By NEIL MacFARQUHAR, DAVID ROHDE and ARAM ROSTON
Published: February 12, 2011
After Hosni Mubarak’s younger son, Gamal, left his job as an executive with Bank of America in London in the mid-1990s, he joined forces with Egypt’s largest investment bank. Today he has a significant stake in a private equity company with interests throughout the Egyptian economy, from oil to agriculture to tourism, corporate records and interviews show.
During President Hosni Mubarak’s nearly 30-year rule, he and his family were not flamboyant with their wealth, particularly by the standards of other leaders in the Middle East. While there is no indication that Gamal Mubarak or the bank were involved in illegal activity, his investments show how deeply the family is woven into Egypt’s economy.
Now with Hosni Mubarak out of power, there are growing calls for an accounting to begin.
Within hours of Mr. Mubarak’s resignation on Friday, Swiss officials ordered all banks in Switzerland to search for — and freeze — any assets of the former president, his family or close associates. In Egypt, opposition leaders vowed to press for a full investigation of Mr. Mubarak’s finances.
Tracing the money is likely to be difficult because business in Egypt was largely conducted in secret among a small group connected to Mr. Mubarak.
“Now we open all the files,” said George Ishak, head of the National Association for Change, an opposition umbrella group. “We will research everything, all of them: the families of the ministers, the family of the president, everyone.”
Estimates of the Mubaraks’ fortune vary wildly, including a widespread rumor that they are worth as much as $70 billion. United States officials say that figure is vastly exaggerated and put the family’s wealth at $2 billion to $3 billion.
Gamal Mubarak, who was being groomed to be the next president, and his older brother Ala’a, were considered major figures in the business elite.
Gamal Mubarak’s private equity business came through his ties to EFG-Hermes, the largest investment bank in Egypt. EFG-Hermes, which listed assets of $8 billion on its 2010 financial statement, was pivotal in Egypt’s privatization program, in which state companies were sold to politically connected businessmen.
The connection to EFG-Hermes reaches back to the mid-1990s. After Gamal Mubarak left Bank of America, he set up an investment firm called Medinvest Associates in London in 1996 with two partners. Medinvest, in turn, is owned by an international securities fund in Cyprus called Bullion Company Ltd. According to EFG-Hermes, Gamal Mubarak owns half of Bullion, and records in Cyprus show that his brother Ala’a is on the board.
Bullion owns 35 percent of the private equity operation, which has $919 million under management, according to the chief executive of EFG-Hermes, Hassan Heikal. The equity fund invests in oil and gas, steel, cement, food and cattle.
Mr. Heikal said that other than the private equity investment, Gamal Mubarak had no other ties “directly, indirectly, offshore or through family” to the bank. He said the fund constituted only 7 percent of the bank’s business. Questioned about the size of Gamal’s initial investment in the 1990s, Mr. Heikal declined to elaborate.
A spokeswoman for EFG-Hermes said in a statement that the bank “has received no special privileges or consideration from the Egyptian government and has always operated under legal and transparent best-practices.” Calls to Medinvest’s office in London and Bullion’s office in Cyprus last week were not returned. In the past, Gamal Mubarak has denied any wrongdoing and said he was involved in legitimate business activities.
For years, opposition groups have contended that since Egypt privatized its economy in the 1990s, the Mubaraks and a few dozen elite families have held stakes in the sale of state assets and in new business ventures. Later, some of these businessmen were appointed to government positions overseeing the very businesses they ran. Connections to the presidential palace brought benefits like the opportunity to develop government real estate and access to easy bank loans.
“The corruption of the Mubarak family was not stealing from the budget, it was transforming political capital into private capital,” said Samer Soliman, a professor of political economy at American University in Cairo.
Occasionally, members of the ruling elite who fell out of favor were suddenly convicted of financial corruption charges, but generally, the inner workings of the system have remained hidden.
One businessman who won government approval for various major development projects is Magdi Rasekh, Ala’a Mubarak’s father-in-law. Mr. Rasekh is chairman of the board of Sixth of October Development & Investment Company, which built one of a series of sprawling new developments in the desert outside Cairo. The government-backed development, Sixth of October City, is home to 500,000 people, an entirely new satellite city with an industrial park, a hospital, villas and middle-class apartments. Efforts to reach Mr. Rasekh were not successful.
As attention turns to tracking the Mubaraks’ purported wealth, rumors of vast real estate holdings by the family have swirled. But the only property outside of Egypt that has emerged is the London townhouse at 28 Wilton Place in Knightsbridge where Gamal Mubarak lived when he was an investment banker there.
But determining the precise ownership of the house shows why investigating the family’s wealth is complicated. A woman answering the front door of the house said the Mubaraks had sold it, but property agents said there was no record of a sale, and neighbors said they had seen Gamal Mubarak and his family entering it several times recently.
According to British records, the home is owned by a company called Ocral Enterprises of Panama. The registered agent for the company in Panama is a local law firm. A lawyer at the firm said that he could not reveal Ocral’s owner. The lawyer said his firm received its instructions regarding Ocral from a company in Muscat, Oman, which he declined to identify.
Though Swiss banks have begun the search for Mubarak family assets, experts said any money would be returned to Egypt only if its new government formally demanded them.
“Egypt has to run a criminal investigation,” said Daniel Thelesklaf, director of the International Center for Asset Recovery in Switzerland. “A lot will depend on the new Egyptian government.”
As the protest intensified last week, government prosecutors froze the assets of five government ministers and imposed a travel ban on them. The move appeared to be an effort by Mr. Mubarak to distance himself from the wealthy businessmen who had become the focus of public ire over corruption. It is unclear whether the military, which now runs the government and has vast business holdings itself, will allow a full inquiry into the Mubarak family’s wealth.
Perhaps the most difficult question to answer is the level of corruption involving Hosni Mubarak himself. Former American diplomats said he appeared to live relatively simply, particularly by the standards of rulers in the region. His main residence outside Cairo was a villa in a private compound in the Red Sea resort town of Sharm el Sheik, where he went after resigning the presidency on Friday. Diplomats said the villa was not particularly grand for the neighborhood, smaller than the nearby home of Bakr bin Laden, a member of the wealthy Saudi construction clan and a half-brother of Osama bin Laden.
Mr. Mubarak’s villa is in a compound developed by Hussein Salem, an Egyptian businessman and close friend of the former president. Mr. Salem pleaded guilty in 1983 to overcharging the Pentagon $8 million for shipping military equipment to Egypt. Despite the conviction, he prospered in Mr. Mubarak’s Egypt and heads a lucrative business that ships natural gas to Israel.
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