All the king's men: Who runs Mubaraks' money?

Ahram Online unravels one of the strings of the convoluted Mubarak fortune, starting with business stakes in a Cyprus-based company

Post Egypt revolution, the Mubarak family fortune, estimated at billions, can finally be pointed at and investigated without fear. Ahram Online reveals one source of Gamal Mubarak's wealth and shows that profits increased after Gamal became politically involved.
On 28 February 2011 the Egyptian daily Al-Ahram published a list of bank accounts allegedly belonging to Gamal Mubarak (younger son of ousted President Hosni Mubarak) and that the Prosecutor General received a report that Gamal deposited significant amounts into these accounts, which were not yet traceable.
The recent revolution in Egypt, whose people have risen up against corruption, among many things, prompted the Prosecutor General's decision to freeze all Mubarak family bank accounts, including those of Gamal Mubarak.
In comparison to the media's reports of the fortune that the Mubaraks accumulated the actual case against the Mubaraks is over trivial sums of money. The full network of assets, funds, shares and accounts will be no doubt tricky to assess, making it an unenviable task.
A search of all the Mubarak family-linked investment funds on the web always leads to a singular end: No information available.
Ahram Online's investigation, however, has unearthed a few key names and inevitabley leads to the largest investment bank in Egypt: EFG-Hermes.
Into Gamal's rabbit hole
EHPE denies giving Gamal the cookie
It all started when Gamal Mubarak left Egypt for London in the late 1980s to work at the Bank of America.
In 1996 he branched out with one of his colleagues, Walid Kaba, to start up a small investment banking operation: Medinvest Ltd, based in London, with small headquarters in Cairo and an initial capital of $54m, according to the transcript of an interview conducted with Gamal himself back in January 1999 as chairman of Medinvest Ltd.
“We started out in the field of corporate finance, which is very much related to the Middle East and Africa,” Gamal said in the 1999 interview with World Investment News.
He goes on to describe their fund, EFG Private Equity: “We have expanded in the past two years and we set up an office in Egypt. A year and a half ago we set up a private equity fund that is purely dedicated to Egypt, i.e. to invest in an Egyptian equity fund. This has been our main activity in Egypt in the past year and a half. The fund had an investing base from Egypt and the Gulf area… We have partners with us in the management fund EFG Private Equity.”
Medinvest, Gamal's company, is owned by a Cyprus-registered, Bullion Company Ltd, according to USA Today.
In early 2003 Bullion established EFG-Hermes Private Equity (EHPE) in partnership with Egypt's largest investment bank, EFG-Hermes, in which "Bullion owns a 35 per cent stake. The fund has $919 million under management, and invests in oil and gas, steel, cement, food and cattle," according to the EFG-Hermes website.
In a recent statement, EFG-Hermes themselves state that Gamal owns a stake in Bullion – a fact that doesn't appear in the Cyprus registry, which instead states that his brother, Alaa, sits on Bullion's board, since 1996.
In March 2010 Gamal Mubarak mentioned that he sat on EFG's board.
Ahram Online tried to ascertain from EFG-Hermes when exactly Mubarak sat on the board, to which Public Relations Manager, Heba El-Hamzawy responded in an email that the younger Mubarak was "never aboard member."
In an emailed statement to Ahram Online, EFG-Hermes denies Gamal Mubarak is a shareholder in any of the firm's local or foreign investment funds
The conflict between Gamal's television statement and EFG's denial leaves plenty of room for suspicion.
EFG comments on Mubarak's involvement by stating: "EFG Hermes Holding further notes that its relationship with Mr Gamal Mubarak is limited to his 18 per cent ownership stake in a subsidiary of the Firm, specifically, EFG Private Equity" the statement reads "This relationship began — and was made public — in 1997, before Mr Mubarak embarked upon his political career."
The investment bank further tries to distance themselves from the Mubaraks: "EFG-Hermes Holding does not manage any funds or portfolios for the family of the former president of Egypt"and even released a statement from its executives confirming that they have “no direct or indirect personal or financial ties to the former president nor to members of the former president's family, neither locally nor globally."
When questioned about Alaa Mubarak (the older brother) the investment bank refused to unveil or comment on his share in this subsidiary, or even if he had a share in any other.
However, the Cyprus Registry states that, logically, Alaa should have a stake in EHPE through his stake in Bullion.
Despite the investment company's efforts to distance themselves from the Mubaraks there is one additional tie binding Gamal Mubarak to EFG-Hermes: EHPE was managed by Gamal's chum and partner, Walid Kaba.
A Jordanian who holds British citizenship, there is a scarcity of biographical information publicly available on Walid Kaba. Indisputable, however, is that he was Gamal Mubarak's colleague in Bank of America, London, until 1996, when they both quit and started their own business: Medinvest. Kaba's relative, Saeed Kaba, runs Medinvest.
Significantly, Kaba is a non-executive member of the EFG-Hermes Board and currently serves as a Director of EFG Hermes Private Equity, according to its website.
Gamal finds favour from the Queen of Hearts committee
Gamal enters politics, and companies he's affiliated with report through-the-roof profits
In 2000 Gamal came to political prominence when he joined the ruling National Democratic Party (NDP), and in 2002, became head of its Policies Committee. Several businessmen and market-economy advocates joined the committee, including Ahmed Ezz, Rashid Mohamed Rashid, Youssef Boutros Ghali, all of whom are currentlyfacing corruption charges and Mahmoud Mohieddin, who is expected to be charged.
In February 2001 Bullion created a new fund: the International Securities Fund.
According to original documents filed with the Registrar's Office of the Central Bank of Cyprus, where it was established, it was recognised as an International Unit Trust Scheme, which invests in a diversified portfolio of international equities and bonds for income and capital appreciation.
Again, Kaba's and Alaa's names reappear.
The fund is managed by Bullion, where both Alaa Mubarak and Walid Kaba are board members. The fund had a minimum Initial Investment of $250,000, but an open maximum amount.
In December 2004 the then Egyptian Prime Minister, Atef Ebeid, and Minister of Communications and Information Technology Ahmed Nazif inaugurated the Technology Development Fund (TDF1), one of Egypt's first ICT venture capital funds focusing on early-stage financing and a strong public-private sector partnership. The fund was, again, managed by EFG-Hermes Private Equity (EHPE). Along comes Ideavelopers, another fund, which is also a subsidiary of EFG-Hermes Private Equity.
In 2005 just a few months after the appointment of the pro-business government, which included five of Mubarak junior's friends and business associates, another fund was established: Horus Food & Agribusiness Limited Partnership.
Horus Food & Agribusiness was created with an initial fund of $2 million - and was also based in Cyprus. The fund's members include Walid Kaba; Mohamad Taymour, currently chairman of Pharaohs Holding and, importantly, former chairman and a co-founder of EFG- Hermes; Hassan Heikel, CEO of EFG Hermes; Yasser El Mallawany, Chief Executive Officer of EFG Hermes and last, but not least, Gamal Mubarak on the board of directors and advisors.
The year 2005 saw a new privatisation era unfold, wherefrom Horus II and III benefited enormously: In 2005-2007 Horus II bought stakes in both Egypt's largest cement company, Suez cement, and Al Watany Bank of Egypt. Horus III bought a stake in Alexandria Mineral Oil Co. (AMOC), which it sold in 2008. Currently it invests in oil production, through Sahara North Bahareya Ltd, which requires that the government hold a stake in the company as well as authorisation from the oil ministry.
One trend stands out: Horus funds saw a legendary trajectory of growth and diversification.
A presentation by Vice Chairman & CEO Executive of Abraaj Capital Arif Naqvi May, 2006 (Funding the future private equity) in World Economic Forum in Sharm El Sheikh, shows that Horus Food & Agribusiness has in one year reached a fund size of $ 50.
In 2007, according to the website of EFG-Hermes,thecompany raised Horus III, which closed at $575 million. By 2008, the company launchedthe Technology Development Fund II (TDF II), which was launched with the size of EGP 215 million.
As of 30 June 2010 and through Horus I, II, III and Food and Agribusiness funds, EFG-Hermes have invested $524 million in 35 companies and achieved 25 exits with proceeds totaling $327 million, realizing gains of USD 146 million.
Horus III, a Cayman Island exempted limited partnership, is a stakeholder in Talaat Mostafa Group (TMG) as of end of 2010, according to EFG Hermes website. TMG was condemned for illegally appropriation of large plots of lands, which they developed at enormous profits, according to a final verdict of an Egyptian court.
Gamal, then, receives a share of the $146 million in profits as a stakeholder of the parent company, EHPE, and who knows how much from other subsidiaries.
To sum up: pre-governmental involvement, Gamal Mubarak acquires shares in a Cyprus-based company, Bullion, which de facto is the parent of many investment companies and funds. Some of which reported record profits after Gamal's entrenchment in Egypt's politics as the head of his father's treacherously monopolistic National Democratic Party Policies Committee.
What's wrong with this world, Alice?
Aren't all of these assets illegal? Isn't it illegal to marry business with government? Ahram Online asks an expert sitting on the committee, Legalists to Return Egypt's Wealth, formed during the 25 January Revolution to trace and recover Egyptian money embezzled at home and hidden abroad.
While Egyptian law bans ministers, as well as the president, from having ownership in businesses enterprises, it doesn't clearly criminalise the president's son for doing so, even if he's highly involved in politics.
"The law doesn't clearly prohibit anyone holding an official post, other than cabinet ministers and the president, from doing business" says legal expert and law professor at Ain Shams University, Hossam Eissa, "Yet, you can easily prove that he's made all this billions through illegal means."
"How could an NDP high official, like Gamal, make all these profits? The answer is that simple: He has clearly used his powers as the president's son," Eissa concludes.
Cyprus and Corruption
What's the connection?
Adding to the suspicions is the idea that if Mubaraks' money is legally earned, why establish companies in ill-reputed offshore islands?
Cyprus was the destination for some of Mubarak's business because in the last couple of decades Cyprus became a safe-haven for money-laundering operations and offshore companies by those wishing to escape paying taxes in their country, according to a study by leading academic, Jon Kofas titled “Human Trafficking and Cyprus” (2010).
Kofas' study is based on the common-knowledge premise that money vanishes in Cyprus: “With massive corrupt money on the island of Aphrodite...Cyprus began to raise its living standards as money poured in from nearby Arab countries.”
The American watchdog, Global Financial Integrity, estimated “illicit flows” in the developing world at $857 billion in 2009, increasing by 18 per cent from 2008, with an estimated $6.357 billion a year missing from Egypt.
The large sums amassed by the Mubaraks and other cronies in Arab countries, now swept by revolutions, is the reason why "Every year between $850-1000 billion disappears without a trace from developing countries, ending up in tax havens or rich countries," according to “Bringing the billions back: How Africa and Europe can end illicit capital flight,” by Eurodad (The European Network on Debt & Development).
Perhaps with a new government in Egypt corruption can be prosecuted for what it is, despite politicians who twisted the law in their favour.
(Additional reporting Michael Gunn and Bassem Abo Al Abass)