Stock market manipulation case: experts' report has shortcomings

Gains of all dealers of Al Watany Bank of Egypt deal deemed legitimate, says experts committee

After the Cairo Criminal Court ordered on Saturday to arrest the sons of former President Hosni Mubarak and Hassan Heikal, member of the board of directors of EFG Hermes, in the "stock market manipulation case", the report of the Experts Committee, obtained by Daily News Egypt, showed that dealers on the Al Watany Bank of Egypt deal have made their profits legitimately through making variable profits in light of the dates of buying and selling shares.
The report added that the National Bank of Kuwait (NBK) had alone borne the burden of these profits by offering EGP 77 for the acquisition. The court said the report of the panel of experts, which came in favour of the accused, was flawed and asked the committee to complete the report and postpone the hearing until 20 October.
The Cairo Criminal Court has ordered on Saturday the arrest of Gamal and Alaa Mubarak, sons of former President Hosni Mubarak, in the case dubbed as "stock market manipulation." The court also ordered the arrest of Ayman Ahmed Fathi Hussien, Yasser El Mellawani the former CEO of EFG Hermes, Ahmed Naeem Bader (now on the run), Hassan Mohamed Hassanein Heikal, a member of the board of directors of EFG Hermes, Gamal and Alaa Mubarak, Amr M El-Kadi, head of Investor Relations and Risk Management, and Hussein Al-Sherbini, managing director of Arab African Investment Holding, to the Criminal Court of Cairo, facing charges of obtaining EGP 2.51bn in violation of the law.
The committee received a letter from the defence of Ayman Fathi Hassan containing a copy of the speech of the NBK signed by the bank's unit head in Egypt and managing director Yasser Ismail Hassan dated 3 April, which explains that the business, funds, and activity of the bank were not damaged by trading its shares on the Egyptian Exchange (EGX) and acquisition through the compulsory purchase in November 2007.
The NBK had no relationship with any of EFG Hermes or Naeem Financial Investments on the acquisition prior to the letter of intent. It also had no violations regarding the operational procedures for the NBK's acquisition of the shares of the Al Watany Bank of Egypt.
The experts said that no crime could be proved against the defendant simply because they did not sell on 11 March 2007, the date of disclosing the letter of intent on the EGX and kept the shares until the transaction was fulfilled, as long as the procedures were healthy and in accordance with the law.
As for Hassan Haikal, one of the defendants who worked for EFG Hermes at the time of the deal, the report said that he did not hold any executive or non-executive position in the Al Watany Bank of Egypt, nor he was part of its board. Haikal did not buy or sell the shares of the bank during the inspection process. He also did not gain any personal benefit from Hermes dealing on these shares. The purchase for Horas 2 Fund was conducted by a brokerage company not owned by EFG Hermes. The inspection also showed that the fund did not conduct any transactions of the shares of the bank through EFG Hermes's subsidiaries in Egypt.
The report said that Gamal Mubarak has no transactions in his name on the shares of Al Watany Bank of Egypt on the EGX, adding that Yasser El-Malawany was not a member of the board of the bank when the decision of the investment committee at EFG Hermes to directly invest by buying shares of Al Watany Bank of Egypt in favour of a fund at the time managed by the EFG Hermes.
The committee said in its report that Alaa Mubarak confirmed in the investigations that he bought shares in the bank for his wife and in her name to take advantage of the banking reform process that boosted the banking sector, and was not based on any internal and substantial information.
The Cairo Criminal Court on Monday ordered the defendants to be held on charges of manipulating the stock exchange and accused the sons of former President Hosni Mubarak and Hassan Heikal.
The court said the report of the panel of experts, which came in favour of the accused, was flawed and asked the committee to complete the report and postpone the hearing until 20 October.
Sources close to the matter said that the decision was not expected after the positive report of the experts committee.
The Cairo Criminal Court has appointed a group of experts headed by Advisor Yahya al-Dakroui, a member of the board of directors of the Central Bank of Egypt, with the membership of Laila Al-Khawaja, member of the board of directors of the Central Bank of Egypt, Ahmed Kouchouk, deputy minister of Finance for Financial Policies, Mohsen Adel, EGX vice chairperson, and Reda Abdul Moaty, vice chairperson of the Egyptian Financial Supervisory Authority to conduct technical inspection on the defendants transactions on the EGX.
The former attorney general, Abdelmajid Mahmoud, referred Ayman Ahmed Fathi Hussien Soliman and his brother, Yasser El Mellawani, Ahmed Naeem Bader (now on the run), Hassan Mohamed Hassanein Heikal, a member of the board of directors of EFG Hermes, Gamal and Alaa Mubarak, Amr El-Kady, and Hussein al-Sherbini to the Criminal Court of Cairo accused of obtaining EGP 2.51bn in violation of the law.