Fraud inquiry in Egypt drags in top UAE firms Damac and Al-Futtaim

No suggestion of impropriety by Al-Futtaim Group or Damac Properties as ex-ministers in Cairo face investigation into corruption over land sold at below market prices.

No suggestion of impropriety by Al-Futtaim Group or Damac Properties as ex-ministers in Cairo face investigation into corruption over land sold at below market prices.

Two of the UAE's largest property companies have been unwittingly dragged into an investigation of alleged corruption by former Egyptian government ministers.

There is no suggestion of impropriety by Al-Futtaim Group, the family-owned conglomerate that built Dubai Festival City, or Damac Properties, one of the biggest privately owned developers, both of which bought land from the Egyptian government before the revolution.

Egyptian government ministers who facilitated the land sales are under investigation for alleged corruption and abuse of public funds.

They include the former housing minister, Ahmed el Maghrabi, who is in prison in Cairo awaiting a trial expected to begin today, and the former tourism minister Zuhair Garana. Other business leaders, including the steel magnate Ahmed Ezz, are also under investigation.

Since the removal in February of Hosni Mubarak as president of Egypt, thousands of corruption allegations have surfaced and some of the country's best-known businessmen have gone on trial.

Protest groups have called on the military government to cleanse the country of the cronyism that they say stifled the economy and hurt the prospects of everyday Egyptians.

Niall McLoughlin, a Damac spokesman, confirmed the company was involved in "many ongoing negotiations" with officials in Egypt but declined to comment on the nature of the discussions. "As it is sub judice, any comment would be speculative," he said. "At the appropriate time we will make a comment."

Damac did not give details about its dealings with the Egyptian government. It is developing Hyde Park, a 1,500-hectare housing development east of Cairo. In 2009, Egypt's Housing and Development Bank bought a 39 per cent stake in Damac's Egyptian venture.

Al-Futtaim said it was eager to continue building Cairo Festival City in New Cairo. It said it had paid the full contract price set by the Egyptian government before the revolution, but over the course of its agreement it was ordered to pay additional sums.

Al-Futtaim said only that it had paid more than 2.7bn Egyptian pounds for the project so far and had an additional 5.7bn pounds worth of construction contracts under way.

It first invested in land for Cairo Festival City in May 1997, according to a timeline provided to The National.

It signed a deal with the New Urban Communities Authority to buy 669 feddans (288 ha) of land in New Cairo and paid 85m pounds to level an old quarry on the land.

In July 2004, the government issued a decree approving the Al-Futtaim plans and set a 10-year deadline for the project.

In 2006, the group said it paid "the price of the land in full", but two years later the Egyptian government amended the contract to include a 287m pound price increase. This was also paid, the group said.

Several businessmen under investigation have offered to pay additional funds to the new government to make up the difference between the prices paid and the market prices, said Hesham Gaafar, a prosecutor at the Public Prosecution Office.

"We are studying the issue, but we have not accepted any offer yet," Mr Gaafar said. "It's under review."

Al Ahram, Egypt's largest newspaper, said a group of businessmen had offered more than 2bn Egyptian pounds to avoid prosecution.

The Egyptian property market has been one of the most vibrant in the region, attracting many investors from the Gulf.

Emaar Properties and Qatari Diar are among other companies to launch projects there.

The rapid growth and increasingly speculative nature of the Egyptian property market made it a lucrative business for the Cairo government, which owned huge tracts of land around the country.

Mohammed Serry, managing director of Serry Law Office in Cairo, said property was "the main business which made the best profits over the past three or four years".

Officials who gained personally from those deals are now being investigated, he said.

"It's a period now where everybody is paralysed until these investigations are done," he said. "Some of the heads of companies have fled the country."

A debate has begun in Egypt about how to handle the prosecutions of businessmen found guilty of corruption. On one side, there is a movement to allow them to pay reparations to avoid prison. Others advocate their incarceration.

UAE companies have already begun to feel the effect of court actions.

An administrative court ruled that Al Dahra Agricultural's purchase of 100,000 feddans of land from the Egyptian government was against the law because the land had not been auctioned at market prices, and the court therefore voided the sale.

Al Dahra said the land deal was no different from many others with the government.

The company originally said it would invest $500 mn (Dh1.83 bn) in the project in the south-west of Aswan.