The Crooks Return to Cairo

Egypt's government is happily letting exiled billionaires and convicted Mubarak cronies buy their way back home.

CAIRO — As crowds packed streets throughout Egypt during the 2011 uprising that overthrew autocrat Hosni Mubarak, it wasn't only the politicians and generals in Cairo who were scrambling to protect their interests. With the old regime teetering, business tycoons connected to the regime packed up their bags -- and their billions -- and fled the country.

One of them was Hussein Salem, who was nicknamed the "Father of Sharm el-Sheikh" for his ownership of multiple hotels in the coastal resort city. Salem made billions of dollars in the energy, arms, and hospitality industry in Mubarak's Egypt -- he was so close to the former president that the two even invested together, according to documents obtained by Foreign Policy. It was a lucrative alliance for Salem: In the early 2000s, Mubarak granted him a monopoly over gas exports to Jordan, Israel, and Spain. Salem used this deal to sell gas at below-market rates for years, according to an Egyptian court ruling, costing the country more than $700 million.

Salem hasn't been back to Egypt since Mubarak's fall -- and for good reason. As post-uprising Egypt looked to recoup the millions stolen by Mubarak and his cronies, a series of court cases focused on the corrupt business practices of Salem and his family. In October 2011, Salem -- along with his son, Khaled, and daughter, Magda -- were found guilty of making illicit gains on their gas sales, and sentenced in absentia to seven years in jail. In June 2012, he was convicted of selling gas to Israel at below-market prices, and sentenced in absentia to 15 years in jail, and ordered along with other defendants to pay $412 million in fines. 

Salem, however, holds Spanish citizenship, which has allowed him to dodge the Egyptian legal system. He is now living in Majorca, Spain, and is wanted by Interpol along with his son and daughter. Spanish courts, however, have refused to extradite him to Egypt because the two nations do not have judicial or legal bilateral cooperation agreements and the courts' uncertainty about the fairness of Egypt's legal process.

But for the first time since Mubarak was toppled, Salem's fortunes -- and that of other Mubarak-era businessmen -- may be shifting for the better. Since Egypt's generals ousted Islamist President Mohamed Morsi last July, Salem said he has been ecstatic and is planning his return to Cairo, his lawyer Tarek Abdel-Aziz told FP. The billionaire Mubarak confidant phoned in to a popular television program in January to offer a deal to the new military-backed government: Cancel my convictions and I'll give Egypt millions.

Egyptian officials publicly welcomed the offer.

"Mr. Hussein Salem and other noble businessmen ... your initiative is really appreciated," said Hany Salah, a cabinet spokesman, during the phone-in on local channel CBC. "Anyone who proposes a noble and good offer, then the least we can do is listen to him for the best of our beloved country."

Since the overthrow of Morsi, Salah continued, Egypt is more open to initiatives of "reconciliation" -- and he expects other Mubarak-era fugitive businessmen to propose similar deals. Reconciliation deals can either be reached by committees appointed by the prime minister and justice minister, or they can be brokered by the general prosecutor, who is appointed by the president.

Reconciliation, however, seems to mean little more than dropping corruption charges in exchange for cash. During another phone-in on Jan. 9, Salem offered the government a $3.6 million fund to boost tourism and repair police stations, churches and mosques in exchange for his freedom. That's actually a drastic decrease compared to his pre-coup proposal: In May 2012, just before Morsi became president, Salem offered at least half his estimated $1.6 billion in wealth in exchange for settling the charges against him, according to Abdel-Aziz.

Three years after protests against the sort of business cronyism that gutted Egypt's economy, the country is now considering turning to the very people who robbed the country for a financial bailout. Despite protesters' widespread demands for social justice, post-revolutionary Egypt has witnessed precious few improvements: Transparency International ranks Egypt 114 out of 177 countries on its "Corruption Perception Index," and its position has actually fallen since 2011.

The relationship between Mubarak-era business tycoons and the Egyptian government appeared to have been severed long ago, as the prosecutions targeting these businessmen were launched by the interim military government that followed Mubarak. But "reconciliation" could allow the new military-backed government to reestablish the same powerful networks of loyal businessmen that flourished under Mubarak.

The process "opens the door for more corruption and escaping justice," said Ghada Ali Moussa, a political scientist who heads up the Governance Center, a government agency dedicated to preventing corruption and advancing transparency. "[Salem's prospective reconciliation deal] will be an ideal prototype for others to follow."

Other businessmen with ties to the Mubarak regime are also lining up their reconciliation offers. Mubarak's minister of foreign trade and industry, Rachid Mohamed Rachid, is in similar talks with the government and is set to put in another offer, Moussa said. Rachid, who was sentenced in absentia to 20 years in jail and at least $330 million in fines for squandering public funds and profiteering, fled to Dubai during the 2011 uprising.

Army chief Abdel Fattah al-Sisi's consolidation of power could also increase Egypt's willingness to cut reconciliation deals. While much normal government business has been on hold under the current interim government, a strongman in the presidential palace and a new parliament could change that.

"There will be a climate for such reconciliation to materialize," Ibrahim el-Henedy, Egypt's deputy justice minister and head of the Illicit Gains Authority, the body in charge of investigating corruption, told FP. "It's all about the offer of reconciliation: Which is better for Egypt, to reconcile or not?"

Even though Salem was "among the worst" of the country's corrupt businessmen and has been ordered to pay some of the biggest fines, Henedy said, the government was still interested in striking a reconciliation deal.

Salem's lawyer, Tarek Abdel-Aziz, also believes that the time is ripe to settle his client's disagreements with the Egyptian government. He told FP he is working on an official reconciliation offer, which will be submitted to the authorities now that Morsi has been ousted. His client is "very optimistic," the lawyer said.

"Now, thank God, there is an existing system that takes care of all Egyptians," Abdel-Aziz said. "Today we have a new regime -- hopefully a just regime that will move things forward."

Abdel-Aziz denied that Salem was tied to Mubarak and said the charges were politically motivated. However, a leaked document from the Illicit Gains Authority shows that the Salems and the Mubaraks -- together with other businessmen tied to the old regime -- invested together in an offshore fund registered in the Cayman Islands, a Caribbean tax haven.

The investment fund, which was called the Egypt Fund, invested in 18 Egyptian companies in the cement, banking, real estate, steel, oil, food, and agriculture industries. The head of investor relations at EFG Hermes bank, Hanzada Nessim, wrote in an email that her bank set up the Egypt Fund in 1997. When asked whether EFG Hermes was aware of the investors behind the fund, Nessim wrote that the bank was fully informed of the investors' identities and that no allegations of wrongdoing had been levied against them at the time.

While Salem and Mubarak were not personally listed as contributors, the fund included companies owned by their children: Clelia Assets Corporation, owned by Khaled and Magda Salem, invested $3 million; and Pan World Investments Corporation, owned by Gamal and Alaa Mubarak, invested $250,000. The offshore fund would have provided significant tax breaks to its investors, as well as allowing them to shield their investments from prying eyes.

Salem not only bilked Egypt -- he also stole from the United States. In 1979, his company, the Egyptian American Transport and Service Corporation (EATSCO), was granted a contract to ship military goods from the United States to Egypt. The deal came in the wake of the Camp David Accords, when U.S. military sales started to flood in to Cairo, making shipping a potentially lucrative business.

Salem, however, tried to boost his profits by charging the U.S. Defense Department for inflated shipment costs. Between 1979 and 1981, according to U.S. court documents, EATSCO submitted false invoices for 34 shipments, which overcharged the Pentagon by $8 million. In 1983, Salem pled guilty to felony charges in the U.S. District Court in the Eastern District of Virginia. The fines and civil claims settlements paid by Salem and the companies involved in the scheme totaled more than $4 million.

Most of Salem's millions came from sweetheart deals in Egypt, where he received preferential treatment from his allies at the top echelons of government. In April 2011, Mubarak-era spy chief Omar Suleiman testified before an Egyptian prosecutor that Salem's company, the East Mediterranean Gas Company, was handed the monopoly over gas exports to Israel, Jordan, and Spain in the early 2000s, bypassing the usual bidding process. Suleiman was asked to testify as Egypt's intelligence services were allegedly involved in brokering the gas deals.   

Suleiman said Salem had been friends with Mubarak for more than 20 years, and that his experience in business dealings with Israel was the reason he was chosen for the deal.

"[Salem] had dealt with the Israelis before with MIDOR," Suleiman said, referencing Salem's time as chairman for the Middle East Oil Refining Company, an Israel-Egyptian project established in 1993 to build a joint refinery on the North coast of Egypt and to extend an oil pipeline to Israel.

Seven years later, Salem sold 37 percent of the East Mediterranean Gas Company for $4.2 billion, according to the Israeli business news website Globes.

It's not hard to see why Salem is pushing so hard for reconciliation. If Egypt refuses to cut a deal and negotiates an extradition agreement, it could win back his frozen assets in Switzerland, Hong Kong, and Spain. The extradition would allow Egypt to convict Salem in person, and many countries -- including the ones where Salem stashed his wealth -- require such a final verdict if they are to return his stolen assets.

If successfully extradited back home, Salem would also be obliged to pay more than $4 billion in fines and restitution, and he would serve 22 years in prison based on his combined sentences by Egyptian courts.

A reconciliation deal, on the other hand, would not only place Salem back in the good graces of the Egyptian government, it would also effectively end foreign investigations into whether his wealth is the result of illicit gain.

"It would be very difficult for the Swiss authorities to continue prosecution against Hussein Salem if the Egyptian authorities drop any charges against him," said Olivier Longchamp, officer for international financial relations at the Swiss NGO Berne Declaration. "Money can only be seized if it has been proven to be of illegal origin."

Now, three years after a revolution against Mubarak-era cronyism, Salem appears closer to his goal than ever before. In an ironic turn, he is now hailing the military-backed government for combating the same underhanded business dealings of which, for many Egyptians, he is the symbol. As he put it in January, "the era of corruption and injustice is gone now."



Taliban TV

How a triple murder in Karachi left the Taliban not just making headlines, but writing them, too.

PESHAWAR, Pakistan — On Jan. 17, gunmen on motorbikes fired 17 shots into the back of a TV van in Karachi, killing three employees of the Express News, one of Pakistan's most popular media outlets. At first glance, the event might seem unremarkable in Pakistan's increasingly violent political environment. Viewed against the backdrop of the Pakistani Taliban's (TTP) reinvigorated campaign against the media, however, it could mark a watershed moment for independent journalism in the country. Those who were killed -- a guard, a driver, and a technician -- were caught in a clash of public opinion, one that's pitted Pakistan's burgeoning independent media against extremist militants vying for control of the country.  

Pakistan has long been one of the most dangerous countries for journalists, and the sixth most dangerous in the world, according to the Committee to Protect Journalists. But attacks on the media have generally been aimed at silencing particular individuals -- like leading investigative journalist Saleem Shahzad, whose brutalized body was found in a canal in 2011 after he reported on connections between Pakistan's infamous Inter-Services Intelligence agency (ISI), the country's navy, and al Qaeda militants. But the attacks on the Express, which preceded a detailed fatwa spelling out what kind of reportage the TTP would tolerate, could mark the beginning of something else entirely: a wholesale targeting of the press as part of the organization's propaganda war against the Pakistani state.

"The way that Express News is being picked out and targeted, makes absolutely clear that we are being given some sort of message," Fahd Husain, director of news at Express TV, said as the network shifted into live coverage of its murdered employees.

Not long after, while the bodies of the slain still lay under white sheets, TTP spokesman Ehsanullah Ehsan called in to the channel to take responsibility for the shooting: "Express TV, like a lot of other Pakistani media outlets, is acting as propagandists against the Pakistani Taliban," he said in an attempt to justify the attack on live TV.

What happened next was even more astonishing: Express anchor Javed Chaudhry began to negotiate a sort of informal peace settlement with the TTP, offering coverage on demand in exchange for security.

"I will guarantee to you that in the future, if there are any instances of terrorism, or instances that the state considers to be 'terrorism' or an attack, and the Taliban accepts responsibility for it, we'll give you proper space to give your point of view that will be broadcast on TV or detailed in newspapers without any slant," Chaudhry said on air. "But for this, I'd like a guarantee from you that you won't attack anyone in the media."

Ehsan, the TTP spokesman seemed amenable to the offer: "Of course, God willing," he replied before adding a critical caveat. "I'll promise you that if the Pakistani media gets out of the war and holds to its practice of journalism and doesn't promote propaganda then we won't have to attack them."

Chaudhry then proceeded to sweeten the deal, telling Ehsan that the TTP should feel free to call him or the newsroom at any time to share their perspective through Express TV or the Express Tribune. The network issued no formal statement after this bizarre interaction, and executives have refused to comment on whether or not the network has endorsed the on-air deal.

The attempt to trade professionalism for safety predictably infuriated many Pakistani journalists. "It's an insult not only to the idea of an independent media, but to those of his colleagues who were just killed not even an hour ago," said Shehryar Rizwan, an editor at Dawn, Pakistan's largest English-language newspaper. Others, like journalist Gharidah Farooqi and Meheen Usmani, a blogger, took to Twitter to air their disdain for the Pakistani network.

Even beyond ethical concerns, some pointed out, it would be virtually impossible for reporters to fully meet the TTP's demands and still do anything resembling journalism. Militant organizations in Pakistan have been known to threaten media outlets that don't carry their statements word-for-word. According to Malik Siraj Akbar, the founder and editor-in-chief of the English-language newspaper Baloch Hal, this might require referring to Shiites as "kafirs or non-Muslims or people who deserve to be killed." Publishing such statements, of course, would only incite continued violence, but by refusing to do so, journalists risk incurring the wrath of the militants themselves.

Such trepidation has already compromised the caliber of journalism in Pakistan. Akbar, who fled Pakistan for the United States in 2010 but still edits Baloch Hal, said that it has been years since his newspaper printed bylines for fear of reprisals against individual journalists. He also refuses to assign stories that present too grave a risk for reporters. "[A]t times we take a step back where we tell people to stay away," he said in a telephone interview. "There have been a lot of times when we've had to restrict ourselves from covering those stories."

Umar Cheema, an investigative reporter for The News, a Pakistani daily, who in 2010 was abducted and beaten by militants allegedly connected to the ISI, sees a similar decline in the quality of reportage on extremism.

"There is no in-depth coverage of militancy in Pakistan -- neither media houses are interested nor journalists and this is out of fear," said Cheema, who recently launched the Center for Investigative Reporting in Pakistan in order to support what he sees as an industry under threat. "When [the] state is unable to protect its citizens and rather faces allegations of double games, [the] media feels having become sandwiched between the two."

Days after the attack on the Express News, on Jan. 23, the TTP released a 29-page fatwa detailing the sort of reportage that it would consider "propaganda" against its goal of establishing an Islamic emirate in the country -- along with a hit-list of nearly two dozen journalists which has been delivered to media outlets but not released to the general public.

The fatwa states that the TTP will not tolerate being characterized as a "terrorist" group, despite the fact that it's a "banned organization" upon which the government has formally declared war. Referencing official policies or framing events in terms of Pakistani laws is also prohibited: The fatwa declares that the media should accept Islamic law, or sharia, as the ultimate authority in Pakistan. "The media give too much importance to secular policies," the fatwa reads, "when the Quran and ways of the Prophet Mohammed should be accepted as the law of the land."

Husain, the director of news at the Express, said he doesn't know why his organization has been singled out by the TTP.  "We don't believe that we are being biased or unjust in our coverage. We do not believe that we have violated any basic norms of journalism," he said in a telephone interview from Lahore. "We are ... therefore very surprised and concerned that Express News is being targeted."

Other journalists see the attack on the Express and subsequent fatwa as the opening volleys in a broader campaign to silence the media. According to Akbar, of Baloch Hal, the TPP is "targeting one organization and making an example out of it." He added, "There are reporters who have not been personally and directly threatened, but everybody sees it coming. ... If they are targeting Express, we are sure they are also observing our organization to see what we are reporting, so everyone has voluntarily begun to take precautionary measures to stay safe."

This is not the first time the TTP has issued a fatwa against journalists, but it is the first time it has addressed one to media outlets in general. Following the attack on education activist Malala Yousafzai in 2012, for example, the TTP attempted to silence several regional outlets, as well as the BBC and two leading Pakistani journalists. According to Daud Khattak, who heads Radio Mashaal, a U.S.-funded news radio program that operates in the Pakistani tribal areas, reporters who covered the TTP attack on Yousafzai received specific threats by phone. In his view, the latest fatwa can be read as a more detailed version of the militant group's 2012 pronouncement. 

Reporters have long faced security concerns when reporting from cities like Karachi or Quetta, where targeted killings and sectarian violence are rife, or in the country's north, where bombings have become an almost daily phenomenon in recent months. So far in 2014, there have been more than 30 terrorist attacks across the country, including one on a military compound in the northwestern city of Bannu that left at least 20 members of a government-led paramilitary unit dead, and just days later, a suicide bombing near Pakistani Army headquarters in Rawalpindi, the capital's so-called "twin city," that left 13 dead. Both were claimed by the TTP.

But as the TTP has intensified its campaign against the state in recent years, the security situation for journalists has deteriorated appreciably with no real increase in security from the government. According to Akbar, who joked that he once thought being stopped at airports or having hotel rooms raided was simply "a part of journalism," Pakistani journalists are now working in a considerably more hostile environment. "Now things have changed," he said, referring to the heightened threat posed by the TTP. "People will get killed before they even receive a threat."

In the past, individual journalists would often receive threats if they veered too close to information intelligence agencies wanted to keep private or vexed militant organizations. The Committee to Protect Journalists reports that 29 journalists have been murdered in the country since 1992, and in all but one case, the killers never faced trial. (The lone case in which justice was served was that of Daniel Pearl, the Wall Street Journal reporter who was beheaded outside of Karachi almost exactly 12 years ago.)  

"Whoever wants to kill a journalist in Pakistan -- be it the Taliban, be it the government intelligence agencies, be it an irate businessman, or warlord of some sort -- I'm pretty sure that they can operate with complete impunity, and that's long been the case," said Bob Dietz, director of the Asia Program at the Committee to Protect Journalists. "I don't think that there's enough political will or enough political strength on the government to make Karachi safe for journalists, or for anyone else."

In the wake of the Express attacks, the chief minister of Sindh, the province in which Karachi is located, promised to increase security for journalists and to conduct a full investigation into the attack -- something that is routinely promised but rarely delivers justice.

"Police is investigating all criminal cases alike and this is one of them," Atiq Ahmad Shaikh, a spokesman for the Karachi police told Foreign Policy by email. "We cannot decrease or increase the importance of any case. However [with the victims] being from media they are closer to us as we both work for the same cause which is to restore our forgotten norms in society."

Paradoxically, the intensification of the TTP's campaign against journalists may not be all bad news. Disconcerting as the latest fatwa is, Khattak of Radio Mashaal sees it as an indication that the Taliban are worried about declining public support. "In cities on an individual level they are inflicting terror, but on a public opinion level, people can tell that the Taliban are losing or beginning to lose," he said. "If you look from about 2009 on, public opinion has started to turn away from them to some extent."

Talat Masood, a former three-star general in the Pakistani Army who now works as an independent security analyst, sees a similar motivation for targeting the press: "Whenever there is public outrage against [the TTP], they look to shut down the media in some way, because they think that whatever they are doing is for their country and their people and their idea of religion." 

"The Taliban are much more media savvy than our rulers," he said in a telephone interview from Islamabad. "The government and the state is already paralyzed ... so they are taking full advantage of that."

At least in the short-term, unfortunately, the TTP's strategy appears to be paying off, whether because networks like Express are willing to negotiate under duress or because reporters are simply shying away from sensitive topics. Masood said he has seen fewer and fewer stories that deal at any length with the Taliban in recent years. Now that the TTP has formalized its campaign against the media in a fatwa, he expects even more self-censorship -- what he tellingly terms "self-preservation" -- in the future.

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