Connect with us

Egyptian tycoon Hussein Salem, a symbol of cronyism

Hussein Salem, Credit Suisse, German

Economy

Egyptian tycoon Hussein Salem, a symbol of cronyism

Hussein Salem became a symbol of cronyism and corruption during President Hosni Mubarak’s three decades in power. Leaked bank data shows that he held accounts at Credit Suisse for years, even after public accusations of bribery and fraud.

For two and a half decades, the owner of account 750191 at Credit Suisse remained hidden.

Then, in 2000, German authorities managed to link the account to one of the biggest frauds in the country’s history. The owners of a drilling equipment maker called FlowTex had just been arrested for securing loans worth over 2 billion euros for gear they never made. Company records showed its co-founder had received over 4 million Swiss francs in possible kickbacks from the Credit Suisse account.

When investigators pressed Credit Suisse on its owner, the trail led them far away from Germany: The account was held by Hussein Salem, an Egyptian businessman with deep ties to the country’s ruling elite and intelligence establishment.

Already for years at that point, Salem’s name had been associated with major scandals and accusations of grand corruption, including charges of defrauding the U.S. government in the 1980s. In Egypt, his name would become a symbol of the cronyism and sweetheart deals that pervaded President Hosni Mubarak’s rule and drove many to take to the streets during the Arab Spring uprising of 2011.

Records obtained by German investigators showed that Salem had used account 750191 to pay millions of dollars in suspected kickbacks to FlowTex’s co-founder. They believed the payments were related to a deal to provide machinery for a refinery Salem co-owned in the Egyptian port city of Alexandria. But they did not pursue charges against Salem since their focus was on the FlowTex executives. Salem also never faced prosecution over the case in Egypt, where he had powerful friends.

Nor, apparently, did the investigation affect Salem’s ability to remain a Credit Suisse customer. Not only did account 750191 remain open for over a decade after the scandal, but its balance increased by tens of millions of Swiss francs in the three years after the German investigation.

The Suisse Secrets investigation, coordinated by OCCRP and based on a trove of banking data leaked to Süddeutsche Zeitung, has found that account 750191 was not the only account Salem opened at Credit Suisse. In total, he opened 11 more between 1983 and 2010. Several remained open in 2015, well after Salem was charged in multiple corruption trials in Egypt.

Spanish investigative documents also show that he actively used some accounts at the Swiss bank to transfer millions of dollars out of Egypt as the 2011 anti-government protests were under way.

The Suisse Secrets Investigation

Suisse Secrets is a collaborative journalism project based on leaked bank account data from Swiss banking giant Credit Suisse.

The data was provided by an anonymous source to the German newspaper Süddeutsche Zeitung, which shared it with OCCRP and 46 other media partners around the world. Reporters on five continents combed through thousands of bank records, interviewed insiders, regulators, and criminal prosecutors, and dug into court records and financial disclosures to corroborate their findings. The data covers over 18,000 accounts that were open from the 1940s until well into the last decade. Together, they held funds worth more than $100 billion.

“I believe that Swiss banking secrecy laws are immoral,” the source of the data said in a statement. “The pretext of protecting financial privacy is merely a fig leaf covering the shameful role of Swiss banks as collaborators of tax evaders. This situation enables corruption and starves developing countries of much-needed tax revenue.”

Because the Credit Suisse data obtained by journalists is incomplete, there are a number of important caveats to be kept in mind when interpreting it. Read more about the project, where the data came from, and what it means.

Salem has long been known to bank at Credit Suisse. The existence of account 750191 was reported when the FlowTex case came to light, and German journalist Meinrad Heck reported extensively on Salem’s account in 2011. But details of its activity after 1999, and the other accounts belonging to Salem and his associates, have not been made public before.

Credit Suisse declined to comment on specific questions about Salem. But in a statement it said it “strongly rejects the allegations and inferences about the bank’s purported business practices” of the Suisse Secrets investigation and that “actions have been taken in line with applicable policies and regulatory requirements at the relevant times, and that related issues have already been addressed.”

“The matters presented are predominantly historical, in some cases dating back as far as the 1970s, and the accounts of these matters are based on partial, selective information taken out of context, resulting in tendentious interpretations of the bank’s business conduct,” the bank said.

Read the bank’s full statement here.

Salem died in 2019. His former lawyer, relatives, and business associates did not respond to calls and messages seeking comment on the accounts.

Salem faced a reckoning after the 2011 Arab Spring protests deposed Mubarak, his longtime friend and benefactor. Corruption charges were brought against him in Egypt and he was convicted in absentia of profiteering and money laundering, among other charges, after he fled to Spain. The sentences included multiple prison terms and over $4 billion in fines, but they were mostly cleared after Salem struck a 2016 deal with Egyptian authorities to repay hundreds of millions of dollars to the state.

Salem’s Swiss assets were frozen after the Arab Spring revolt, although Swiss authorities have not said specifically what was frozen.

Arms Sales and Scandal

Born in Cairo in 1933, Salem came to symbolize the cozy relationship between business, politics, and family that characterized Mubarak’s Egypt.

After graduating from Cairo University’s Faculty of Commerce, he worked in a series of modest jobs at government-run agencies inside and outside Egypt while building up a network of his own companies.

In 1979, five years after opening his first Credit Suisse account, Salem moved to Washington, D.C., to serve as a trade official at the Egyptian embassy. The president at the time, Anwar Sadat, had just signed a peace deal with Israel that had redrawn the regional political map — and that was presenting new commercial opportunities.

The year he arrived, Salem founded a company called the Egyptian American Transportation Service Co. (EATSCo), which he co-owned with Thomas Clines, a former CIA agent. Despite having no background in the industry, the company won contracts reportedly worth tens of millions of dollars to ship American weapons bought with U.S. military aid to Egypt.

In 1982, the U.S. Department of Justice started investigating complaints that EATSCo was inflating costs by filing false invoices. Media reports mentioning Salem as the company’s owner appeared in prominent newspapers, though at first Egypt’s foreign minister denied any wrongdoing.

Despite the public furor over the investigation, Salem opened a second Credit Suisse account in January 1983, which at one point held 18 million Swiss francs ($13.6 million at the time), the leaked bank data shows. It appears to have remained open even after EATSCo pleaded guilty to false invoicing that July. U.S. media reported it had paid $3 million in fines to settle the case.

The investigation also showed that Salem had connections to Mubarak, who became president in 1981. Testimony from Clines, as well as later Egyptian media reports, linked Salem and EATSCo to Mounir Thabet — the brother of Mubarak’s wife — and Abdel Halim Abou Ghazala, a former defense minister who was serving as Egyptian military attaché in Washington. Clines later alleged that Mubarak himself had taken money in connection with EATSCo.

Salem went on to open new Credit Suisse accounts in 1985, 1986, 1989, 1990, and 1997, four of which were only closed after Egypt’s Arab Spring revolution, according to the data.

These would not be the last accounts he opened — and EATSCo would not be the last scandal he weathered.

Going With the Flow

In the years after the arms shipment scandal, Salem’s star continued to rise.

The tycoon’s assets expanded into sectors as diverse as tourism, energy, and real estate. According to a 2016 report by the Swiss watchdog Public Eye and the Egyptian Initiative for Personal Rights advocacy group, the defining characteristic of these deals was that “Salem made hundreds of millions of dollars without adding much value himself.”

Throughout his business dealings, Salem showed a clear fondness for Switzerland. In addition to Credit Suisse, media reports have linked him to accounts there with UBS and Raiffeisen. He also registered a Swiss company called Maska, which he used to co-found the Alexandria refinery that was later linked to the FlowTex scandal.

Salem set up the refinery, known as Midor, with the Israeli investor Yossi Maiman in 1994, then a few years later they sold off most of their shares to an Egyptian state-owned bank for a significant profit.

The year that sale began, 1998, Salem and his son went to southern Germany to meet FlowTex’s co-founder and CEO, Manfred Schmider. According to German investigations, the men discussed a 150-million-mark (more than $80 million at that time) contract for FlowTex to provide equipment for Midor. Soon after, account records from the investigation file show, Salem’s Credit Suisse account transferred about 4 million Swiss francs ($2.49 million at the time) to Schmider and then, once the contract was signed, he received about 8 million marks ($5.48 million) from FlowTex.

Court filings alleged Salem made the initial transfer to facilitate the contract’s signing and then received commissions on the deal. Schmider was sentenced to 12 years in prison over the FlowTex scandal in 2001.

Bank statements show that Salem’s account 750191 was very active throughout 1999, posting tens of millions of dollars’ worth of transactions, before ending the year with a negative balance of about $10 million. It is unclear why such a large negative balance was allowed.

The account hit a maximum balance of over 104 million Swiss francs ($79.3 million) in September 2003, according to bank data, three years after German authorities flagged its connection to the FlowTex scandal. Salem continued to open Credit Suisse accounts, adding another four in his name between 2001 and 2005.

Account 750191 remained open until March 2013 — after corruption investigations into Salem had been launched in Switzerland, Egypt, and Spain in the wake of the Arab Spring.

Romanian Assets

Documents obtained by OCCRP for a 2012 report show that shortly before the Arab Spring hit Egypt, Salem sold shares worth millions of euros in properties including a luxury shopping mall in the outskirts of the Romanian capital, Bucharest.

The documents revealed another connection to Credit Suisse: Specifically, they showed Salem had been using a Credit Suisse account set up in the name of his British Virgin Islands-based company, Jolie Ville Invest, since 1998.

A letter from Credit Suisse at the time of Salem’s 2002 purchase of the Romanian assets noted Salem’s company had been a client for years and their relationship had been carried out “in an impeccable manner.”

Documents show he used the Credit Suisse account to finance the Romanian business over the next two years.

The Great Gas Scandal

More than with any of these scandals, Salem’s name in Egypt came to be associated with a 2005 deal to sell natural gas to Israel through a company he owned called East Mediterranean Gas (EMG).

Under the contract, EMG would act as a middleman, buying Egyptian natural gas from a government agency, then selling it to Israel at prices later shown to be well below market rates.

Salem made a major profit selling a quarter of EMG’s shares for half a billion dollars to investors, including the American billionaire Sam Zell, in 2007. But the following year an Egyptian court ruled the prices had been manipulated and that the government had to stop exporting gas.

Once again, Salem’s name featured prominently in international press coverage. And once again, the banking data shows, he opened another Credit Suisse account two years later.

The prosecution was revived after the 2011 Arab Spring uprising, with several officials involved in the deal charged with manipulating prices and squandering public funds. But all were acquitted after testimony from top officials that the deal was done for purposes including supporting the peace process and funding intelligence operations for Egypt’s “national security.”

The ruling also noted that Salem had allegedly given Mubarak and his sons five villas in the coastal resort of Sharm El Sheikh as a “gift” in exchange for helping secure him lands to develop tourist resorts in the southern Sinai. The bribery charge was dropped, however, because the statute of limitations had expired.

None of these dealings appeared to affect Salem’s ability to make use of his Credit Suisse accounts. As documents would later show, he continued to use the accounts to move money right up to, and after, the Arab Spring protests that aimed in part to put an end to the corruption of which he had become such a potent symbol.

Shifting Assets Abroad

Soon after the Arab Spring hit Egypt, Salem fled the country, making his way to Spain, reportedly after stopping in Geneva. Egyptian authorities launched an investigation into Salem after Mubarak’s resignation, and in June he was arrested in Spain on money laundering charges.

The arrest warrant showed that on January 24 and 26, 2011 — just as the protests were beginning in Egypt — Salem’s family transferred 3.5 million euros ($4.65 million) from Egypt to an account at Credit Suisse.

Salem also used a Zurich-based Credit Suisse account to make 13 transfers to another Credit Suisse account in Boston, totaling $326,000, the warrant said. The purpose, it said, was “to hide and cover up the origin and nature of these funds and to hinder the discovery of those who committed the crimes of illicit enrichment.”

As Spanish authorities debated whether to extradite Salem, an Egyptian court tried him in absentia and sentenced him to seven years in prison and more than $4 billion in fines for profiteering and money laundering.

The exact fate of Salem’s Swiss assets at the time is unclear. Half an hour after Mubarak’s resignation, Swiss authorities published a list of figures linked to him whose assets they were freezing. Salem’s name was not on the list and was not added until September 2012.

Even then, the reckoning didn’t last.

In 2016, Salem struck a deal with Egyptian authorities to pay the state about 5.7 billion Egyptian pounds — around $640 million at the time — which was ostensibly equal to over three quarters of his total wealth. In exchange, charges against him were dropped. His Swiss assets were unfrozen in December that year.

According to the justice minister at the time, Salem carried out the reconciliation deal because he wanted “to die in Egypt.” But he apparently remained in Spain. In August 2019, he died in Madrid.

Research on this story was provided by OCCRP ID. Data expertise was provided by OCCRP’s Data Team. Fact-checking was provided by the OCCRP Fact-Checking Desk.

Contents published under this byline are those created by the news team of BLiTZ

Click to comment

Leave a Comment

More in Economy

To Top
%d bloggers like this: