Monday,23 October, 2017
Current issue | Issue 1307, (11- 17 August 2016)
Monday,23 October, 2017
Issue 1307, (11- 17 August 2016)

Ahram Weekly

A win-win deal?

The recent legal settlement with Mubarak-era business tycoon Hussein Salem has received mixed reactions, reports Safiya Mounir

Economy
Economy
Al-Ahram Weekly

He was the mastermind behind exporting gas to Israel at a cost to Egypt of at least $10 billion. He was also involved in money laundering, profiteering from selling electricity, and misappropriating public land. Meet one of ousted former president Hosni Mubarak’s closest allies, businessman Hussein Salem.

The 83-year-old tycoon who left Egypt soon after the 25 January Revolution has now reached a settlement with the Egyptian government under which most of the charges against him have been dropped in return for his paying LE5.43 billion, the equivalent of 75 per cent of his wealth, according to the Illicit Gains Authority (IGA).

Adel Al-Said, deputy justice minister for the IGA, said at a press conference last Wednesday that assets turned over by Salem under the deal included “eight villas in Sharm El-Sheikh, a hotel in the same resort, a golf course, a villa in Cairo, and other property, as well as a 24 per cent stake in a company.”

Salem also reportedly paid LE123 million in cash.

Alia Al-Mahdi, a professor of economics at Cairo University, said the announcement of a final settlement between Salem and the authorities was “evidence that the state is opening the door to reconciliation.” Salem’s is only one of several names linked to corruption cases during the Mubarak regime, and he was deeply involved in the export of gas to Israel.

“However, this act of reconciliation will not be enough to encourage new investors to pump in investment,” Al-Mahdi added, saying that there were still problems impeding new investment, among them instability in the currency markets, the difficulty of companies exiting the market when they wished, and problems with the new investment law.

Hani Tawfik, former chair of the Direct Investment Association, an investors group, shared Al-Mahdi’s opinion that the decision to reach a settlement with Salem indicated a desire to turn over a new page.

However, he wondered what the criteria used to assess Salem’s assets had been. “I thought his wealth was bigger than what was announced,” Tawfik said. “But what was got was still better than the state losing its claim if there had been no deal or if the suit had lapsed because of his death.”

According to data released by the IGA, 37 of 93 requests for reconciliation deals from businessmen, investors, Mubarak regime figures, and former public servants have ended in settlements since the legal amendments to regulate cases involving the misuse of public funds or illicit gains were introduced last year.

In March, President Abdel-Fattah Al-Sisi issued a decree amending legislation regulating reconciliation deals with investors involved in financial cases, followed by another decree in August amending the provisions of law 62/1975 on illicit gains.

According to the IGA, the state has reclaimed LE5.677 billion in settlements other than that of Salem.

In April, high-level judicial sources revealed that the IGA under Adel Al-Said had ordered investigations into businessmen Mahmoud Al-Gammal, an in-law of former president Mubarak, and associate Salah Diab to be closed after Al-Gammal paid the state LE238.7 million to account for any difference in the price of land he had received in a case regarding land in Giza.

Amr Adli, a political economist, criticised the settlement with Salem, saying that the latter was “a thief” who had built up enormous wealth by squandering state-owned gas and land.

“Reconciliation with him means undermining the rule of law,” Adli said, adding that the case had been conducted like tax-evasion cases, but the damage to the economy had been many times greater.

He said reconciliation deals should be reserved for investors who owned businesses in Egypt and wanted to maintain them and increase their investment. The state was right to reach settlements with investors in cases involving land prices, he said, since it was motivated by a desire not to harm the investment climate, but this standard did not apply to Salem.

Adli was critical of the settlement received by the state, which was in fixed assets instead of foreign currency which could have justified the reconciliation deal.

He said the state should have confiscated the assets concerned to redress the damage Salem had inflicted on the economy. The assessment of Salem’s assets should have been public and overseen by regulatory agencies such as the Central Accounting Authority, he added.

 

Previous judgements

• In October 2011, the Cairo Criminal Court sentenced Hussein Salem and his children Khaled and Magda to seven years in prison in absentia and fined them $4 billion on charges of money laundering from the proceeds of selling Egyptian gas to Israel.

• In March 2012, the Giza Criminal Court sentenced Salem and his son Khaled to 15 years in prison on charges of misappropriating public funds in the Bayadiya Island case. In the same case former prime minister Atef Ebeid and former agriculture minister Youssef Wali were sentenced to ten years in prison and one other defendant was sentenced to three years. The defendants were fined LE796 million and required to return an equivalent sum for a total of LE2 million. This judgement remains in force.
• In June 2012, the Cairo Criminal Court sentenced former oil minister Sameh Fahmi and Hussein Salem to 15 years in prison in absentia for profiteering and misappropriating public funds through the export of Egyptian gas to Israel. Five other ministry officials were sentenced to between three and ten years in prison in the same case. The defendants were collectively fined $2 billion and required to return $499 million.

• In September 2014, the Alexandria Criminal Court sentenced Salem and his children Khaled and Magda to ten years in prison, four other defendants to seven years in prison, and six other defendants to a year in prison (suspended) in a case involving corruption in electricity supplies. The defendants were collectively fined LE11 million and required to return an equivalent sum for a total of LE22.5 million.

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