Slammed over land deals, HSBC says transactions legit

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CAIRO: HSBC came under scrutiny this week for the role it played in controversial land deals by senior Egyptian officials who are now being investigated on corruption allegations.

The bank, however, says it did not actually finance these deals and adds that its operations have always been transparent.

According to the Bureau of Investigative Journalism, based in London’s City University, HSBC was the most active European investment bank in Egypt and helped raise roughly £450 million ($742 million) for two of Egypt’s largest and most controversial property developers, Talaat Moustafa Group (TMG) and Palm Hills Development (PHD).

In a statement to Daily News Egypt, Charles Clarke, senior manager of corporate communications of HSBC Middle East, said, “As the leading international bank in Egypt, HSBC was involved in various financial administrative roles with some of the companies mentioned.”

He also added that the financing of these companies was not actually provided by HSBC, but rather “came from existing or new shareholders or from external investors.”

Many of Egypt’s business moguls, who were in their prime during ousted president Hosni Mubarak’s tenure, are now facing trials for selling or buying state-owned properties for unreasonably cheap prices as well as keeping business between them in close ties.

In the bank’s defense, Clarke said, “These transactions were a matter of public record, and were conducted with the full knowledge of government, the press, and the public at the time.

“All of these deals were subject to the required approvals of the Egyptian Stock Exchange and the Central Bank of Egypt.”

Sarah El-Banna, banking research analyst at Naeem Holding, told DNE, “They [HSBC] can’t do anything illegal outside of their policy. Maybe there was a problem in the pricing of the lands [during these transactions] but nothing illegal in the documents.”

PHD and TMG are also facing court cases disputing their purchase of land directly from the state — at undervalued prices — instead of through public auction.

The Bureau of Investigative Journalism said HSBC had on its Egyptian board of directors two ministers who oversaw privatization of state land in 2004.

Former transport minister Mohamed Mansour and his cousin, Ahmed El-Maghrabi, who served as housing minister from 2005 to 2010, are both shareholders in the parent company of PHD. While Mansour’s brother, Yasseen, is the chairman of the company.

Similarly, former parliamentarian Hisham Talaat Moustafa, who in 2009 was convicted of involvement in murder, was the chairman of TMG.

Palm Hills, Egypt’s second biggest publicly traded real-estate developer after TMG, has been recently under investigation for its property in the country’s North Coast as well as Sixth of October city.

Last April, in order to reduce land liability and avoid related payments to the government, PHD returned 190 feddans to the state. Just on Tuesday, they returned their largest piece of land yet, a 9 million square meter property in Egypt’s north coast getaway, Marsa Matrouh.

According to the Bureau’s research, PHD’s share offering which was overseen by HSBC in March 2010 helped the company raise LE 700 million.

Furthermore, the bank also presided over TMG, which is the country’s biggest developer, which owns a 33.6 million square meters property also currently being examined by Egyptian investigators.

Research by the Bureau found that HSBC was “joint underwriter and join global coordinator for TMG’s share offerings” while helping the company raise roughly £400 million.

According to the London-based Guardian newspaper, HSBC’s collaboration with Egypt’s most contentious businessmen has raised questions about the role played by Lord Green, the banks former chairman, who was also appointed as British trade and investment minister in January by prime minister David Cameron.

Experts say that as a leading international bank bound by stringent policies and monitored by European financial service institutions like Crédit Agricole and Société Générale, HSBC had to stick to specific protocol.

While this news will not affect other banks in Egypt, El-Banna says it might affect HSBC, but they “will deal with it.”

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