Egypt's former trade minister sentenced for seizing public funds

Rachid was tried in absentia

Egypt's new leaders continue to push on with investigations and trials of the former rulers and elites, with former trade and industry minister Rachid Mohamed Rachid the latest to fall.

Rachid fled Cairo shortly after the start of the uprising in which Hosni Mubarak, the country's former leader, was overthrown, and in a February interview, he denied any wrongdoing. Indeed, he was known as a man of probity, and many were very surprised when he was originally charged.

The court ruled that he had unlawfully seized public money from a government export develop fund. He was sentenced to five years in prison and given a fine of US$1.57 million.

While thought to be in London, Rachid's exact whereabouts are unknown, and he was tried in absentia.

Another man wanted within Egypt is Hussein Salem, one of Mubarak's closest friends, who was arrested in Spain on 14th June. Salem was head of the Eastern Mediterranean Gas (EMG) company, which was set up to sell gas to Israel.

The independent daily newspaper Al-Masry Al-Youm published leaked documents recently which showed that General Oman Suleiman, Mubarak's intelligence chief told former petroleum minister Sameh Fahmy to allocate land to EMG.

Fahmy and five other senior officials have been charged over the gas deal, and there is speculation that they might now seek to plead that they were coerced into approving the deal by the presidency. Their trial has been adjourned until 16th July.

Salem is due to stand trial on charges of corruption and illicit gain, and while Egypt would like him to be extradited, it is not clear if this can happen, as Salem has a Spanish passport. A Cairo court recently upheld an earlier decision to freeze the assets of Salem and his family.

When Salem was detained in Spain, he was with Ali Evsen, a Turkish national who owns 93 per cent of Albanian Airlines. Albanian authorities have frozen about €3 million in Evsen's bank accounts, as they suspect Evsen was laundering money on behalf of Mubarak.

Finally, steel magnate and senior official in the former ruling National Democratic Party Ahmed Ezz, who has been detained since 17th February is to face new charges of profiteering and squandering public funds.

The new charges against him include unlawfully acquiring shares in Al-Dekheila Steel, now an affiliate of Ezz Steel, between 1999 and 2001, netting illegal gains of US$115.3million. Former industry minister Ibrahim Mohammadein and five officials of al-Dekheila were also referred to court on charges of profiteering and squandering public funds.

Ezz is also being questioned on further separate charges of creating a monopoly in Egypt's steel market.

Sources: Al-Jazeera, Menas Associates

For more information, please see the Menas ACCS website, here.

UK's FSA reveals investigation into investment banks

Tracey McDermott

The UK Financial Services Authority (FSA) revealed on 22nd June that it was launching an investigation into the way banks do business. The FSA will be specifically looking at whether the investment banks have taken steps to protect against the risk of bribery and corruption, especially with the UK Bribery Act due to come into effect on 1st July, 2011.

The investigation was announced at a financial crime conference in London by the acting head of enforcement for the FSA, Tracey McDermott.

The Financial Conduct Authority (FCA), one of the three agencies that will take on the FSA's duties when it is broken up, will take on the task of investigating what McDermott called “the use of firms as a conduit for financial crime.”

It will work on “keeping crooks out of finance, encouraging industry to strengthen its defenses, and educating and warning consumers about the dangers they may face,” McDermott said in her speech.

The FSA published a separate review on 22nd June on how banks manage money-laundering risks, and were generally critical of banks' efforts.

The review said lenders “appeared unwilling to turn away, or exit, very profitable business relationships” where “there appeared to be an unacceptable risk of handling the proceeds of crime”, according to Bloomberg.

The review said that seventy-five per cent of the 27 banks whose money-laundering controls were examined did not adequatedly establish the source of their customers' wealth. About a third dismissed “serious allegations” against some of their customers without adequately reviewing them.

The FSA expressed “serious concerns” about the review's finding and two banks, which were not named, were referred to the FSA's enforcement division for “apparent serious weaknesses” in their risk management.

It seems likely that the FSA's review of investment banks will find similar results. According to Adam Greaves of McGuireWoods LLP, banks have been cutting costs since the crisis of 2008, and many do not see the point in spending large sums of money on anticorruption compliance.

Indeed, the fact that the UK's Serious Fraud Office has never prosecuted an investment bank for overseas corruption is part of the problem: banks have been able to get away with complacency.

Other analysts have a more positive perspective. Jeremy Cole, a bribery, corruption and fraud partner at Hogan Lovells said all banks with branches in the UK will be aware of the new legislation and their obligations.

“If there are concerns, it will be in relation to overseas financial institutions headquartered outside the UK who might not be aware they are caught by the Bribery Act,” he told Bloomberg.

Sources: Bloomberg, FSA.gov.uk, McGuireWoods LLP (Lexology)

For more information, please see the Menas-ACCS website, here.

Niko Resources fined for bribing Bangladeshi minister

Canadian oil and gas company Niko Resources pleaded guilty to one charge of bribing a foreign official, in violation of the Canadian Corruption of Foreign Public Officials Act (CFPOA), in the Alberta Court of Queen's Bench on Friday 24th June.

Niko admitted to bribing a Bangladeshi government minister in 2005 after a blowout at one of its natural gas fields.

Niko provided a luxury SUV worth CDN$190,000 to Bangladesh's Minister for Energy and Minister Resources AKM Mosharraf Hossain and paid for non-business expenses him to visit Calgary, with side trips to visit family in New York and Chicago.

Hossain resigned from his post on 18th June 2005 as corruption allegations hits the Bangladeshi media.

In 2005, Canadia' then-ambassador to Bangladesh David Sproule met with the president of Niko's Bangladeshi subsidiary Qasim Sharif to discuss the allegations. According to court documents, Shirf told Spoule “these things are done all the time” and “they give these things in these situations”.

Niko agreed to pay CDN$8,260,000 plus a victim surcharge of 15 per cent, bring Niko's total fine to CDN$9,499,000.

Niko will also have to submit to a three-year probation period during which the court will supervise Niko's compliance with the CFPOA through audits and reports conducted by an independent third party, at Niko's expense.

The Niko conviction is significant because it is only the second conviction under the CFPOA and the first since the Royal Canadian Mounted Police (RCMP) established a dedicated International Anti-Corruption Unit in late 2007.

Canada has been criticised by Transparency International in recent years for failing to pursue corruption convictions, but analysts see the Niko case as a positive step forward as it involves corruption in a foreign country undertaken by a foreign subsidiary of a Canadian company.

The RCMP announced in January 2011 that it had 23 active investigations under way and according to Bennett Jones, that number has now risen to over 30.

One such investigation is into Liberal Senator Mac Harb, who is being looked at in a RCMP breach-of-trust investigation into whether he used his position in public office to influence the Banglasdeshi government.

Harb was paid CDN$65,000 to work as a consultant for Niko. It is alleged that he travelled to Bangladesh four times using a special passport reserved for MPs, senators and retired ambassadors while on Niko business.

Canadian senators are allowed to accept outside employment, but the investigation is into whether he traded on his position as a senator to help the interests of a private company. Harb has so far not been charged with a crime.

Niko operates mostly in India and Bangladesh, but also has interests in Pakistan, Kurdistan, Indonesia, Trididad and Tobago and Madagascar.

Niko's shares were down nearly 4 per cent in afternoon trading on the Toronto Stock Exchange on Friday.

Sources: Bennett Jones, CBC, Globe & Mail, Montreal Gazette

For more information, please see the Menas ACCS website, here.

Tunisian court sentences Ben Ali to 35 years in prison



'The Family' as they were known, built up vast fortunes during Ben Ali's rule



A Tunisian court sentenced in absentia former president Zine Al-Abidine Ben Ali and his wife, Leila Trabelsi, to 35 years in prison each on Monday 20th June, after just one day deliberating.

Ben Ali, who ruled Tunisia for 23 years before being ousted in the face of mass protests in January, and his wife were accused of theft and unlawful possession of large sums of foreign currency, jewellery, archaeological artefacts, drugs and weapons.

Monday's trial focused only on the alledged US$27 million in cash and jewels, some of which had 'historic value' that were found in the Ben Ali palace in Sidi Bou Said.

Judge Touhami Hafian also ruled that Ben Ali and his wife would have to pay fines totally US$65.6 million (91 million Tunisian dinars).

Hafian postponed a second case against the former president and his wife, involving weapons and drugs allegedly found in a presidential residence in Carthage until 30th June to allow Ben Ali's lawyers more time to prepare.

More serious charges, including plotting against the security of the state and murder, will be dealt with at future trials. Ben Ali could eventually face the death penalty.

More than 30 members of Ben Ali's family and inner circle have been arrested since January, some of whom have since been charged with economic crimes and abuse of power.

Ben Ali, speaking through his Beirut-based lawyers, continues to reject the trial. According to the BBC, one of his lawyers, Akram Azouri, said the sentence was “a joke.”

“Don't forget that the drug and the money were found three months after the president left his palace,” Azouri said.

In a statement released on Monday, 20th June, Ben Ali said the weapons he was accused of possessing illegally were gifts from other heads of state and the jewellery was gifts given to his wife by foreign dignities.

The money and drugs had been planted in his home after his departure as part of the plot against him, the statement said.

In the statement, Ben Ali spoke for the first time about his departure from Tunisia, and denied that he had fled the country.

He said he had received information about a plot to assassinate him, so he boarded a plane that was taking his wife and children to Saudi Arabia, but with the intention of returning immediately.

After arriving in Jeddah, the plane returned to Tunisia without waiting for him, as per his instructions, according to his statement.

“He did not leave his post as president of the republic and hasn't fled Tunisia as he was falsely accused on doing,” the statement said.

Tunisia said that in February it asked Saudi Arabia to extradite the Ben Alis, however no response has been given. Despite their absence, the sentence will take immediate effect.

Sources: Al-Jazeera, BBC News, the Guardian, Reuters

For more information, please see the Menas ACCS website, here. 

Anti-corruption groups ask Clarke for clarification on UK Bribery Act Guidance

The Bond Group called Clarke the government's 'anti corruption Champion'

Some of the UK's top anti corruption groups have written to the UK's Justice Secretary Kenneth Clarke asking for clarification on a number of points relating to the UK Bribery Act, due to come into effect on 1st July, 2011.

The Bond Governance Group, which includes Global Witness and Transparency International UK wrote to Clarke on 16th June, saying that they had "signficant concerns about the Ministry of Justice's interpretation of the Act."

The letter highlighted a number of points, including the question of what companies would be covered under the law. Clarke's guidance on the UK Bribery Act, released in March, said the "mere fact" that a company was listed on a UK exchange was not enough to bring it under the arm of the law.

The Bond Group wants assurance that the Act will be broadly interpreted, so that "all companies listed on UK stock exchanges and foreign companies that operate subsidiaries in the UK" will be covered by the act.

On the question of subsidiaries and joint ventures, the guidance says "a bribe on behalf of a subsidiary by one of its employees and agents will not automatically involve liability on the part of its parent company, or any other subsidiaries of the parent company."

The Bond Group's response to this is that "companies should be held liable for bribes paid by their subsidiaries and joint venture partnerships, even if they benefit only indirectly by virtue of their relationship with them."

As well as raising issues over whistleblower protection and government support for prosecutions, the letter encouraged the government to go further and adopted "a comprehensive cross-Whitehall anti-corruption strategy," pointing out that bribery is only one type of corruption.

Sources: Bond, WSJ

You can read the Bond Group's letter, here.

For more information on the UK Bribery Act, please see the Menas ACCS website, here.

Ben Ali's trial in absentia begins in Tunisia

Many in Tunisia believe Ben Ali fled with large sums of money and gold

The trial in absentia of former Tunisian president, Zine Al-Abidine Ben Ali, is due to begin on Monday 20th June.

Ben Ali faces up to 20 years in prison in this first of many legal cases against him, if convicted on charges including corruption and drug trafficking.

After ruling Tunisia for 23 years, Ben Ali fled to Saudi Arabia on 14 January, 2011 after weeks of protests against his rule. The protests, now called the Jasmine Revolution, set off a wave of protests across the Arab world.

Some 2kg of drugs and US$27 million in cash were allegedly discovered in raids of Ben Ali's palaces after he left, and this will be the focus of the first trial.

He is also being investigation on suspicion of abuse of power, trafficking of archaeological artefacts, money laundering and murder.

Ben Ali's Beirut-based lawyers released a statement on Sunday 19th June condemning the trial.

“He [Ben Ali] would like everyone to know this criminal prosecution is only a false and shameful image of victor's justice,” the statement said.

“Is the purpose behind that [trial] to divert the attention of Tunisians from the turmoil that nobody can accuse him of or hold him responsible for?”

The caretaker government has requested Ben Ali's extradition from Saudi Arabia to stand trial over corruption charges and his involvement in the deaths of protestors during the uprising, but Saudi Arabia has not yet responded.

It is widely believed in Tunisia that Ben Ali, his wife Leila Trabelsi and their family accumulated vast fortunes through their political and economic power during Ben Ali's rule.

More than 30 members of Ben Ali and Trabelsi's families have been arrested since January and some have since been charged with economic crimes and abuse of power.

Ben Ali and his family built up huge stakes in a number of Tunisian companies and industries; the Tunisian interim government has vowed to recover these assets and return them to the state.

The Ben Ali trial will be closely watched in neighbouring Egypt, whose own former ruler Hosni Mubarak is facing similar charges of corruption and the murder of protestors.

Sources: BBC, Guardian, RTT News

For more information, please see the Menas ACCS website, here.

Uganda's ex-VP granted bail in corruption trial

Bukenya denies allegations of corruption

Uganda's former vice president, Professor Gilbert Bukenya, has been granted bail by an anti corruption court in Kampala, while he awaits trial for fraudulent practice and abuse of office.

Bukenya appeared in court on 16th June, facing charges in relation to the awarding of contracts for the purchase of 80 BMW vehicles used during the Commonwealth Heads of Government Meeting (CHOGM) in November 2007.

It is alleged that Bukenya used his position to influence the award of a US$3.9million contract to the Motorcare Uganda company. He denies any wrongdoing.

A parliamentary committee recommended in 2010 that Bukenya and other ministers be charged, but MPs voted to clear them.

Bukenya lost his job in May in the wake of Uganda's February elections, however before this he was the longest serving vice president under Uganda's President Yoweri Museveni.

According to Uganda's Daily Monitor, although he was popular, Bukenya's time in office was marred by allegations of corruption and colourful revelations about his private life.

A cash bail of 50million Ugandan shillings (US$20,000) was required and Bukenya also had to deposit his passport with the court.

Sources: BBC, Daily Monitor, New Vision

For more information, please see the Menas ACCS website, here.

Algeria to freeze Qadhafi's assets

Djoudi reportedly ordered the freezing of Libyan assets in May

Algerian finance minister Karim Djoudi is reported to have sent 'secret' instructions to the banks, insurance companies and all local and foreign accredited institutions to freeze assets belonging to members of the Libyan government, according to Algerian media sources.

It is also reported that Djoudi ordered all Libyan assets, including real estate, funds and investments in Algeria to be tracked down and frozen.

Djoudi confirmed his instructions on 6th June, but it appears attempts to locate Libyan assets in Algeria had already started at this date.

The Algerian government was quick to point out that this action did not signal a change in their approach to Libya or the West.

Algerian foreign ministry spokesman Amar Belani told Magharebia that the decision to freeze Libyan assets “doesn't mean there has been a change in Algeria's position on this conflict, or that it is aligning itself with the West's position.”

“All Algeria has done is to comply with the UN resolutions,” Belani said.

On 5th June, the daily Arab-language newspaper Echourouk published Djoudi's order, in the form of a letter to the banks and other financial institutions, dated 12th May.

There does seem, however, to be some suspicion as to the veracity of the letter.

It has been suggested that the letter is merely an attempt by the Algerian government to help further its public denial of support for Libya's Mu'ammar Qadhafi regime.

Sources: Menas Associates, Africa News, Magharebia, Xinhua

For more information, please see the Menas ACCS website here.

Chinese authorities in telecommunications corruption probe

China Mobile has 580 million mobile subscribers

The detention of a senior China Mobile Ltd executive by China's anti corruption authorities in March led to an investigation into more than 60 people, the official Xinhua news agency reported on 1st June.

Deputy general manager of China Mobile's data services division, Ma Li, provided information after being detained, leading to a probe into the whereabouts of up to 350 million yuan (US$54 million) of 'illegal money'.

Authorities launched an investigation into China's top three telecommunications companies: China Mobile, China Unicom and China Telecom. Exactly what the alleged corruption entailed was not made clear in the Xinhua report.

The probe is set to widen and senior management at all three companies have been asked to surrender their passports to the authorities. According to the Beijing Morning Post, every middle-level manager and above will be investigated.

The telecommunications industry in China is thought to be one of the most lucrative sectors in the country, and is no stranger to corruption allegations.

In December 2009, then vice chairman of China Mobile, Zhang Chunjiang, was removed from his post on allegations of corruption. It was found that he abused his position by taking bribes.

A total of seven senior managers from China Mobile have been arrested since 2009.

China Mobile is the world's biggest largest mobile operator by market value and it is the second most profitable company in China.

Chinese media reports suggest that the government will overhaul leadership at the major telecommuniations companies, although this has not been confirmed.

According to Bloomberg, Caijing magazine reported on 31st May that Xi Guohou, vice minister at the Ministry of Industry and Information Technology will replace Wang Jianzhou as chairman at China Mobile.

China Unicom's Chairman Chang Xiaobing will become chairman of China Telecom, being replaced at China Unicom by its current president, Lu Yimin.

Current China Telecom chairman Wang Xiaochu will become governor of Yunnan province, according to reports.

Data service provider companies associated with the three major telecom companies are also being investigatied. Ye Bing, CEO of ASPire Holdings, a subsidiary of China Mobile, has been under investigation since mid-May.

Sources: Bloomberg, C114, Reuters, Xinhua

For more information, please see the Menas ACCS website, here.

Leading Western banks hold Qadhafi's funds

Qadhafi's regime made billions of dollars through oil revenues

Some of the world's biggest banks are key holders of funds from Libya's Colonel Mu'ammar Qadhafi's regime, according to a report obtained by anti corruption group Global Witness.

A June 2010 document, leaked to Global Witness, showed the location of state oil revenues, managed through the state-owned Libyan Investment Authority (LIA).

As of 30 June 2010, the LIA had over US$53 billion invested. Japanese bank Nomura and the Bank of New York held US$500 million each. Over US$292 million is held by HSBC and Goldman Sachs has US$43 million.

Almost US$4 billion is held in structured products with banks, hedge funds and private firms: Societe Generale for example holds US$1 billion.

Some US$19 billion is held in Libyan and Middle Eastern banks.

The LIA also holds billions of dollars in shares, including global corporations such as BP, ExxonMobil, General Electric, Pearson and Halliburton.

Despite the fact that these are state assets, the Libyan people had no access to information on how the funds were invested because banks have no obligation to disclose state assets that they hold.

Global Witness is calling for new laws requiring banks and investment funds to disclose all state funds that they manage.

When Global Witness asked HSBC to confirm they held funds for the LIA, they reportedly refused, citing client confidentially.

"It is completely absurd that banks like HSBC and Goldman Sachs can hide behind customer confidentiality in a case like this. These are state accounts, so the customer is effectively the Libyan people and these banks are withholding vital information from them," said Global Witness director Charmian Gooch.

The Qadhafi family has significant person control over the LIA, which means it is essential that banks investigate whether they have done enough to ensure state funds have not been used for the family's personal benefit.

According to a prosecutor from the International Criminal Court, "Qadhafi makes no distinction between his personal assets and the resources of the country."

Global Witness is calling on banks holding Libya state funds to ensure they have done due diligence to prevent the transfer of state funds to accounts personally controlled by individuals with links to the regime.

According to the Sovereign Wealth Fund Institute, the LIA is the 13th largest sovereign wealth fund in the world. It scores two out of 10 on the institute's transparency ranking.

In May, the EU extended its economic sanctions against Libya to include the LIA and the country's central bank. It had already frozen assets of Qadhafi and some members of his family.

Sources: BBC News, Economic Times, Global Witness

For more information, please see the Menas ACCS website, here.