After investing LE20 million to renovate Studio Galal, Rafaat El-Mihi now faces possible imprisonment. So what is happening, asks Yasmine El-Rashidi When Raafat El-Mihi approached the government a few years ago about leasing Studio Galal, the government seemed happy to leap at the opportunity. El-Mihi's plan was to take the crumbling property and transform it. An agreement was reached. El-Mihi would lease the studio from the government for 20 years, cover the renovation expenses himself, and pay an annual rent of LE260,000. After the second year, the rental agreement would automatically be converted into a mortgage. Initially, the bank that had loaned the capital for part of the renovation agreed to pay 50 per cent of the annual rent, and that, one might suppose, was that. But four years and LE20 million later, the contract has not been converted, and a virulent press campaign has been launched against the director following the bouncing of 12 cheques that El-Mihi had signed. He allegedly owes two years outstanding rent which, with incidental expenses, now amounts to a debt of LE742,000. He now faces the possibility of a jail sentence. The viciousness of the press campaign -- "Pay up or jail" screamed one headline -- could well suggest a degree of orchestration. "Yes, my cheques bounced. Yes I didn't have the balance in my account at the time," El-Mihi says matter-of- factly. "But one has to look at both sides of the issue. I can't understand where people get their facts from, the papers are writing all sorts of things," El-Mihi told Al- Ahram Weekly as he produced photocopies of the relevant documents . "The agreement we reached was that I would receive a preliminary 50 per cent discount on the rent, which meant I would pay LE130,000, the bank would pay LE130,000 for the first year, and in October I would pay a further LE35,000, followed by monthly instalments of an agreed sum. I would also have to pay interest on any late payment," he explains. "But right from the start it was clear that they would try to create problems for me," he said of the holding company (Egypt for Sound and Light and Cinema). "Two months after I signed the contract I was told that I was liable for redundancy payments for outgoing employees, and I realised that the 50 per cent discount was not being factored in to the bills I was receiving. I also found out later that the land did not in fact belong to the holding company, but to the Higher Institute of Culture, which meant that conversion into a mortgage, necessary if I was going to be able to sell shares to outside investors, was no longer a possibility." At the time of the initial negotiations El-Mihi wrote out 12 cheques: LE130,000 for the rent of 2002 plus LE22,240 in interest; LE260,000 for the rent of 2003, plus interest of LE18,417; LE53,215 and LE8,396 for miscellaneous employee payments and an estimated LE100,000 of cheques to cover taxes, stamp duty and other payments. Post-dated, the first few cheques bounced earlier this year, which is when the holding company launched a court action. El-Mihi had expected renovation costs to come in at between LE10-15 million. In the end they reached LE20 million. "The place was an absolute dump," he says, taking out an album of photos taken at the time of the deal. They reveal a set of ruins: the crumbling walls, garbage-strewn grounds and water-damaged infrastructure reek with decay. "Of course I saw the condition of the studio and should have known at the outset about what I was getting into," El-Mihi says. "But they lied, they covered up things. When my engineers came in to begin work, we discovered that the entire infrastructure was a disaster. Ceilings that had been painted, and which looked fine, had no real supports. They were, basically, tied together. The water and sewage system was falling apart, as was the entire electrical circuit. I've actually left a part of the studio in its original condition as proof." The grounds now house a state-of-the-art production facility modelled with Moorish touches. The studios, offices, and labs curve around the grounds of the historic premises, at their centre a pool, and an umbrella-shaded seating area with palm trees and plants. "What this place has become is amazing," says Mohamed Hamed, a guard who has overseen the property for the last 20 years. "It was a tip before. You would have never imagined it could be turned into this. It stank and there were rats and there was garbage everywhere." The renovations, however, may eventually cost El-Mihi his freedom. "The LE20 million consisted of LE10 million in bank loans, and LE10 million raised on the basis of my name and reputation. When I wrote those 12 cheques there was money to cover them, but I had to keep drawing on the account to cover all the additional expenses I was incurring." While the press, for the most part, have lined up to denounce El-Mihi and, in a similar, less publicised, case, Karim Gamal El-Din, who leased Studio Misr -- they have been called thugs who deserve to be imprisoned -- others have raised an eyebrow at both the actions of the holding company and the apparent support for such actions from official quarters. "The privatisation of these studios is a good thing for the country. What El-Mihi has done is something positive, for the good of the people. He has invested in the country. Putting him in jail makes little sense," said one director who asked for his name to be withheld . "It looks like a dirty business. If El- Mihi does in fact get sentenced, the property goes where? It goes back to the holding company and the government." The Weekly tried on several occasions to speak with government officials involved with the case, and with the Egyptian Company for Sound and Light and Cinema. All requests for interviews were refused. Read the papers, was the usual response. "I've always been seen as problematic," El-Mihi says, referring to his bad boy of cinema reputation. "I've tackled issues deemed taboo and have provoked much heated reaction. When you look at what I've done to the studio, the LE700,000 over which they claim this is about is a fraction of what its cost, in terms of the financial investment, and of what its worth for the country." El-Mihi insists that, while the 12 cheques were not backed by the necessary funds, the complex web woven around his contract show that he was not only set-up, but conned. "It's clear they want me to fail," El-Mihi says, indicting the public sector. "They want this entire project to collapse so that they can point to the private sector and say 'you see, it's a failed endeavour and bad idea.' And the fact that I did all this to the studio with just LE20 million has only aggravated the situation. It has infuriated them. Renovation projects like this usually entail hundreds of millions, so there is a lot of money to be swindled. In my case I didn't give anyone that chance." El-Mihi has appealled against the charges and has presented the papers of the case to the new cabinet of Prime Minister Ahmed Nazif. The case is on hold pending review.
