election, scheduled for June 27, 2008. In the weeks leading up to the runoff, there were thousands of casualties reported—and tens of thousands of refugees.

McGee wouldn’t find out for years, but as the attacks were unfolding, and as he worked with Washington to financially isolate Mugabe, a Wall Street consortium provided the $100 million for the dictator’s government. These millions secured the rights to mine platinum, among the most valuable of minerals, from central Zimbabwe. Several firms were involved in the investment, including BlackRock (BLK), GLG Partners, and Credit Suisse (CS). The most vital player was Och-Ziff Capital Management (OZM), the largest publicly traded hedge fund on Wall Street. An Och-Ziff spokesman declined to comment for this article. Now some of its African investments are at the center of an investigation by the U.S. Department of Justice and the Securities and Exchange Commission.
 
Och-Ziff, founded by Daniel Och in 1994, is a hedge fund titan, with an estimated $45.7 billion in assets under management. Large institutions such as the California Public Employees’ Retirement System, private foundations, wealthy families, and other fund management firms all put their money in its care. When Och took the fund public in November 2007, it became the foundation of a personal fortune estimated by Bloomberg to be about $3.7 billion.

In 2000, Och sent Michael Cohen, an American then in his twenties, to live and work in London. Cohen was a personal protégé of Och’s, according to testimony Cohen gave in 2010 in an unrelated London intellectual-property dispute involving the firm. In the spring of 2008, Cohen was in charge of picking and running Och-Ziff’s European and African investments, according to company filings and court testimony. Cohen declined to be interviewed.

An economics graduate of Bowdoin College, Cohen, according to an executive from another London hedge fund, was a cigar-chomping American who embraced a favorite pastime of English aristocrats—duck shooting. After a decade in the U.K., Cohen told the court, “I have forgotten a lot of my ‘American.’?” He also revealed that “approximately 50 percent of [Och-Ziff’s total] assets are invested outside the United States, and 40 percent of our investors are resident or based in Europe.”

London is a clearinghouse for investments in mining around the world, with about 140 mining companies currently traded on the AIM stock exchange. Many listed companies don’t make much money from actually taking minerals out of the earth. They exist mainly to explore for, or gain rights to, potentially lucrative minerals. Then they hope either to resell the rights for a profit or to get bought out by bigger mining or commodities companies.

The Central African Mining & Exploration Co., or Camec, was listed on the AIM exchange and wasn’t afraid of doing business in chaotic places. It attracted attention in the British press because its chairman was a retired English cricket star. But by February 2008, an Israeli diamond trader named Dan Gertler had negotiated the largest individual ownership stake in the company—almost 40 percent, to be held in family trusts. He forged a close relationship with Joseph Kabila, the former army chief and current president of the Democratic Republic of Congo, or DRC, and later amassed stakes in that country’s state-owned mining ventures, along with a fortune estimated by Bloomberg to be worth $2.5 billion.

A panel headed by former UN Secretary General Kofi Annan last year said the DRC, among the world’s poorest countries, lost about $1.4 billion when its government underpriced assets sold to Gertler. The businessman has denied any wrongdoing, and a London-based spokesman declined to comment for this article.

Not long after Gertler negotiated his stake in Camec, corporate records show, Cohen and Och-Ziff sought their own piece of the London mining company. It’s unclear just what brought Och-Ziff to the table, but a source familiar with its investment decisions, speaking on the condition of anonymity, says that Och-Ziff was primarily interested in Camec because of the DRC assets it was developing with Gertler. Attorneys representing Gertler say he played no role in bringing the hedge fund into negotiations to buy a piece of Camec. For its own part, Camec was looking away from the DRC and toward Harare.

Zimbabwe has few sources of foreign currency, but in March 2008, one asset it did have, platinum, hit a record $2,301.50 an ounce, almost doubling in six months. Some of the best of Zimbabwe’s platinum claims are along the southern tail of a narrow, 300-mile seam of ridges known as the Great Dyke. It’s one of the richest seams of platinum and related metals ever found. The English geologist Cecil Rhodes was the first to dream of exploiting the area’s wealth after he landed in southern Africa in the late 19th century with funding from bankers in the City of London. Ever since, companies with financing from the City and Wall Street have pursued wealth along the ridge.

Just weeks before the first round of elections in March 2008, Mugabe’s government took control of undeveloped platinum claims along the Great Dyke held by Anglo American Platinum (AMS:SJ), according to the company’s shareholder filings. (Anglo American is the world’s largest primary producer of the precious metal.) Then the government set out urgently to sell the rights.

Camec was ready to buy. It just needed money. It announced in March and April that it was privately raising about $200 million by selling ownership stakes, cash it said it would use to pursue “multiple investment opportunities available to the company in Africa,” besides funding its existing DRC operations. It didn’t specify what or where such opportunities may be.

Och-Ziff provided 75 percent of Camec’s total fundraising for the effort, or $150 million, corporate records show, making it the mining company’s fourth-largest shareholder. Camec raised the rest by privately selling much smaller stakes to BlackRock and 10 other companies, including GLG Partners and Credit Suisse, according to records obtained by Bloomberg Businessweek and interviews with other fund managers involved. Och-Ziff’s shares in Camec were issued on April 7, 2008.

Four days later, Camec announced it was using the money it raised to purchase a joint venture with the Zimbabwe Mining Development Corp., or ZMDC, Mugabe’s state-owned mining company. The joint venture owned the platinum stakes on the Great Dyke that had been taken back just a few weeks earlier from Anglo American. The price included $5 million in cash; Camec issued shares to partners whose identities were shielded by a shell company based in the British Virgin Islands; and $100 million to Mugabe’s government. Camec said the $100 million was a cash loan “to comply with its contractual obligations to the government of Zimbabwe” for the platinum claims. It said the money would be repaid out of ZMDC’s share of future platinum earnings. Camec’s balance sheets for the period make clear that funding for the platinum rights came from the private transactions involving Och-Ziff.
 
On the day Camec announced the deal with Mugabe’s government, two of McGee’s embassy employees were in the countryside gathering intelligence on Mugabe’s efforts to ensure his win. A lieutenant colonel in the president’s army told embassy staffers that soldiers, militia members, and ruling party backers loyal to Mugabe were training to conduct what he called a “reorientation campaign,” according to McGee and embassy cables. The lieutenant colonel also said 400 vehicles were being deployed to facilitate the operation.

Violence intensified throughout May. Soldiers drove opposition supporters out of their rural villages or urban neighborhoods. According to the United Nations Office for the Coordination of Humanitarian Affairs, more than 33,000 people were driven from their homes by month’s end. Hundreds turned up at the gates of the American Embassy. “These people were literally running for their lives,” McGee says.

The ambassador also began getting reports of the murder of opposition party activists: Men in Toyota pickup trucks without license plates abducted three members of the opposition’s youth group. Their bodies, two badly mutilated, were found over the next few days. An opposition leader named Shepherd Jani was abducted off a sidewalk in his town and pushed into a truck by four men. His mutilated body was found two days later. Such reports multiplied.

Mugabe denounced accounts of the violence as a “damn lie” in a newspaper he controlled. McGee was outspoken about what he found on his own tour of a few violence-stricken areas, so the same paper portrayed the U.S. ambassador, who’s African American, as an Uncle Tom for “White America.” No runoff election was held; the opposition leader withdrew from the race hoping his move would end the attacks. The U.S. Department of State estimated the violence left 289 dead and more than 22,000 injured.

Part of McGee’s job was to help identify sources of funding that had helped the regime stay in power so Washington could apply more targeted sanctions. The ambassador and his staff began to look into the platinum deal weeks after it was announced. His staff interviewed mining industry insiders and sent a cable back to Washington in June titled, “Rich Platinum Claims Change Hands in Hush-Hush Deals.” They didn’t know where Camec got the funding, but on July 25, 2008, the U.S. Department of the Treasury placed Camec’s partner, the state-owned mining company ZMDC, under sanctions.

Three days after Treasury acted, a public filing from Camec in London revealed that Och-Ziff was behind 75 percent of Camec’s private fundraising effort in advance of the platinum deal. It’s not clear what triggered the filing or why Camec didn’t make it sooner, given U.K. regulations requiring that it be done “without delay.”

By October 2008, McGee’s staff pursued a tip that a Camec shareholder, Muller Conrad “Billy” Rautenbach, was helping the government buy vehicles off the books. A Zimbabwean businessman named Raymond Tendai Chamba, who ran the local office of a Namibian export-import firm, alleges that Rautenbach and Mugabe’s central banker, Gideon Gono, placed orders for 642 vehicles with his company. They were mostly Isuzu (7202:JP) pickups, Toyota (TM) SUVs, and minivans. Chamba says the orders began coming in during the election period, and he was paid $65,000 in cash per truck. He claims Rautenbach paid mostly in U.S. dollars.

In November, after the orders had been reported by McGee’s embassy to Washington, the U.S. Treasury Department designated Rautenbach for sanctions, calling him a Mugabe crony. Rautenbach did not respond to phone and written requests for comment. Reached at a poultry farm he runs in Zimbabwe, Gono says, “As soon as I left the bank, I closed off my mind to anything that related to the bank’s business.” He says he doesn’t recall the platinum deal or any vehicle purchases.

Camec never disclosed precisely who in Zimbabwe got the $100 million it raised from Och-Ziff and others in London, nor did it identify its other partners in the platinum transaction. Former Camec Chief Executive Officer Andrew Stuart Groves hung up the phone this July before offering comment. A spokeswoman for Groves said the $100 million went “to a series of international creditors for a variety of commodities, primarily for seeds, grain, fertilizer, and fuel” and that the company “undertook appropriate due diligence” when it paid out the money. She also said Camec executives believed Och-Ziff was “aware of the profile of assets being considered” when it bought into the mining company. Although Camec called the $100 million payment a loan when it closed the financing in 2008, there are as yet no records of repayment. The platinum claims have never been mined.

Camec was bought out in 2009 for about $970 million by a much bigger company listed on the London Stock Exchange, Eurasian Natural Resources. That company, made up of a trio of Kazakh oligarchs in business with their country’s government, pulled itself off the stock exchange last November after corruption allegations caused its shares to plummet. (In a statement at the time of its delisting, Eurasian said it is cooperating with authorities examining the company and has not been “charged nor convicted of any wrongdoing.”)

On March 18, 2013, Och-Ziff announced Cohen’s departure from the firm, without explanation. Before Cohen left, he bought a $22 million English country estate outside London. Called Ewhurst Park, the more than 900-acre spread includes a sprawling main house, cottages, a church, a large lake with ducks, a boathouse, bridges, wooded areas, fountains, and formal gardens. Reached on his cell phone, Cohen declined to comment.

One year later, Och-Ziff warned shareholders that the Department of Justice and SEC were investigating the firm for, among other things, “investments by some of our funds, both directly and indirectly, in a number of companies in Africa.” The probe involves a statute against bribing foreign officials and “related laws,” the firm said, without elaborating. (Spokesmen for both Justice and the SEC declined to comment on their investigations into Och-Ziff.) The firm also handled investments for Libya’s sovereign wealth fund during the reign of the late Muammar Qaddafi, and a source familiar with the company’s operations said that business is also under investigation for possibly violating the Foreign Corrupt Practices Act. In July, Och-Ziff hired David Becker, the SEC’s former general counsel, as its chief legal officer.

Asked repeatedly when Och-Ziff first learned its money would fund the Zimbabwe platinum deal, a spokesman for the hedge fund firm declined to comment. Six different current and former hedge fund executives from other firms in London interviewed for this article said it’s unusual for fund managers to make a large private investment without knowing how the proceeds are to be used. Och-Ziff’s investment in Camec did not come with a seat on the mining company’s board.

On April 28, 2014, about six weeks after Och-Ziff disclosed the federal probe, it suffered the biggest daily drop in its stock price in almost five years when the Wall Street Journal reported that, starting in 2008, it had loaned a total of $284 million to two African ventures in the DRC controlled by Gertler. There was no indication these deals were among those under investigation. Through his lawyers, Gertler denies any wrongdoing in the DRC and “any allegation which might be understood to mean that our client was involved with or engineered an investment which potentially involved funds being used to promote the Mugabe regime in Zimbabwe.”

A tenuous power-sharing agreement between Mugabe and the opposition ended last year when Mugabe won new elections. The U.S. and others declared them rigged. American sanctions have been extended under President Obama. Mugabe, 90, is still in power.

McGee, the former ambassador, is now 65, retired, and living near Sarasota, Fla. When told Camec closed the funding transactions only nine days after Mugabe lost the first election, he’s outraged. “That’s how all the good work we do, or try to do, gets blown away in nine days,” he says. He vividly recalls the platinum deal, which was equal in value to the estimated total of all of Zimbabwe’s currency at the time—and, with Mugabe’s power in the balance, it couldn’t have come at a worse moment. He didn’t know a Wall Street hedge fund supplied most of Camec’s cash. “There’s just so, so many behind-the-scenes deals in Africa that the typical American has no idea about,” he says. A source familiar with Och-Ziff’s finances says the firm lost money on its Camec investment.