Investigations of corruption in the banking sector have revealed that Banque Du Caire and Misr Exterior Bank are the biggest offenders by far. Gamal Essam El-Din reports Steel magnate Abdel-Wahab Qouta was released from custody on Sunday on LE20,000 bail. While investigations of alleged profiteering and graft by the heavyweight National Democratic Party (NDP) MP have been ongoing for three weeks, Quota was released after he claimed that it was actually his son, Mohamed Qouta, who should be investigated on the charges, and not him. Qouta has been prohibited from leaving the country and his assets sequestrated since 13 January, after prosecution authorities found that he had allegedly used his personal contacts with the former chairman of parliament's economic committee Abdallah Tayel, who was also the chairman of Misr Exterior Bank, to illegally reduce one of his company's debts to the bank. According to Qouta, the company is owned by his son Mohamed, who should thus be the one under investigation. Qouta is just one of several businessmen who are being investigated on charges of rampant banking fraud. The prosecution has concluded that it is the corruption and mismanagement of two banks -- Misr Exterior Bank and Banque Du Caire -- that have been responsible for the bulk of the country's banking fraud. Prosecutor-General Maher Abdel-Wahed has thus far barred as many as 25 bankers and businessmen from leaving the country in order to ensure their presence as investigations into corruption at the two banks continue. Meanwhile, on 16 January, the Court of Cassation finally endorsed a series of court verdicts that had been handed down in July 2002 to 31 businessmen and bankers at the end of the mega- banking fraud trial that was dubbed by the local press as "the loan deputies" case. The defendants were found guilty of profiteering and facilitating the illegal acquisition of public funds, as well as the misappropriation of bank funds to the tune of LE1.2 billion. The court handed down the maximum penalty -- sentences ranging from five to 15 years, all with hard labour. "Banking fraud is now Egypt's greatest economic blight, its biggest social disease and the major political challenge for the government," said Fayeqa El-Rifaie, an appointed MP and a former deputy for the governor of the Central Bank of Egypt (CBE). El-Rifaie, addressing a parliamentary meeting in which prime minister Atef Ebeid faced five questions on corruption in the banking sector, warned that corruption in general, and banking corruption in particular, has shifted, since the 1980s, from being a limited phenomenon to a scourge so widespread that it now forms a major channel through which social, political and economic resources are misallocated. In the Qouta case, the prosecution said Misr Exterior's Tayel allowed either the steel magnate, or his son Mohamed, to pay back a dollar- denominated loan against an exchange rate of $1/ LE4.27 instead of $1/LE4.61, the official rate set by the CBE at the time. Tayel, who has been in custody for three months now, is expected to face trial on four charges: providing a large number of businessmen millions of pounds in loans without receiving adequate collateral; misappropriating Misr Exterior Bank's funds in return for personal interests and hefty commissions; speculating on the Egyptian pound; and faking the bank's files and accounts in an attempt to cover up his shady practices. Prosecutor-General Abdel-Wahed also ordered the arrests of two Misr Exterior Bank senior officials on charges of collaborating with Tayel to issue false bank accounts in an attempt to reduce the debts owed to the bank by multimillionaire Tayseer El-Hawari. El-Hawari, another steel magnate, was detained for questioning on 9 January regarding over LE130 million in unpaid loans to the bank. Two private accountants have also been detained for 15 days on charges of preparing unrealistic valuations of the assets of three of the bank's big borrowers -- Magdi Yaqoub, El-Hawari and Mohamed El-Garhi -- to illegally help them obtain more credit facilities and reduce their debts to the bank. Investigations revealed that the corruption and mismanagement at Banque Du Caire is far worse than at Misr Exterior Bank. On 9 January, Abdel- Wahed ordered that Mohamed Abul-Fath, the former chairman of Banque Du Caire, be placed into custody for 15 days pending investigations on several corruption charges. Initial questioning by the prosecution has found that Abul-Fath, throughout his eight years in office (1991-1999), provided 37 businessmen with LE12 billion in unsecured loans. A parliamentary interpellation delivered by opposition MP Ragab Hemeida on 11 January claimed that this amount of unsecured loans accounted for 53.1 per cent of the credit facilities provided by Banque Du Caire over the last ten years. This, Hemeida added, was clearly in violation of CBE instructions that loans must not exceed 30 per cent of the bank's capital. Abul-Fath's arrest has exposed much of the corruption that has plagued Banque Du Caire over the last ten years. A case in point is multimillionaire Hossam Abul-Fotouh, who, prosecutors say, obtained LE1.7 billion in loans from Banque Du Caire even though he put up no more than LE680 million in collateral. Investigations also revealed that 40 per cent of the loans obtained by Abul- Fotouh were used in a completely different way than had been agreed upon. Prosecutors also claimed that Abul-Fotouh transferred a portion of the loans ($18 million and 1.5 million sterling pounds) into overseas accounts. Abul-Fotouh is being questioned by the Public Funds Prosecution on charges ranging from banking fraud and importing banned goods to possessing unlicensed communications equipment. The businessman defended himself by saying that he put up more than LE800 million in collateral, while he owes Banque Du Caire no more than LE250 million. On Monday, Abul-Fotouh was acquitted of the charge of dodging custom duties on alcohol. Banque Du Caire has also recently been the focus of heated parliamentary debates. MP Hemeida charged that Ahmed El-Baradie, the current chairman of Banque Du Caire, has done nothing to stem the tide of corruption since his appointment in February, 2000. Hemeida also claimed that El- Baradie did not have enough banking experience to qualify him for the post, and that his appointment was largely due to his connections with leading officials in the government and the ruling NDP. Prime Minister Ebeid vehemently denied these charges, calling them entirely unfounded, and warning that exaggerating about banking irregularities was not healthy for a country that had just begun to bounce back from an economic downturn. El-Baradie also defended himself by indicating that during his two years in tenure, he was able to recover LE1.5 billion in money that had been looted from the bank. He also revealed that Banque Du Caire had hired private investigation offices to help it chase down businessmen who had fled the country with the looted money. On his way back from Saudi Arabia last week, President Hosni Mubarak vowed that the government will never let "banking swindlers" enjoy the money they stole.
