Hussein Salem established a huge petroleum company in Alexandria, and borrowed millions of Dollars for it from Egyptian and foreign banks, then sold it in thin air before it started operating. He monopolized contracts for supplying it with electricity and water. This, in short, is the story of the Middle East Oil Refining Company (MEDOR), whose name was connected for a very long time with Hussein Salem.
The above information may not carry anything new after it was published in many media outlets, and after it was revealed by the late writer “Majdi Mhanna” in his column, “About the Prohibited”. But what is new here is what documents from the British Commercial Register reveal, explaining the relationship between Maska, Hussein Salem’s economic giant in Switzerland, and MEDOR, established with a capital of $1.3 billion in 1994.
The deal came about for the purpose of normalizing relations with Israel, and represents half the capital from the Egyptian side. The other half belongs to the Israeli side, represented by MIRHAV company. The Company project, which includes a crude oil refinery whose products are to be exported, and the construction of the necessary pipelines for the project, was financed by some Egyptian and foreign banks through huge loans.
Documents published by Al-Ahli Bank mention that Hussein Salem established MEDOR Electric Company (MEDELEC) with some banks and companies to be the sole provider of electric power to NEDOR oil refining company, in addition to another company to supply it with water. What draws attention is that the documents establishing MEDELEC show that the objective of establishing it is servicing MEDOR only, which means that it monopolizes the service provision to the mother company.
Information floating around the Egyptian financial market shows that the ownership of Hussein Salem and his group, composed of his family, represents the whole Egyptian share since the Company was established in 1994, including the sale, which was completed in 2002. There is a study, however, that was published by the Arab Center for Studies, titled “Israeli Investments in Egypt,” referring to Maska, as owning 20% of MEDOR, but did not mention that Maska is owned by Hussein Salem, or that it is a Swiss company.
Financial operations in Europe ad the United States are characterized by more transparency, controlled by the law. If this transparency was not available regarding Hussein Salem’s deals in Egypt, data maintained in Western records do not completely conceal information regarding companies established on its soil. This was the thread that led us to search in information networks, and to buy 15 documents from the American LexisNexis site, specialized in financial data of companies around the world. These documents tell the details of deals concluded on MEDOR’s shares.
New documents obtained by Al-Masry Al-Youm say that the Public Petroleum Commission of Egypt bought 20% of MEDOR’s capital for the price of $1200 per share at the end of 1999. It was then decided to increase the Commission’s share to 60%, reducing Hussein Salem’ and the Israeli shares down to 40%, divided equally, so that each one of them owns 20% only.
The year 2000, represented the dividing point in selling MEDOR. Hussein Salem’s group sold 18% of its share to the Egyptian Al-Ahli Bank at $4300 per share, when its real share was $1200 less than one year before, according to the previous deal which was completed with the Petroleum Public Authority.
A simple mathematical operation would tell you that the share value increased at the rate of 360% within a short period of time, although the Company had not actually started operating. MEDOR documents and balance sheet, obtained by Al-Masry Al-Youm emphasized that it started operating in October 2002.
Going back, the same documents published by LexisNexis asserted that the acquisition deal by Al-Ahli Bank of 20% of Israeli MIRHAV’s share in MEDOR in 2001 came as a result of MIRHAV’s desire to sell its share, and was looking for a buyer, and not the result of an initiative from Al-Ahli Bank, as was circulated at the time. The sale deal was completed for $4300 per share in July 2001.
The documents provide the smallest details about three deals completed on MEDOR, numbered (1189789040), (1191512040) and (594939040).
The big surprise, however, was revealed by the documents, which show that these deals were concluded at the Stock Exchange on July 13, 2001, which happens to be a Friday, at the time when the Egyptian Stock Exchange was closed, which shed doubt and suspicion on the secret behind concluding these deals, and the pressure exerted on the Stock Exchange’s management at the time to pass them.
Al-Masry Al-Youm tried to reach one of those responsible for concluding the MEDOR deals at the Stock Exchange. We succeeded weeks later I identifying three brokerage financial securities firms, among which was Al-Ahlia Securities Brokerage, an affiliate of Al-Ahli Bank, and HC Securities Dealing Company, in addition to another company we could not reach.
None of the former officials had enough courage to talk publicly about his testimony regarding suspicions about the MEDOR deals. One employee who was involved in the deals agreed, with great difficulty and many attempts to talk to Al-Masry Al-Youm, but the arrangement failed because he was worried about the political situation and the sensitivity of his position in the marketplace.
At the beginning, he refused to mention his name against divulging the most sensitive details regarding one of the deals he attended.
The source, whose name is known by Al-Masry Al-Youm emphasizes that between 3 and 5 deals were concluded on the shares of MEDOR during the period 2000 to 2002. He adds: “I used to work for one of the companies that concluded one of the sales deals to the Israeli MERHAV company in favor of Al-Ahli Bank.” The deal was concluded at the stock exchange at exactly 5 o’clock, or hours after closing. It was concluded on a Thursday (he did not mention a date). Dr. Sameh Al-Turujman was the head of the Stock Exchange at the time. He expressed his objection to concluding the deal because the file was not complete, and because it was to be concluded in the “Parallel Deals” parallel market (which is not subject to the supervision of the Stock Exchange Commission. The source went silent for a short while, then added: “But the Egyptian businessman, Hussein Salem interfered in the deal and pressured the Stock Exchange chief to conclude the deal.” The former official refused to mention whether the instructions came directly from Hussein Salem or through others, saying: “All I know is that the Stock Exchange chief received a phone call, after which he agreed to conclude the deal.”
He explains, at the end of his testimony, which was audio recorded at Al-Masry Al-Youm, that the documents of the concluded deals on MEDOR shares are not available now. Even if they are, nobody will reveal them now for a main reason, namely that the law compels companies to maintain files for a period of 5 years only, and since the deal is 10 years old, there is nobody who can request the documents because they do not exist in the eyes of the law.
On its part, Al-Masry Al-Youm tried to obtain a response from Dr. Sameh Al-Turujman who was the head of the Stock Exchange at the time, but attempts were futile. Justifications by former officials at the Stock Exchange varied over concluding the deal at a time when the Stock Exchange was closed. Dr. Khaled Sari Siyam, the former Stock Exchange chief, said: “I am not aware of the details of the deal, but if the date it was concluded happens to be Friday, it is normal for the deal to be concluded on the next work day of the Stock Exchange closure; namely, Sunday.”
Siyam added that perhaps the agreement contract to conclude the deal had two dates, one being the agreement and the declaration of the deal, and the other is when the deal becomes effective. According to him, there is a big difference between the two dates, because the effective date is connected to the beginning of the contract, but the implementation is the date ownership is transferred, according to the former official.
Despite his initial justification, Siyam went back to emphasize that procedures to transfer ownership at the Stock Exchange during a holiday require an administrative decision from the board of the Capital Commission, provided there are many justifications. Siyam justified the presence of deals concluded after closing hours by saying: “Perhaps it is connected to the end of a financial year, rather than a legal violation.” Here ends what we had in terms of exciting information and details about the MEDOR with Hussein Salem. Perhaps there are larger secrets and bigger answers to questions that are wide open, regarding the extent to which businessman Hussein Salem profiteered from one of the largest sales operations in the Egyptian petroleum industry. Will the coming days reveal anything new? Until then, the information mentioned in the three parts of this investigation are presented for the Public Prosecution and the monitoring agencies, to maintain the right of Egyptians to knowledge, and accountability if necessary.
Journalists Miranda Patrick and Paul Rado from the Anti Corruption Project – Investigations Center in Sarajevo, Bosnia assisted in completing this investigation. The Arab Reporters for Investigative Journalism (ARIJ) assisted in networking.
Leave a Reply