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Surprise Arrests a ‘Message’ for Mubarak’s Sons to Back Off

Egypt- Alaa and Gamal Mubarak
The sons of ousted Egyptian president Hosni Mubarak, Alaa (R) and Gamal are seen behind the defendants’ cage during their retrial at the Police Academy in Cairo on June 8, 2013. Photo AFP

The Cairo Criminal Court ordered the arrest of five prominent businessmen on 15 September 2018 in connection with an embezzlement case dating back to 2012. Among those arrested were Alaa and Gamal Mubarak, the sons of former Egyptian president Hosni Mubarak. Commentators believe Gamal’s frequent public appearances played a role in the surprise arrests.

The defendants were released on bail on 20 September 2018, and the first hearing has been schedule for 20 October 2018. The men are accused of violating stock market rules to make unlawful profits amounting to EGP 2 billion ($111 million) from the sale of al-Watany Bank of Egypt.

The other men arrested are Amr el-Kady, head of risk management at the investment company Qalaa Holdings; and Hassan Heikal and Yasser el-Mallawany, former co-CEOs of investment bank EFG Hermes.

Other defendants in the case include Ayman Fathy Suleiman, former head of al-Watany Bank, and his son, Ahmed Naeem Badr, managing director of Naeem Holding for Investment; and Hussein el-Sherbiny, managing director of the Arab African Investment Holding.

The court gave the defendants the option to settle the case financially and avoid a prison sentence, according to the local business newspaper Alborsa. The defendants are reportedly divided over whether or not to settle.

The arrests came as a surprise since a report by an ‘expert committee’ appointed by the court had recommended that most charges in the case be dropped.

Some media have speculated that the arrests are related to the frequent and high-profile public appearances by Alaa (57) and Gamal (54) Mubarak since early 2017. The Sydney Herald reported that this stoked rumours of a possible presidential run by Gamal in 2018. Although that did not happen, the brothers continued to build a public image. Alaa, for instance, became active on Twitter, regularly commenting on political news.

“Most definitely their arrest was related to the higher profile of the brothers, and to the more widespread re-emerging public profile of people close to the Mubaraks,” a Cairo-based analyst told Fanack on condition of anonymity. Alaa’s social media presence also “irks” the current leadership, the analyst said.

With close links to the business elite, Mubarak’s sons symbolize their father’s corrupt regime in the eyes of the public. They were first arrested on several charges of corruption and illicit gain shortly after Mubarak’s overthrow in 2011. In May 2014, they were handed a three-year prison sentence for embezzling public funds worth EGP 125 million ($7 million) allocated to maintain presidential palaces. The two men were released in October 2015 after the court ruled that they had served the requisite time.

On 22 September 2018, the Court of Cassation rejected a request from the brothers’ lawyer to resolve the presidential palaces case and reinstate their political rights. “[The arrest] is very much about sending a message: play by the new rules or don’t play at all,” the analyst said.

That message has arguably been sent before in a subtler way. In May, Yasser Rizq, chairman of the state-owned newspaper al-Akhbar al-Youm and alleged confidant of President Abdel Fattah al-Sisi, penned an opinion piece stating that al-Sisi would run for a – currently unconstitutional – third term in 2022, and warned Gamal from pursuing any political ambitions.

In a talk show, Rizq also blamed Gamal for the outbreak of the 25 January Revolution in 2011, argued that he had not been punished for his “political crimes”, accused him again of having presidential ambitions, and claimed that he had a pact with the outlawed Muslim Brotherhood.

Alaa lashed out against these allegations on Twitter, describing them as ‘poor and superficial analysis’.

The high profile of those arrested had a strong effect on the Egyptian stock market, which recorded the largest drop since January 2017 on the Sunday after the arrests, hitting its lowest level since February 2018. EFG Hermes and Qalaa Holdings were hit particularly hard, with their stock down 8.6 per cent and 6 per cent respectively. On 19 September 2018, the stock market fell even further, marking the largest drop since mid-2016.

The analyst believes that the five defendants were released on bail a day later because of this stock market loss.

The current regime’s issue with the Mubaraks’ emerging profile is historically rooted. “The last years of Mubarak’s rule witnessed the expansion of political power of a business elite that was tied to the regime and in particular to his sons Gamal and Alaa … and it’s likely the army didn’t appreciate that,” Timothy Kaldas, non-resident fellow at the Tahrir Institute for Middle East Policy, told Fanack chronicle.

Moreover, plans for Gamal to succeed his father as president, changing the republic into a birth-line succession system, met with strong resistance that is believed to have been one of the factors leading to the 25 January Revolution.

Furthermore, the armed forces, which since the overthrow of the monarchy in 1952 have been a key player in Egyptian politics, were not happy with Gamal, a non-military man, and his presidential ambitions.

Researcher Gijs Verbossen from La Trobe University in Australia, described in detail the growing resentment of the army towards the Mubarak regime in his 2018 dissertation Mubarak’s weakness, showing how this regime increasingly favoured the business elite – consisting of Gamal and Alaa’s cronies – and the security forces, while marginalizing the armed forces as a political power. ‘With the help of Gamal Mubarak, the business elite seated itself at the core of the Mubarak regime, where their mutual interests converged and resulted in Egypt’s kleptocratic state,’ he wrote.

The budget allocated for the army shrunk significantly under Mubarak’s rule, from an estimated 19.5 per cent of GDP in 1981 to 2.1 per cent in 2010. On the other hand, the budget and size of the police and intelligence services increased, and police officers had a far stronger representation in Mubarak’s National Democratic Party than army officers. Mubarak effectively transformed Egypt from ‘a military state into a police state’, Verbossen noted.

This eventually led the army to abandon Mubarak when protests against his rule broke out in 2011, and it even participated in his ouster. ‘It was a chance to dispense with the regime that orchestrated [the army’s] institutional downfall, practically without firing a shot,’ according to Verbossen.

Under the leadership of military strongman al-Sisi, the army has regained its central position in the state. Many new governors are military men, weapons imports have increased sharply and the army’s business interests are expanding “tremendously”, in the words of the previously quoted analyst. Egypt has made headlines in recent years with large and expensive military purchases, such as Rafale fighter jets from France and MIG fighter jets from Russia.

“There are certainly a lot of people in the inner circle of the current leadership that would take issue with [the Mubarak sons] trying to emerge as political actors,” Kaldas said, while adding, “It should be kept in mind the allegations of corruption against them are credible.”

What is less clear is whether the Mubarak sons and their business cronies actually pose a threat to the current leadership. “Probably not,” the analyst said. “What is left of the intelligence service loyal to Mubarak?” However, there seems to be a perceived threat, stemming from al-Sisi growing “increasingly paranoid” and “untrusting” as his popularity declines. Previous cases have shown that anyone not fully under al-Sisi’s watch is considered a threat, with clear examples being the presidential hopefuls Sami Anan and Ahmed Shafiq.

In this political climate, there is no space for a vocal Mubarak clique.

Further Reading

Fanack’s Egypt country file provides a comprehensive overview about Egypt, its history, politics, culture, economy and...
Between 1981 and 2011, Muhammad Hosni Mubarak was the president of Egypt. A popular revolution overthrew Mubarak in 2011...
Hosni Mubarak, a former Air Force general, continued on the path Sadat had laid out. The struggle against radical Islami...

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