Hamdy El Fakhrany didn’t set out to strike a blow against Egyptian government corruption when he traveled to a state land auction in 2007. All he wanted was a quarter of an acre to build a house.
The auction was canceled, as were the others he tried to attend over the next six months, the 53-year-old engineer said in an interview in Cairo. Finally, a housing ministry employee took him aside and told him how things worked in President Hosni Mubarak’s Egypt.
“‘You are not Hisham Talaat Moustafa’ he told me,” referring to the billionaire whose family founded the country’s biggest property developer, Talaat Moustafa Group Holding. “‘If you were, you would have been given 33 million square meters (355 million square feet) of land without an auction, and for nearly nothing.’”
El Fakhrany left the meeting determined to keep coming back to learn as much as he could about the Talaat Moustafa purchase. He said he was barred from reading the contract and relied on handwritten notes slipped to him by someone else at the ministry to build a case that persuaded a court to annul the land sale underpinning the 120,000-home Madinaty project on Cairo’s outskirts. An appeals court is set to review the ruling May 24.
Publicity surrounding Madinaty, Egypt’s biggest property development, prompted other people with knowledge of land sales to provide El Fakhrany with evidence of suspicious deals. He says he’s now the plaintiff in more than a dozen lawsuits targeting state officials and developers.
“I’m not against private companies working, but why can’t they pay fair prices,” he said. “Those companies should not be an excuse to loot Egypt.”
A court reversed a 966,000-square-meter land sale to Palm Hills Developments SAE (PHDC), Egypt’s second-biggest publicly traded developer, based on another suit by El Fakhrany that claimed the price was significantly less than the market value.
Former Housing Minister Ahmed El Maghraby signed the Palm Hills sale document, said a panel of judges who annulled the transaction on April 26. El Maghraby owned a 4.6 percent stake in Mansour & Maghraby Investment & Development Co., which in turn holds 55 percent of Palm Hills, according to a company filing. He faces prosecution on charges of squandering public funds and profiteering in connection with the case.
Shares of Talaat Moustafa Group fell 0.7 percent to 4.2 pounds at 11:51 a.m. in Cairo today. Palm Hills declined 2 percent to 1.92 pounds, trimming the stock’s slump to 63 percent in the past 12 months. Six of October Development & Investment Co., known as Sodic, lost 3.3 percent to 63.1 pounds.
Dozens of Cases
El Fakhrany is preparing further lawsuits based on the information he has received, saying he already has enough documents to file 76 cases that challenge 126 projects. The contracting-business owner said he is working with his daughter, Yasmin, a practicing dermatologist, and using his own income to cover legal costs. El Fakhrany said he only hires lawyers for appeals cases, when they are required by law.
“If I had to pursue all those cases, I would spend all my time in the courts and parliament,” he said. “I would have to live there.”
His efforts have won him criticism as well as admiration. A Facebook page superimposes his face on a picture of a pirate and says “Together, let’s sue Hamdy El Fakhrany.” More than 400 people have indicated they like the page.
The size of the Madinaty deal and the government’s attempts to override the court ruling became a focus of criticism of Mubarak, his family and corruption in Egypt. A popular uprising that started in January forced he president to resign after 30 years in power.
El Fakhrany already knew some details of the Madinaty contract before a court order finally allowed him to view it. Even so, he said, he was still shocked by the terms.
Talaat Moustafa Group (TMGH) received 33 million square meters of land, which it pledged to develop over 25 years under the 2005 deal, which was completed without a public auction, El Fakhrany said. In return, the state was entitled to 7 percent of the residential properties built, while the developer would get 93 percent, he said. Madinaty is designed to house 600,000 people and include a golf course, hotels, commercial space, a shopping center and schools.
The government also agreed to fully exempt the developer from all taxes and fees incurred during construction, including imports of construction materials, and relinquished rights to any commercial or retail space developed on the land, El Fakhrany said.
Like an Enemy
“The deal couldn’t have been any more slanted on the side of the developer and against Egypt,” he said. “It was like it was drafted by an enemy of the state.”
Jihad Alsawaftah, chief financial officer at Talaat Moustafa Group, didn’t return calls made to his mobile phone and two e-mails sent to him seeking comment.
Housing Minister El Maghraby insisted the court’s decision last June to cancel the contract wouldn’t derail the Madinaty project. Almost two months later, Egypt’s public prosecutor ended an investigation into the land purchase without pressing any charges.
An appeals court upheld the earlier court ruling canceling the sale. A committee formed by Prime Minister Ahmed Nazif responded by revoking the sale and reallocating the same land to the Talaat Moustafa under a new contract, saying the law allows it to allocate land by a direct order to “protect the public interest.”
On Nov. 23, an appeals court ruled on the case again, saying the state must respect an initial verdict canceling the land sale. The government then said it would change the law to allow the project to go ahead.
Before that could happen, Egyptians swept Mubarak’s government from power. Housing Minister Maghrabi was arrested on corruption charges, along with Mubarak himself and his sons Alaa and Gamal.
“All the companies that benefited had at their helm people who were close to Mubarak,” El Fakhrany said. “There was a culture of looting. Everyone saw people around them plunder and thought: ‘why not me?’”
While investigating the Madinaty case, El Fakhrany discovered that a Cayman Islands-based fund called Horus Investments III was a shareholder in Talaat Moustafa Group and lists Mubarak’s son Gamal as one of its owners.
Shareholders in High Places
Egypt-based investment bank EFG-Hermes said in a February filing that Gamal Mubarak, the president’s son and former head of National Democratic Party’s policy committee, owned 18 percent of its EFG Private Equity subsidiary. Of the two current funds at EFG Private Equity, both Horus Private Equity Fund II and Horus Private Equity Fund III have invested in Talaat Moustafa Group Holding, according to information on EFG-Hermes’s website.
Hisham Talaat Moustafa, who was elected to the Egyptian parliament’s shura council in 2004, was convicted in May 2010 of paying a former police officer to kill his former girlfriend, Lebanese pop singer Suzanne Tamim. His sentence was reduced from death to 15 years in prison after a retrial that ended in September.
During the interview with El Fakhrany, in the cafe of the journalists syndicate in Cairo, a woman approached and asked if she could contact him and provide some documents to review. She thanked him for his work.
“All the land, which was acquired through corruption, must be returned to the country or those companies must pay the fair value for it,” El Fakhrany said. “Only then, we will settle and let the projects go on.”
To contact the editor responsible for this story: Andrew Blackman at email@example.com.