Al-Ahram Weekly Al-Ahram Weekly
29 June - 5 July 2000
Issue No. 488
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Corrupt MPs suffer court fury

By Gamal Essam El-Din

Many observers were dumbfounded by the harsh verdicts handed down on Sunday by the Supreme State Security Court against 31 businessmen and bankers involved in the so-called "case of the loan deputies." Following a three-year, on-and-off trial, the court finally issued on Sunday the maximum penalty for 15 businessmen and 16 bankers. The jail terms range between one and 15 years. The defendants included four members of parliament from the ruling National Democratic Party (NDP). All were found guilty of three offences: the misappropriation of bank funds involving more than LE1 billion, profiteering and facilitating the illegal acquisition of public funds. The court also ordered that 10 of the 31 defendants be dismissed from their jobs in five banks.

Politically, it is expected that the harsh verdicts will thrust under sharp public scrutiny the increasing use of parliamentary immunity and political clout to make illegal profits. For their part, NDP officials emphasised that the list of party candidates for the November parliamentary elections will be carefully examined to ensure that wrongdoers are excluded.

The verdicts sent shock waves in business circles. Economic observers agree that the case was partially responsible for a liquidity crisis that recently hit several Egyptian banks. They also argue that the sentences may have negative long-term effects on investment prospects because banks are bound to become extremely cautious in financing the business community.

The court, explaining its reasons for the verdicts, said that "the 31 defendants resorted to a myriad of criminal acts and diabolical intrigues to secure the wicked purpose of plundering the financial deposits of several banks." The court furthered that 16 of the defendants constituted the largest criminal network that has surfaced in years and made use of their positions in five banks to provide a number of businessmen with hefty loans and credit facilities, without listing them in the banks' books or charging the 25 per cent commission set by the Central Bank of Egypt.

"These facilities were even provided without adequate collateral and for no clear purpose. Such grave malfeasance could lead to the loss of the greater bulk of bank deposits, the destruction of the banking sector and the collapse of the national economy as a whole," the court said. It added that it was stunned by the criminal practices to which the convicted businessmen resorted in order to plunder the banks' money.

"They embarked on establishing 18 companies, with the paid-up capital of each a few thousand pounds, simply to have the legal structure necessary to obtain hefty bank loans. For example, the Al-Namla Company for Real Estate Investments, established by defendants Yassin Aglan and Mohamed Elba, has a paid-up capital of a mere LE250,000 but was able to obtain LE22 million in loans and credit facilities," the court said.

These companies, the court found, did not serve the nation's economic, industrial or commercial interests. In some cases, forged documents were used in establishing some of them. The court urged the government, the Central Bank of Egypt and the legislature to cooperate in order to stiffen penalties for banking irregularities. "Some kind of insurance for bank deposits should also be introduced to safeguard the national economy against such highly dangerous malpractices," recommended the court.



Defendants from the "case of the century" await the verdicts
photo: Mohamed Atiya
The 31 defendants were classified into five categories. The first included two banking officials and one businessman. They were sentenced in absentia to 15 years imprisonment with hard labour. The three, who fled the country last year, are Aliya El-Ayyouti, vice-president of the Nile Bank, Hossam El-Manawi, executive manager of the Nile Bank, and Ashraf Labib, owner of the Egyptian Centre for Road Equipment.

The second category includes 14 defendants, six of whom are leading officials at the Nile, Mohandess and Daqahliya Banks, and eight are businessmen involved in construction and real estate activities. Topping the list of this category are three MPs. The first is Tawfiq Abdu Ismail, a former minister of tourism and civil aviation and NDP deputy for Dekerness district (Daqahliya governorate). Ismail is also former chairman of the Commercial Bank of Daqahliya and head of Parliament's Planning and Budget Committee. Second is Khaled Mahmoud, son of a former minister of local administration and chairman of the Egyptian Company for Construction Materials, and an NDP deputy for Rahmaniya district (Beheira governorate). The third is Mahmoud Azzam, grandson of Abdel-Rahman Azzam, the first secretary-general of the Arab League, and the husband of defendant Aliya El-Ayyouti. Azzam is the chairman of the Mohamadiya Contracting Company and NDP deputy for Al-Saff district (Giza governorate). This category also includes 87-year-old Eissa El-Ayyouti, chairman of the Nile Bank and father of Aliya El-Ayyouti. The 14 defendants were sentenced to 10 years in prison with hard labour.

The third category includes one businessman who was sentenced to five years in prison with hard labour. He is El-Sayed Hussein El-Kiek, board chairman of the Egyptian Company for Road and Paving Equipment.

The fourth category includes seven defendants, six of whom are businessmen and the seventh an official at the Suez Canal Bank. Each was sentenced to three years in prison with hard labour. The most prominent name on this list is Fouad Hagras, a former MP and current owner of fertiliser-trading company "Hagarpota."

The last category includes six defendants, five of whom are banking officials and the sixth a businesswoman. Each was given a suspended sentence of one year in jail with hard labour. These defendants are topped by MP Ibrahim Aglan, the NDP deputy for Edko district (Beheira governorate). This category also includes Mona El-Ayyouti. This third member of the El-Ayyouti family. is a professor at Cairo University's Faculty of Economics and Political Science.

Reactions to the verdicts were mixed. Shawqi El-Sayed, an appointed member of the Shura Council and defence lawyer for Mona El-Ayyouti, told Al-Ahram Weekly that he believes the verdicts will be a landmark in Egypt's political and economic history. "The case of the loan deputies is perhaps the case of the 20th century. I think the verdicts are solid proof that the government's crackdown on corruption is serious and genuine. More importantly, they provide assurances to ordinary citizens that officials, however high their posts, are neither above the law nor immune to trials and harsh sentences," El-Sayed said.

He pledged, however, to contest the verdict against Mona El-Ayyouti because "she has already paid back all the loans [plus interest] she had borrowed from the Nile Bank. In fact, the charges against her should have been dropped," he said.

In parliamentary circles, Fathi Sorour, speaker of the People's Assembly, announced that the verdicts against the four deputies did not mean that they would lose their parliamentary membership. "Parliament is now in a summer recess and I, in my capacity as speaker, am not empowered by the law or the constitution to drop the membership of any MP. I'm merely empowered to strip MPs of parliamentary immunity," said Sorour.

Ahmed Abu Zeid, leader of the NDP parliamentary majority, told the Weekly that he expects that the verdicts against the four NDP deputies would be exploited by the opposition to defame the ruling party. "But in fact, the verdicts are proof that the NDP can never be tolerant in dealing with such issues as the corruption of some of its members. The case also serves to underline President Hosni Mubarak's assurance that nobody in Egypt is above the law," said Abu Zeid.

Samir Tobar, chairman of the NDP's economic committee, told the Weekly that the verdicts are very harsh and could scare away many investors who will now hesitate before resorting to bank loans. "This could lead to more recessionary consequences on the market," said Tobar.

The case had passed through six stages until the court handed down the sentences. The Administrative Control Authority first exposed the case, implicating 32 persons, in January 1995. The following year, the four MPs were stripped of their immunity so that they could be investigated by prosecution officials.

The second stage began in April 1997 when the 32 defendants were put on trial before the Supreme State Security Court on charges of misappropriation of bank funds.

In stage three, beginning in November 1998, the chief investigating magistrate Mohsen Sobhi pressed two additional charges against the defendants. These were profiteering and facilitating the illegal acquisition of public funds.

The fourth stage, from June to September 1999, was climaxed by Sobhi's decision to take 15 defendants (including three MPs) into custody, and order the release -- with and without bail -- of 12 defendants. Four defendants (including MP Ibrahim Agaln) went out of circulation. One defendant, Mohamed Hussein Saleh, manager of the National Group of Tourist Investments, died in 1997.

The fifth stage was marked by the sudden death of Judge Hassib El-Batrawi of a heart attack only two days before he was scheduled to hand out sentences on 27 November 1999.

The sixth stage began with another circuit of the Supreme State Security Court opening new hearings in December 1999. These continued until April 2000 when Judge Nasreddin Sadeq decided to pass sentence on 25 June.

Relates stories:

Businesswoman faces extradition - 23 - 29 December 1999
New trial for 'loan deputies - 2 - 8 September 1999
More MPs behind bars - 12 - 18 August 1999
Judge gets tougher - 5 - 11 August 1999
MPs versus the judge - 29 July - 4 August 1999

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