HSBC accused of helping Mubarak regime land deals: newspaper

Ahram Online, Sunday 1 May 2011

The global bank played a vital role in Mubarak-era deals now mired in criminal investigations, says a report in The Observer

The global bank's Egyptian moves are coming under scrutiny (Photo: Reuters)

HSBC is facing accusations of helping to enrich members of Egypt's political and business elite currently at the centre of corruption investigations.

The role of the global banking and financial services company in Egypt's corruption scandals is detailed in a report published in the British Sunday newspaper, The Observer, and on the Guardian's website. It cites research by the Bureau of Investigative Journalism, a not-for-profit body based at London's City University.

The bureau concluded that HSBC was the most active European investment bank in Egypt and raised more than £450 million (LE4.47 billion) for two of the country's largest and most controversial real estate developers. Both are now mired in corruption trials and have seen their stock values plummet.

Two former directors from the Egyptian board of HSBC became ministers in Mubarak's government in 2004, overseeing land sales and privatisations -- former investment minister Mahmound Mohieldin and ex-trade minister Rachid Mohamed Rachid.

HSBC is said to have been joint underwriter for embattled property firm, Palm Hills Development, Egypt's second-biggest listed developer.

Former housing minister Ahmed El-Maghrabi and his cousin, ex-transport minister Mohamed Mansour, are shareholders in Palm Hills' parent company while Mansour's brother is Palm Hills' chairman. Maghrabi is now in custody awaiting trial.

An Egyptian court ruled last week that a sale of state land to Palm Hills for a northern Cairo residential development was illegal. The sale took place in 2006 when Maghrabi was a minister and he is accused of undervaluing and transferring the land via a foreign firm.

HSBC also advised the Talaat Moustafa Group (TMG), run by a former member of the Egyptian parliament's upper house, whose 33.5 square metre development in Cairo, Medinaty, is also mired in corruption allegations.

The Observer reports that in 2007 HSBC was joint global co-ordinator and underwriter for TMG's share offering, helping it rasie some £400m (LE3.97bn). HSBC also acted as joint lead financial adviser in a finance deal raising £52m (LE516m) for Egyptian Arab Land bank in the same year.

HSBC has denied any wrongdoing.

In a statement, the bank said: "Each of these transactions… was subject to thorough due diligence to meet international standards of regulation. This is standard HSBC policy in every capital market transaction in which we participate.

"None of the companies or their principals was under Egyptian, United Nations, United States or European Union sanctions of any kind at the time of these transactions. The Arab Republic of Egypt was not under any sanction at the time of these transactions."

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