Tag Archives: Ahmed Ezz

Egypt’s Mafia Fund

A private equity fund launched by Gamal Mubarak managed to reel in millions of dollars of investment from Egypt’s elite, revealing the depths to which political and business connections ran as he began rising in stature in the late 1990s.

According to a document obtained by Rebel Economy, Gamal Mubarak’s $54 million Horus I Fund, created in 1997, attracted some of the country’s most controversial businessmen including steel fugitive tycoon and Mubarak-confidante Hussein Salem, steel magnate Ahmed Ezz, who was acquitted in June after being charged with monopolising the country’s steel market, and the ex-CEO of Egyptian investment bank EFG Hermes, Hassan Heikal. Heikal is a defendant in an insider trading case involving both of the Mubarak sons. His former colleague, Yasser El Mallawany, who is still officially an employee of EFG, is another investor in the Horus Fund.

[caption id="attachment_2059" align="aligncenter" width="640"]Full list of investors who committed to Gamal Mubarak's fund Full list of investors who committed to Gamal Mubarak’s fund[/caption]

The fund, which was operated by EFG Hermes and invested in Egyptian projects and companies, attracted millions of dollars of investment from members of Egypt’s old guard, some of whom have been targeted in corruption cases since the fall of Hosni Mubarak in 2011. Although there is no evidence the fund engaged in corrupt activity, the connections between the people named as investors on the account has never been properly investigated by the Egyptian authorities.

The list of individuals and companies published above raises questions that have so far been left unanswered by Egyptian investigators.

The document, which details how much individuals and companies committed to the fund at the time of launch, also provides a window into the everlasting influence of Mubarak’s old guard and their long-standing ties to Gulf nationals in Saudi Arabia, Kuwait, the United Arab Emirates and Qatar.

It represents the beginning of Gamal Mubarak’s foray into private equity, where his financial interests in the Egyptian economy, from tourism to agriculture to oil, began to grow. The fund was created prior to Gamal’s entry into political life, when he acquired 18% of EFG Hermes Private Equity.

Among the handful of Gulf companies listed is First Arabian Development and Investment Company, run by Hamza al Kholi, a prominent Saudi Arabian businessman, and Yahya Al Yahya, the chief executive director of Gulf International Bank.

The ZAD Global Direct Investments Fund is also a notable appearance on the list. This investment company, founded by Prince Mishaal Al-Saud, second child of the Prince Abdullah bin Turki bin Abdulaziz Al-Saud in Jeddah is a privately controlled investment company, organized, owned, controlled and operated as the investment vehicle for the family of Prince Mishaal  for the purpose of managing the family’s investments.

Some businessmen have used clever ways to hide their investment activity. A company connected to Hussein Salem appears on the document. Clelia Assets Corporation, a Panama registered company, is linked to his name.

Salem fled Egypt in 2011 when he came under fire for tax evasion and his complicity in a corrupt gas deal.

Other controversial names on the list include Mohammed Abou El Enein, the chief executive of Cleopatra Ceramics, a major Middle East ceramics firm that has faced repeated labour strikes.

Abou El Enein, who once called himself “the noblest businessman on Earth”, was at one point under investigation for allegedly violating labour laws. Workers have staged sporadic strikes asking for improved working conditions and higher wages.

The fund is a worrying sign of how little progress Egypt has been made in defeating a tight circle of Egypt’s mafia, some of whom were subject to now forgotten corruption cases.

And now, there is evidence that some of Mubarak-era moguls may make a reappearance on Egypt’s political and business scene. Hussein Salem, who is currently exiled in Spain, has reportedly asked to make a deal with the interim government that would end any court cases against him. He has said he is presenting a new initiative to the interim government which includes funding for the unemployed in the tourism sector, as well as restoration of police stations, churches and mosques.

Hassan Heikal, who resigned from EFG Hermes earlier this year, has indicated that he will be acting in a consultancy basis to the Egyptian government. He has signalled he will offer ideas and launch new initiatives “that offer long-term solutions to Egypt’s fiscal challenges and economic development,” according to a statement he made when he resigned.

But the army has a strategy of its own. It’s interest is in preventing an examination of its own assets and business interests, which not only is likely to affect other investigations but focus on a shift away from Mubarak-era crimes toward the Muslim Brotherhood and the former president Mohammed Morsi.

So as the army continues its assault against the Muslim Brotherhood, journalists and civilians, the more these characters will disappear into the background, leaving them free to operate, uninterrupted.



Egypt Steel Tycoon Jailed, But Company Lives On

An Egyptian criminal court sentenced steel tycoon Ahmed Ezz to 37 years in prison yesterday for profiteering and squandering public funds and fined him 6 billion Egyptian pounds ($889 million).

Over the last two years, Ezz has morphed into a hate figure of the former regime, used simultaneously by the Egyptian courts to show it was getting justice done and by protesters as an example of the deceitful overlap between National Democratic Party of the former president and businessmen.

Ezz was charged with using his position as a leading official in the dissolved NDP to make illegitimate gains of about five billion Egyptian pounds. He received the harshest sentence yet.

He made several attempts to clear his name, and repeatedly denied any wrongdoing over the past two years, as Bradley Hope writes in The National:

He hired Qorvis, a lobbying firm based in Washington DC, to “promote democratisation in Egypt” and the need for a “transparent judiciary”, according to filings with the US department of justice.

“The allegations made against me are completely without foundation and are detrimental to my reputation and that of my family,” he wrote in an open letter on March 8, 2011. “I refute all of the allegations brought against me and I know that a fair and proper legal process would prove my innocence.”

But it is the rise of Ezz’s firm, Ezz Steel, into the country’s most powerful steel company that remains a controversy.  Even years before the uprising in Egypt, the company was subject to allegations of monopolistic behaviour, Hope writes.

Yet, the country’s main authority on this, the Egyptian Competition Authority turned a blind eye, and in 2009 ruled that it had not broken antitrust laws.

[caption id="attachment_1361" align="alignright" width="342"]Ahmed Ezz tried to side-step his ruling. Source: Egypt Business Directory Ahmed Ezz tried to side-step his ruling. Source: Egypt Business Directory[/caption]

Even as recently as August 2012, when Egypt’s General Prosecutor asked the ECA to look into the company again, it reiterated that it had not broken any anti-monoply laws

The company controls more than 50% of the Egyptian steel industry and has been linked to a number of cases suggesting it manipulated the market to gain a stronger footing, as this American University of Cairo paper details.  The removal of Ahmed Ezz from the company does not mean the same problems do not apply. 

Ezz Steel, aware of the accusations against it, dedicated a section of its website to the competition law in 2009, saying it is an “essential component” of the company. It said it had enforced its own compliance programmed before Egypt issued its 2005 competition law, saying this “is probably an international first”.

Probably. Perhaps not.

The company must be vetted again and this time by a stronger regulator who can uphold a rule of law. Without this, it is difficult to see how Ahmed Ezz’s court ruling has any long-term meaning for Egypt.