Egypt prosecutor alleges schemes by Mubarak

April 9, 2011

Egypt’s top prosecutor has notified the United States and other governments around the world that former president Hosni Mubarak and his family may have hidden hundreds of billions of dollars worth of cash, gold and other state-owned valuables, according to a document obtained by The Washington Post.

Prosecutor General Abdel Meguid Mahmoud wrote in the document that Mubarak and his sons, Gamal and Alaa, may have violated laws prohibiting the “seizing of public funds and profiteering and abuse of power,” using complex business schemes to divert the assets to offshore companies and personal accounts.

The claims spelled out in the document are the most sweeping to date against Mubarak, a strategic ally of the United States for three decades until he was forced from power in February in the wake of national protests and international pressure. The sum of the assets alleged to be appropriated by the Mubarak family — more than $700 billion — far exceeds earlier estimates and might be wildly exaggerated. Previous figures for the amount allegedly stolen by the Mubaraks range from $1 billion to $70 billion.

The 12-page document, written in Arabic and titled “Request for Judicial Assistance,” is intended to provide the legal basis under civil law to recover assets belonging to the Egyptian people. The copy of the document obtained by The Post indicates it was prepared in February 2011 but does not provide a more precise date. An Egyptian official in Washington said the request was sent to countries where the Mubarak family might maintain assets.

A legal representative has categorically denied to news service reporters the “ill-intentioned rumors” that Mubarak and his family had amassed enormous wealth while in office and hid it abroad.

The document mixes the credible with the questionable. Gamal Mubarak’s widely known role at one of the Arab world’s largest investment funds, EFG Hermes, has long fueled suspicion. But other statements appear to be supported only by hearsay witness testimony, secondhand news accounts, and, in two cases, by what apparently are fraudulent bank documents.

The U.S. Embassy in Cairo on Friday issued a statement saying officials were “vigorously pursuing all leads provided by the Egyptian Government with regard to freezing assets of former Egyptian officials. . . . We are meeting regularly with Egyptian Ministry of Justice officials to investigate any allegations that such assets have been deposited in the United States.”

A spokeswoman for the U.S. Justice Department, the agency responsible for recovering stolen assets, declined to comment on the document. A former federal fraud prosecutor said some of the claims made against Mubarak remind him of the allegations against deposed Philippines dictator Ferdinand Marcos in the 1980s.

“Some of this might sound far-fetched at the beginning of the investigation, but often it turns out to be true. The difficulty is in linking the assets to specific acts of corruption,” said Ted S. Greenberg, former chief of Justice’s anti-money-laundering section. “It was alleged that Marcos took huge amounts of gold out of the Philippines. He may have, but we never found it. He did take large amounts of jewelry. He took a steamer trunk of pearls — big pearls, little pearls, all kinds of pearls. The U.S. government seized it and it was ultimately returned to the Philippines.”

The document highlights the difficulty facing Egyptian prosecutors and a military council in responding to public demands that the Mubarak regime be held accountable after 30 years of rule. The murky nature of some of the allegations also may help explain why some governments — including the United States — have been unable or unwilling to act on the request to freeze or seize assets and accounts alleged to be held by Mubarak.

More than 70 people filed charges and the prosecutor cites testimony from eight people, including lawyers and human rights advocates. One witness produced a document alleging that Mubarak in 1982 deposited 19,000 kilograms of platinum bullion worth more than $15 billion into a personal account maintained by the Swiss banking giant UBS. The document provides a 19-digit account number, but a UBS spokeswoman called the document “a forgery.”

An Egyptian human rights group also produced documents listing $620 billion in bonds payable to Mubarak issued by “Barclays International Bank.” But a Barclays Bank spokesman in London said the bank does not refer to itself that way and the bonds sound similar to fraudulent ones posted on the Internet.

The prosecutor’s request also cites allegations that Gamal Mubarak used his position on the Egyptian central bank’s board to withdraw 75 tons of Egyptian gold held by the U.S. Federal Reserve. While the Federal Reserve does hold gold for other nations, the deposits and withdrawals are not public, a spokeswoman said.

The prosecutor also repeats unsubstantiated claims — which apparently were first reported in an Algerian newspaper, without documentation — that the Mubaraks owned property in Manhattan and Beverly Hills, Calif. The document also contains other allegations published in the Guardian newspaper.

The document portrays Mubarak’s sons as skilled businessmen who manipulated the country’s financial system, using offshore front companies to hide ill-gotten gains. It alleges that the Mubaraks “seized public monies and partnered with businessmen, investors, importers and exporters by force to realize profit without basis other than that they are the sons of the president.” The document also says the sons and their partners purchased “one of the debts of Egypt for 35% of its value and then collected the full 100% value from the Egyptian state budget.”

Other allegations came from Mamdouh Hamza, a civil engineering professor at Suez Canal University in Cairo and longtime Mubarak critic detained or put under house arrest several times for criticizing the government. Hamza alleges that Gamal and Alaa Mubarak siphoned off money from the sale of public assets, using front companies in Cyprus and the Cayman Islands to hide the wealth. Hamza gave the prosecutor documents that he claims show that the Mubarak sons worked closely with EFG Hermes, an investment bank listed on the Egyptian and London stock exchanges, to divert money out of Egypt.

Hamza gave the prosecutor details about one deal worth $84 million “with the Egyptian government through Hermes company in Egypt and transfer of 35% as commission or illegal bribes.” In an interview, Hamza said he did not have firsthand knowledge of any transactions and had relied on secondhand media reports and other publicly available information in making his claims.

Hermes chief executive Hassan Heikel is a former Goldman Sachs executive whose father was the longtime aide and spokesman for the legendary Egyptian leader Gamal Abdel Nasser.

In a statement, EFG Hermes denied any wrongdoing: “The firm has always operated under legal and transparent best practices that benefit the vital sector in which it operates.”

Hermes said that Gamal Mubarak’s only relationship with the firm was through his 18 percent stake in a Hermes subsidiary, EFG Private Equity, which accounts for no more than 7 percent of the parent company’s revenue.

In a recent interview with The Post, Hamza said he hopes the investigation recovers stolen assets. “It’s very difficult to say, but it’s billions,” he said. “My goal is to bring the money back. They have no right to take it.”

Robert O’Harrow Jr. is a reporter on the investigative unit of The Washington Post. He writes about law enforcement, national security, federal contracting and the financial world.
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