Thursday,21 February, 2019
Current issue | Issue 1144, 18 - 24 April 2013
Thursday,21 February, 2019
Issue 1144, 18 - 24 April 2013

Ahram Weekly

Hard truths about stolen funds

Hopes of recovering assets smuggled out of Egypt by former regime officials remain dim, writes Hayat Yehia

Al-Ahram Weekly



Since the overthrow of the regime led by ousted former president Hosni Mubarak in the 25 January Revolution two years ago, many stories, or urban legends, have circulated about the corruption of the former regime and funds smuggled out of the country before and after the revolution.

While some of these funds may have left the country through legal channels, since the law allows transfers into and out of the country in accordance with the economic policies adopted by Mubarak’s predecessor president Anwar Al-Sadat, after the revolution there were many rumours of businessmen and former regime officials sending billions of dollars, or tonnes of gold and jewellery, abroad with the help of collaborators in the banks.

There were also rumours of assets being literally flown out of the airports with the alleged assistance of Ahmed Shafik, minister of aviation in prime minister Ahmed Nazif’s government, which was the last cabinet under the former regime. Mubarak chose Shafik to form a new government before he was toppled, and Shafik later became a frontrunner in the first presidential elections after the revolution, losing to the current President Mohamed Morsi.


HOW MUCH IS MISSING? Over the past two years, estimates of how much money was smuggled out of the country have snowballed, gaining several billion dollars at every turn with one final figure being reported in the media as reaching $5 trillion.

“This is a stupendous figure,” exclaimed Gamal Bayoumi, a former deputy foreign minister. “I don’t know how one would calculate it or even write it down.”

Gawdat Abdel-Khalek, a former minister of supply, agrees. Before he left his cabinet post when prime minister Hisham Kandil’s government was formed a few months ago, Abdel-Khalek told the press that “there are many exaggerations on this matter. The figure of $5 trillion is unrealistic. Egypt has a GDP of no more than LE1.25 trillion, so the country could never have lost this amount of money to smuggling.”

“The exaggerations of the value of smuggled funds have been caused by the government’s lack of transparency and the media’s inaccuracy in reporting information,” Bayoumi said, adding that the figure had become inflated after a report published in the US magazine Forbes after the revolution that put the wealth of Mubarak and his sons Alaa and Gamal at an estimated LE70 billion. 

An Algerian newspaper later estimated the figure at around $12 billion by converting the Forbes figure into dollars at an exchange rate of about LE6 to the dollar at the time. The British newspaper The Guardian then reported that the Mubarak family had assets worth $70 billion overseas.

Some writers in Egypt picked up on the story from these publications without taking the time to investigate the facts because of a lack of disclosure. One senior writer at a prominent national newspaper wrote an article based on these figures, and this was then disseminated by another journalist known for reporting fabrications at his own newspaper.

According to the article, EU Commissioner Catherine Ashton had reportedly said that Mubarak had stolen huge amounts of money from the Egyptians and that three-quarters of this money would be enough to solve the economic problems of the EU states, amounting to an alleged $5 trillion.

“Although I did not believe any of this, I asked Ashton about these statements and she denied she had said anything of the sort,” Bayoumi said. “I wrote to the writer in question, a great poet but not skilled in analysing political and economic issues, and told him what Ashton had said. But he did not publish a correction. Even worse, a member of the Shura Council used this mythical figure during a public debate on the issue about two months ago to prove his point that the funds must be returned to the country’s economy.”

Mohamed El-Fiki, chair of the Shura Council’s economic committee, said that anyone claiming to know the real value of the funds was a liar. But it is certain that during the interim phase after the revolution and until the new president was elected, there was an unprecedented amount of money-laundering and smuggling as people took advantage of the state of lawlessness to spirit funds abroad.


LEGAL MOVES TO RECOVER THE FUNDS: A law is currently being drafted to form a committee to take charge of retrieving the stolen funds because the committees created by the former ruling Supreme Council of the Armed Forces (SCAF), in power during the transitional phase, which were primarily chosen by the Illicit Gains Office (IGO) and the prosecutor-general, had focussed only on recovering Mubarak assets.

Al-Fiki said there were several things that needed to be decided regarding the new law, and as a result it had been referred to the council’s legislative and constitutional committee for further discussion.

Mohamed Mahsoub, a former minister of legal and parliamentary affairs, said the government’s draft legislation on recovering stolen assets called on the efforts of various agencies and both government and non-government bodies were working on the task.

At a meeting of the Shura Council’s legislative committee at the end of last month to discuss the draft law, Mahsoub suggested changing the name of the proposed committee to make it an authority instead, as stipulated by the constitution. He noted that creating an authority instead of a committee would reflect on the new body’s composition, since it would then not include civil servants and the president would appoint its chairman after the approval of the Shura Council.

The former minister proposed that the government should add an article to the beginning of the draft law clearly defining the nature of the assets to be targeted, as is necessary under the relevant UN treaty on stolen funds.

He further proposed that the authority should include three public figures, appointed on the recommendation of the authority chairman, saying that these figures would help ensure the independence of the new agency and ensure that it complied with diplomatic requirements. Mahsoub said that “what was stolen at night should not be recovered at night,” and added that people should be widely involved and represented by these public figures. He also suggested that the text should include a commitment by all state agencies to work at the behest of the new authority.

Deputy Justice Minister Omar Al-Sherif has rejected these proposals.

According to Masood Karimipour, regional representative of the United Nations Office for Drugs and Crime (UNODC) for the Middle East and North Africa, the UN supports the Egyptian government in building a legal framework for the recovery of stolen assets. “I have found a genuine determination to cooperate in recovering Egypt’s funds by the Egyptian minister of justice and the prosecutor-general’s office,” Karimipour said. “We cannot train the judiciary, which is very experienced, but we can provide them with experts to combat crime.”

Money-laundering was extensive before the revolution, and although Bayoumi believes that much of what is rumoured about smuggling funds after the revolution is untrue, he feels it will be difficult to prove that funds funnelled through banks before the revolution were stolen, and thus convince other countries to return them. The funds are likely to be seen as having left the country through legal channels, he said.

“None of us doubts Gamal Mubarak’s benefiting from the sale of Egypt’s debt while working at the Bank of America, which bought the debt in the first half of the 1990s with the help of the Central Bank at the time,” Bayoumi said. “But are there any records of the Bank, or Mubarak, trading in the debt? I doubt it.”

Abdel-Khalek echoed these sentiments when he told the press that “it is impossible to estimate the sums stolen by the former regime. It is very difficult to track these funds. The only way to do it is by tracking the flows of foreign currency into and out of the country according to balance-of-payment data over the past 30 years under Mubarak. This will tell us the volume of funds that should have accumulated and compare them with the foreign currency reserves.”

Bayoumi agreed with many former officials, some media people and many experts that pursuing the stolen funds could be like chasing ghosts and it could achieve nothing. “The outcome will be to have invested a lot of time and effort in order to retrieve a few thousand dollars,” he said, adding that the experience of other countries in recovering stolen funds had been largely unsuccessful. “In the Philippines, the country recovered little more than the 3,000 pairs of shoes owned by Imelda Marcos.”

Imelda Marcos, wife of Ferdinand Marcos who ruled the country between 1965 and 1986, was known for her extravagance. After the overthrow of Marcos, their wealth overseas was estimated at about $10 billion, and the president who succeeded Marcos formed a committee to recover the assets but was only able to retrieve $4 billion of them.

Yet, if the Philippines got Imelda’s shoes, Egypt has so far got nothing from its efforts to recover the stolen funds despite the high cost of doing so. According to Adel Omar, director of the Al-Masriyeen Centre for Political, Legal and Economic Studies, the price tag of the four committees tasked with this mission has reached the tens of millions of pounds and not a penny has yet been returned to the Egyptian treasury as a result.

Omar estimated the bill by adding together the cost of air tickets, hotels and food, and he now believes a feasibility study should be prepared on how to recover the stolen funds, especially since other countries had only ever been able to retrieve some 10 per cent of funds stolen from them.

While Minister of Finance Al-Morsi Hegazi, who succeeded Momtaz Al-Said two months ago, asserts that the details of recovering the funds is in the hands of the prosecutor-general and the IGO, he nonetheless denies that the cost of these committees has been as high as the reported LE500 million. However, he refused to reveal the actual cost.

Not reaching a satisfactory result in recovering the stolen funds was one reason for Mahsoub’s resignation from the cabinet in December. In his resignation letter, Mahsoub said that “I reached the unequivocal conclusion that many of the government’s policies contradicted my personal beliefs. I do not believe they represent the aspirations of the people after the great and honourable revolution for which such a high price was paid. These policies include the matter of retrieving the stolen funds, for which I had submitted a comprehensive plan. However, matters remained the same, with the whole issue in the hands of a judicial committee formed by the SCAF.”

“This committee has not achieved any tangible result, and it has been squandering the resources of the state of Egypt, undermining its stature in the eyes of the countries where funds from corruption were smuggled. It has also damaged its own credibility in the eyes of the public.”


LOCATIONS OF EGYPTIAN FUNDS:Many countries are believed to harbour assets in the name of former officials of the Mubarak regime, including Canada, Britain and Switzerland.

Britain froze assets worth 85 million sterling belonging to 19 Egyptians, most prominently the Mubaraks and their wives, as well as former ministers like former minister of trade and industry Rachid Mohamed Rachid and businessmen such as Ahmed Ezz, based on a decision by the EU Council of Ministers in March 2011.

However, disputes then erupted between the Egyptians and the British on the matter.According to the BBC, the Egyptian government filed a suit against the British treasury at the end of last year in order to try to force it to cooperate on the issue of frozen Egyptian assets in Britain.

The BBC quoted former IGO chairman Assem Al-Gohari as saying that the frozen assets division at the British treasury had not cooperated fully with Egypt. The division responded by saying that it could only freeze funds but not return them. Britain has accused Egypt of failing to cooperate in retrieving the funds, since an Egyptian delegation was expected to visit Britain to file a request for the recovery of frozen assets, as ordered by the Egyptian courts, but the Egyptian delegation cancelled the trip without giving its reasons.

Meanwhile, Switzerland has frozen 760 million Swiss francs belonging to several Egyptian figures, and Switzerland has cooperated with an Egyptian request to issue a law to assist Egypt’s efforts in the matter. Egypt took advantage of a Swiss law issued in 2011 that allowed Haiti to recover the assets of its former dictator, Jean-Claude Duvalier. This law has been amended according to Egyptian recommendations to accommodate Egypt’s case.

A few days ago, several Egyptian news outlets reported that Switzerland had placed the condition that a new prosecutor-general must first be appointed to replace the incumbent, Talaat Abdallah, before it will cooperate further. The new appointee should not have links to the Muslim Brotherhood, or any other political or religious party, and the Swiss have made this a precondition before initiating procedures to recover former regime funds or schedule payments.

Switzerland has also demanded that the Egyptian government and presidency not interfere in judicial affairs, after the EU and the US Congress, supported by Amnesty International reports and reports from other international human rights groups, reported human rights violations in Egypt.

WhileKamel Girgis, director of international cooperation in the prosecutor-general’s office, has said that there are many untruths surrounding this issue, Ahmed Kamal Abul-Magd, a legal expert and political activist, believes that Egypt’s disrespect for the judiciary may negatively impact the recovery of funds.

“Chaos and the rejection of court rulings make a negative impression overseas,” Abul-Magd said. “In this age of globalisation, we cannot just say that this is our money and we want it back and that the countries where these funds are located should stay out of our domestic affairs. Every country in the world today has an interest in other countries, and we cannot tell anyone that they don’t have any business in our internal situation. They will simply respond by saying that we will not see a penny of the money.”

Abul-Magd said that thecorruption in Egypt under Mubarak had been so extensive that it was impossible to determine its extent or the amount that had been smuggled overseas. “By looking at some of the cases of the firms that the government intends to settle with, I have concluded that corruption exceeded all limits,” Abul-Magd said. “For example, how could an Arab company have acquired more than 25,000 feddans of land at rock-bottom prices to build a project, regardless of the expected value and profit from the project?”

Accordingly, the country should prepare its case well, and this was likely to take a long time because of the current chaotic conditions in Egypt.


WHAT’S MY SHARE? If the Mubaraks’ assets alone add up to many billions dollars, and if funds stolen by corrupt officials and businessmen and others are added to them, what is the per capita value of the stolen funds?

This was the question on everyone’s minds after the revolution, especially among the poor and unemployed youth. In fact, some people even closely followed the figures given in the newspapers and on television, dividing them by the size of the population in order to find out what their share would be. Whenever estimates jump, hopes soar that each citizen’s share will also leap from the thousands to the millions or even the billions.

“It’s a silly game to fool the simple-minded who have nothing and are only looking to make ends meet,” as one prominent businessman said, though he was connected to the former regime and preferred to remain anonymous. “How could these funds, estimated at billions of dollars or Egyptian pounds, be smuggled out on small planes?  There is no way they could carry such sums.”

Some television channels have reported that funds were smuggled out through the airports after the revolution. Two months after the revolution, the privately owned Tahrir Television station aired video footage on a programme called “From the Square” anchored by Mahmoud Saad that allegedly showed armoured vehicles transporting locked bags in cars belonging to a money-transport company to a presidential plane at Cairo Airport.

There were also rumours that Egyptian business tycoon Hussein Salem, who has fled the country and is accused of stealing Egyptian natural gas and exporting it to Israel, sold his assets despite a freeze by the prosecutor-general and smuggled their value to Spain aboard one plane from Cairo Airport and another from Sharm El-Sheikh.

From the revolution until today, the government and citizens have been dreaming that part of Egypt’s stolen wealth will be recovered to shore up the budget and extract many from poverty. But more than two years later, nothing has so far been retrieved, and there is little on the horizon that supports such dreams and aspirations.

The 760 million Swiss francs will not fix the budget deficit, or resolve the problems of constantly rising poverty rates, or create jobs for the millions of young people who have been jobless since they graduated, or those who lost their jobs after the revolution because of the recession and diminishing growth rates, or those fired by private companies wanting to cut down on labour costs.

Unemployment rates have continued to rise since the first months of the revolution. Some 799,000 people joined the unemployment queues in the first quarter of 2011, bringing the number to 2.1 million jobless, and this figure continues to rise. Abu Bakr Al-Guindi, director of the Central Agency for Public Mobilisation and Statistics (CAPMAS), has recently said that the last quarter of 2012 witnessed a rise in unemployment figures to reach 3.5 million people without jobs. Tourism has been one of the worst-affected sectors, Al-Guindi said, along with construction, and he added that CAPMAS believed that unemployment had risen because of the lawlessness in the country that has impacted direct investment.

Al-Guindi told the press that the highest rate of unemployment was among those with a middle education at 54 per cent and higher education at 33 per cent.

The drop in revenues from tourism and direct foreign investment was the main reason foreign currency reserves had depleted to $13 billion last month, these once standing at $35 billion before the revolution. Such drops in reserves have led to a devaluation of the pound against the dollar by about 20 per cent since the beginning of 2013.

Meanwhile, the government is facing a constant budget deficit. The 2010-2011 budget deficit rose to LE130.4 billion, or 9.5 per cent of GDP. In 2011-2012, the deficit reached LE170 billion, or 11 per cent of GDP. It is expected to reach more than LE200 billion, or more than 13 per cent of GDP, during fiscal year 2012-2013 which ends in June.




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