Hussein Salem: A businessman from the times of crony capitalism (part three)

Karem Yehia, Tunis , Friday 24 Jun 2011

The opportunities for riches created by the Camp David Accords were not missed by Hussein Salem and the coterie of powerful and convenient friends he cultivated in government and the military, reaching right to the very top

Husien Salem

In his memoirs, A Life's Journey, Abdel-Raouf El-Reidy, the Egyptian ambassador to Washington DC from1984-1992, presents a fascinating picture of what went on in the Egyptian embassy’s offices on Decateur Place and in the ambassador’s residence during that period.

El-Reidy writes that when he arrived in Washington, he found that three men who worked in the embassy had struck a close bond. The trio were Abdel-Halim Abu-Ghazalah, the military attaché at the embassy (and a future minister of defence); Mounir Thabet, the embassy’s director of arms procurement (and the brother of Mubarak’s wife, Suzanne); and Hussein Salem, the commissioned minister of trade at the embassy.

The Camp David “Pie”

This bond between the three men lasted long after the Camp David Accords were signed. With the Accords bringing in $105 billion in military aid to Egypt, all three strived to get a piece of the pie.

Major American Newspapers at the time did mention the name of our man, Hussein Salem, as party to some of the arms deals that followed Camp David. For example, on 9 October 1982, The Washington Post published an article titled: ‘Minister horrified by news of arms deals’. The article carried parts of a statement that the Egyptian embassy in Washington circulated regarding arms deals between Cairo and Washington.

In the statement, Kamal Hassan Ali, Egypt’s minister of foreign affairs at the time, denied allegations that ETSCO – the Egyptian American Transportation Company (established in Delaware in 1979 with a branch in Cairo) – had committed any violations.

The CEO of ETSCO was none other than Hussein Salem.

Ali, who would later become prime minister, described the allegations as “wicked.” He said that a year-long investigation by the Egyptian government turned up no evidence that any violations had been committed.

(Ahram is still trying to obtain copies of the investigation report from the Egyptian courts but to no avail, so far).

Ali went on to threaten to sue “anyone who dares to smear his name or any other Egyptian official” in American courts. However, in his 1994 memoir “Life Journeys: Secrets of 70 years of wars, spying and politics,” Ali fails to mention anything about ETSCO-gate or to Hussein Salem’s name.

The New York Times and The Washington Post published the second and third reports that discussed Salem’s activities as well as violations that ETSCO committed, on 22 July 1983 and 17 January 1984 respectively.

The Times titled its report ‘A Company admits to overcharging the United States government.’ And The Post titled its own report ‘United States indicts company headed by former CIA agents in a case involving arms sales.’

Both reports showed that Salem’s partners at ETSCO were former Central Intelligence Agency agents. Salem’s shady partners included Edwin Wilson and Thomas Clance. Wilson received 22 years in jail for criminal activities.

Both men were centrally involved in illegal, undercover operations funded partly by Gulf money to supply arms to various dictatorships in Latin America as well as Mujahedeen fighting the Russians in Afghanistan.

Both reports noted that the American administration of Ronald Reagan intervened in the case to suppress the names of the Egyptian partners in ETSCO. Nevertheless, the reports publicly exposed Salem and his American partners for overcharging the Pentagon for the cost of shipping American aid arms transfers to Egypt. Salem eventually paid an $8 million penalty to the Americans.

Four years later, on 14 January 1988, The New York Times ran a fourth report on the case. The Times titled this one ‘Theodore Greenberg, a district attorney who knows how to keep a secret.’

This report confirmed that Greenberg, the district attorney who prosecuted the ETSCO case, suppressed certain information in the case to “protect national security.” The report also mentions that Stanley Sporkin, a federal judge, described Greenberg as “someone who was on very good terms with the CIA.”

Reopening files after the January 25 revolution

The January 25 revolution prompted the media to deal with this 25-year-old case in a more honest and transparent manner, and to finally name names. The American network ABC ran a story in early March of 2011 about what it described as corruption that was built in the Camp David Accords and American military aid to Egypt.

The network highlighted what it called the role of Hosni Mubarak, Mounir Thabet (Suzanne’s brother) and the late Field Marshal Abu-Ghazalah in ETSCO’s illegal ventures. These men made millions of dollars by running an operation riddled with commissions, bribes and bidding violations.

Edwin Wilson, the former ETSCO partner and CIA agent confessed to ABC that the government pardoned him and released him from jail in 2004, way short of completing his long sentence. Wilson told ABC that Hussein Salem was simply a “front man” for Hosni Mubarak.

Meanwhile, The Washington Post called on the White House to release all classified documents that expose the role of Mubarak and his partners in the ETSCO scandal in order to allow Egypt to tack his real fortune.

A $60 million settlement

We know from reports in the American media in the 1980s that Salem paid an $8 million fine to the Pentagon in 1984 to settle the case. However, Ambassador Amin Yousri told us he personally discovered that Salem actually paid the Pentagon a much larger figure than was publicly announced.

While working on a special assignment at the Egyptian Consulate in New York in the mid 1980s, Amin came across one “coded memo” that the Egyptian embassy in Washington sent to the Foreign Ministry back in Cairo. The memo shows that Hussein Salem’s lawyers actually reached a $60 million settlement with America, not $8 million as the Reagan administration wanted people to believe.

Ambassador El-Reidy confirmed to us that he was aware that Salem reached what he called “some type of financial settlement” with the American government in the ETSCO case.

However, El-Reidy added that the Egyptian embassy in Washington did not monitor the details of that case. He also told us that the embassy did not track any of the activities of Salem’s other firms such as the “Four Wings” and so on.

Ambassador El-Sayed Amin Shalabi, who worked in the Political Department of the Egyptian embassy between 1982 and 1986, corroborated El-Reidy’s version of events. In a phone interview, he told us that nobody ever brought up the ETSCO case in the daily morning meetings that Ambassador Ashraf Gabriel (1973-1984) held with his staff.

Since Ambassador Gabriel has since passed away, we have to refer his 2004 memoirs, The Rise and Fall of Egyptian-American Relations: Secret Communications with Nasser and Sadat. But, once again, and despite the fact that Gabriel discussed all details of his work in Washington during the period we are concerned with, we could not find any mention of Hussein Salem or the ETSCO scandal.

A witness from Abu-Ghazalah’s office

Fortunately, for us, we finally found a living witness. Our witness, who asked to remain anonymous, worked in the office of the late Field Marshal Abu-Ghazalah during his time as minister of defence in the 1980s. “Mubarak was involved in profiteering from arms sales before he became president. And corruption spiraled out of control after Camp David,” our witness said. “Mubarak, Salem and Abu-Ghazalah used different shipping companies that moved between different countries, such as ETSCO and Four Wings, to cover their deals.”

Our witness added, “These shipping countries bought arms and then resold them in conflict-ridden parts of the world.”

We asked the witness if the Ministry of Defence in Cairo was aware of the ETSCO scandal. He answered: “Indeed, it was aware of it. Actually, we received intelligence and American newspaper reports about the case. We presented them to minister Abu-Ghazalah. Initially, he asked us to say that these reports were unfounded. However, when his advisers told him that photocopies of bank cheques prove that something illegal happened, he backed down.”

“This sleuth of corruption and illegal arms deals did not exist during the tenure of Field Marshal Gamasi, the minister of defence in the mid 1970s. It only started in 1978 after Camp David.”

The source added that authorities could not do much because the people involved in these scandals occupied very high positions in government. Plus, Sadat ordered Parliament to commission him to approve all arms deals without any accountability.

“This is the legacy that Mubarak followed later as president,” the source said.

The source also told us that Hussein Salem visited minister Abu-Ghazalah on numerous occasions, and that the minister did not allow staff to attend or take minutes during those meetings.

In 2007, Al Alem Al Youm newspaper, in a rare interview, asked Salem if he had maintained his friendship with Field Marshall Abu-Ghazalah in the years after he left the ministry (or, to be more accurate, after Mubarak drove the charismatic, and thus threatening, minister into early retirement in 1989.)

Salem’s answer was typical of a man who betrayed old friends as a hobby to move ahead. “No need to go there,” he chided the reporter.

The two men, Salem and Abu-Ghazalah, were actually such good enough friends that Salem asked Abu-Ghazalah to sign as a first witness on his son Khaled’s marriage license in 1988 – a year before Mubarak ousted the Marshal.

Nevertheless, our sources and investigation so far lead us to believe that Salem, for his own reasons, might have helped Mubarak get rid of Abu-Ghazalah. As ultimate opportunist, Salem sold out his “good friend” Abu-Ghazalah in order to hold on to his “better friend” Hosni Mubarak.

No names and no flags: The Elwy Hafez parliamentary inquiry

In March 1988, Member of Parliament Elwy Hafez demanded a parliamentary inquiry into allegations of corruption in the shipping of arms covered by American aid. Hafez titled his request ‘Corruption and governmental transparency.’

Interestingly, Refaat El-Mahgoub, the speaker of Parliament at the time, scheduled the session for the same time as the crunch football match between Egypt and Nigeria.

Hafez’s opening remarks during the investigation made it abundantly clear that he was referring to the business deals of none other than Hussein Salem. But Egyptian newspapers carried no mention of Salem’s name in their limited coverage of Hafez’s inquiry the following day.

We received a copy of the parliamentary session that discussed Hafez’s inquiry request from journalist Ahmed Sami Metwaly. Suspiciously, General Yousef Sabri Abu-Taleb, the minister of defence at the time, failed to attend the session.

In 38 pages of minutes taken at a marathon session, which lasted 220 minutes, Hussein Salem’s name, and nobody else’s name for that matter, did not figure. It turns out that Refaat El-Mahgoub personally edited all names – and whole paragraphs – from the session’s record.

Despite all this, the inquiry’s “semi-mutilated” record still shows that the United States had investigated some of the charges of corruption that Hafez tried to uncover.

Moreover, we also learn from the same record that the office of the Egyptian prosecutor-general conducted its own investigation in to allegations of corrupt arms sales between 1982-1985, but, for an unknown reason, it closed the inquiry and sealed its findings.

In the introduction to his 1991 book Corruption, Hafez wrote that he intended to provide documentation and proof regarding the infamous 1988-inquiry session in the book’s appendix. However, our examination of the book’s appendix showed that Hafez clearly failed to track down or acquire any such documents.

In any case, the book never made its way to the market. Mostafa Shordy, the journalist who attempted to publish Hafez’s book printed 10,000 copies of the testimonial manuscript. However, the notorious State Security intelligence of the Mubarak years sabotaged the whole project.

Amusingly, perhaps, Inshirah Hafez, Elwy Hafez’s widow, told us that Hafez developed the idea of presenting such an inquiry to Parliament out of a “sheer” coincidence.

She told us that while she and her late husband were driving back from the Cairo Airport one night, they stopped their car because they noticed an extravagant wedding underway in a luxurious mansion in the neighborhood of Heliopolis. They asked and they were told that Khaled Salem, Hussein Salem’s son, was getting married.

Hafez, observing the unbelievably lavish ceremony, suspected some type of foul play.

Tomorrow, we continue the story.


Translated and edited by Mostafa Ali 

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