Orascom Development appeals against chairman's jail term

Reuters, Monday 29 Aug 2011

Orascom Development Holding lodged an appeal and have begun discussions to counter the charges, including stock price manipulation, against their chairman in Egypt, Samih Sawiris

Orascom
One of the Egyptian resorts that built Orascom's name (Photo: Orascom)

Egyptian real estate and hotels firm Orascom Development has lodged an appeal after a court made an initial ruling to jail its chairman over accusations of stock price manipulation and providing incorrect financial data.

Samih Sawiris was served the two-year prison sentence on 27 August because he is the company's legal representative, said Orascom.

The court also fined him 50,000 Egyptian pounds ($8,401) and said he must not trade in the stock market for a year, a judicial source said last week, quoting the economic court's ruling.

The source said Sawiris had the right to appeal against the verdict and could remain at liberty on payment of 20,000 pounds bail until a final decision is issued.

The company said on Monday that it paid the bail immediately, launched the appeal to suspend the judgment and has begun discussions to settle all the charges.

"The company and Samih Sawiris believe that the allegations are unfounded," it said.

The main allegation, it said, was that parent firm Orascom Development Holding AG misrepresented the percentage of its ownership in subsidiary Orascom Hotels and Development (OHD).

The allegation centred on a discrepancy between the 98.16 per cent stake shown in company financial statements and the 96.14 per cent legal ownership given in a shareholders register.

The difference was due to an earlier non-recognition by Egypt's financial markets watchdog of a 2 per cent ownership transfer which took place in December 2008, Orascom said.

"It is important to note that this 2 per cent economic interest in OHD has been recognised, audited, and approved by the company's auditors and is in full compliance with the International Financial Reporting Standards," it said.

The case was transferred to the court without investigation by the public prosecutor, as required by law, and without giving OHD a chance to defend and clarify its position, said Orascom.

The court issued the initial sentence after only two procedural hearings and OHD was not given the right to plead its case in full, it added.

It said the court case was not expected to have any impact on its operations in Egypt.

Swiss-listed Orascom Development has been diversifying its business, but Egypt remains its biggest market. Businesses there came to a near standstill for almost 50 days earlier this year due to the uprising that ended the 30-year rule of president Hosni Mubarak.  

The luxury resorts builder posted a first half net loss of 13.7 million Swiss francs (US$16.8m) compared to a profit of CHF50.9 million (US$62.5m) a year earlier.

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