Al-Ahram Weekly On-line 30 Nov. - 6 Dec. 2000 Issue No.510

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Rise and fall of a businesswoman

By Gamal Essam El-Din

Bankers in Egypt have had plenty of depressing news in recent weeks. The first disconcerting information was about three cases of bank fraud, involving millions of pounds. As bankers were reeling from the implications of these latest scandals, the Al-Maragha branch of the National Bank of Egypt (NBE) in the southern governorate of Sohag was struck by armed robbers. In total, the bank robbers got away with LE600,000.

Unlike the robbery of NBE in Sohag, which is the first of its kind in many years, the three fraud cases are only the latest in a series of such crimes to hit national banks in the last three years.

On 19 November, Prosecutor-General Maher Abdel-Wahed ordered Laila El-Far, the manager of Al-Shorouq Group (comprising 17 companies), remanded into custody for 15 days on charges which range from banking fraud to embezzlement.

The order to detain El-Far was issued immediately following the recommendation of the Administrative Control Authority (ACA) which warned that she was probably preparing to flee the country to escape LE267 million in unpaid debts to Al-Mohandis Bank and the National Bank of Egypt.

According to ACA's investigation, the prosecutor-general last March ordered that El-Far, along with businessmen Alaa El-Sayed and Mamdouh Ragab, be barred from travelling abroad and prevented from managing Al-Shorouq Group due to suspicion that they had participated in banking fraud and misappropriation of public funds. The prosecutor-general appointed Adel El-Shahawi, chairman of the Holding Company for Food Industries as a "public trustee" for the group of companies.

While the two businessmen abided by the prosecutor's order, El-Far disappeared completely after obtaining millions of pounds of Al-Shorouq's funds.

El-Far is the sixth businesswoman to be implicated in dramatic fraud cases during the last two years. Of the other five women, two fled the country with millions of pounds, two were imprisoned and one died with LE37 million in outstanding debts.

A graduate of Ain Shams University's Faculty of Law, El-Far began her working-life as a clerk for the Heliopolis District Council. Not long after assuming this post, she was dismissed, having been implicated in the embezzlement of LE16,000.

In 1996, she became an assistant to Sameh Ashour, the sole representative of the Nasserist Party in the outgoing parliament and a prominent lawyer who vied last summer for the chairmanship of the Bar Association. That same year, El-Far's parents died in the collapse of an apartment building in Heliopolis. Also in 1996, El-Far lost her investment in the El-Sherif Group which went bankrupt. This group of companies was engaged in the manufacture of electronics and plastics.

After having suffered two tragedies in such a short period, El-Far threw herself into work. Through Ashour's law office she became acquainted with Alaa El-Sayed, the son of a former housing minister, with whom she decided to establish Al-Shorouq as a joint-stock company. Al-Shorouq then set about purchasing the assets of El-Sherif Group in exchange for an agreement to repay the group's investors and a sum of LE170 million.

Although the goal of purchasing the assets of El-Sherif Group appeared noble, Al-Shorouq's owners had ulterior motives. El-Far and El-Sayed, through the intervention of former Prosecutor-General Ragaa El-Arabi, used the contract for purchasing El-Sherif to obtain a loan of LE200 million from the National Bank of Egypt. Having secured this loan, Al-Shorouq set about reimbursing El-Sherif Group's investors whose claims against the company were estimated at LE200 million.

However, a decision by Al-Shorouq to compensate investors in kind raised concerns that its intentions were not strictly above board. In the words of Abdel-Latif El-Sherif, who founded and owned El-Sherif Group, Al-Shorouq's El-Far and El-Sayed dramatically overstated the value of the goods with which they compensated investors. According to El-Sherif, "they [El-Far and El-Sayed] would buy a vacuum cleaner from a public sector company at LE395 and give it to the investor, claiming to have compensated them with a product valued at LE1,200." Investors were also forced to accept shares in the new Al-Shorouq company or lose their right to full compensation.

But this was not the extent of El-Far's bag of tricks. Later, she managed, with El-Sayed and another businessman by the name of Mamdouh Ragab, to obtain a loan from Al-Mohandis Bank, a joint-venture bank, to the tune of LE67 million. As collateral, the three used the assets of El-Sherif Group, which are valued at LE2.2 billion. It soon became apparent that Al-Shorouq's owners were much less concerned with paying back El-Sherif's investors than they were with using their ownership of its assets to manipulate others into forging deals with them.

Thus, El-Sherif Electronics Company, one of El-Sherif Group's member companies, was transformed into LG Electronics Company of Egypt which became the agent of the giant Korean LG Electronics Company that had previously bought out Samsung.

The Korean deal represented the peak of El-Far's achievements. When Maher Abdel-Wahed was appointed prosecutor-general in July 1999, replacing El-Arabi, El-Far began to suffer. The two banks of Al-Mohandis and NBE reported to Abdel-Wahed that El-Far used their loans for personal gain rather than to reimburse investors which had been the purpose she stated in her loan application.

Acting on complaints filed by the banks and many of El-Sherif's investors, Abdel-Wahed last March barred El-Far and her two business partners from travelling abroad.

However, the travel ban did not deter El-Far from allegedly embezzling millions of pounds from Al-Shorouq. El-Far's plans to flee the country, however, were foiled when the Interior Ministry's Public Money Investigation Unit arrested her along with El-Sayed and Ragab. Last week the prosecutor-general ordered that she be held for 15 days pending an investigation.

El-Far's detention set off alarm bells throughout financial circles once again about how bank loans are obtained and used. Prime Minister Atef Ebeid promised last week that a new bill aimed at strengthening the role of the Central Bank of Egypt in monitoring loans and credit facilities in general would be submitted to the newly elected People's Assembly.

Bank fraud is expected to top the new assembly's agenda in its first session. Ayman Nour, a Wafdist MP, told Al-Ahram Weekly, "Banking fraud is now an issue of public concern, especially as people have become frustrated by the periodic appearance of news items about fleeing businessmen." Nour said that when parliament gets under way, he will address an interpellation to Economy Minister Youssef Ghali regarding bank fraud.

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