Cma-cgm: Jacques Saade’s Involvement in “damietta Gate”

Free translation of the article published in the				of CMA-CGM; one more element that adds up to the
egyptian daily « Massaeyat » of October 17th				conflict as to the ownership of this company and
2006				increases the legal stranglehold around Jacques Saade.
Jacques Saade’s involvement in “Damietta				Damietta “Gate” to date is the last link in a
Gate”				series of legal proceedings facing Jacques Saade.
New developments in the case of the Damietta				If this case is taking an official aspect in Egypt given
company next November				that it involves a number of irregularities, corruptions
The General Prosecutor launches new investigations				and misappropriation of public funds, other legal
in relation to public funds and other irregularities				proceedings have been launched in many countries in
perpetrated after the arrest of Ali Massaad				which the conflict between the brothers Jacques and
The appearance of the accused and the lifting of the				Johnny Saade is raging around the ownership of
sequestrations are the main issues of this case				CMA-CGM, the first shipping company in France and
This case locally known as the “great corruption				the third worldwide.
case of the Damietta Containers” and				Six years after the signature of a contract on
internationally named the “Damietta Gate”				September 16th 2006 between the two parties
has shaken the Egyptian, Arab and international public				aimed at ending the conflict but which deprived
opinion.				Johnny Saade of his legitimate rights due to a
From the first audience, three of the six accused				deceitful set-up, new facts could reveal unexpected
confessed, the third, the fifth and the sixth and				developments in the coming months very probably in
acknowledged having been involved in the briberies				favor of the latter.
paid to Ali Massaad, whereas the latter denied at the				The internet site owned by Johnny Saade’s
beginning the whole matter.				company Mistral Holding s.a.l., contains a huge amount
The six accused, Ali Massaad, chairman of the board				of documents, compromising reports and legal
of directors of the Damietta Container Company,				evidence, that explains in detail the conflict between
Jihad Anis Dagher, employee of Leader Company,				the two brothers which is being reported at the top
Nabil Elie Bassil, CMA-CGM regional Finance and				of the news in the Lebanese, arab and international
administrative director, Mostapha Mohamad Khalil				press. Among these documents a report issued by
Abdel Monhem, Director of the Damietta subsidiary,				the financial expert Antoine Gaudino explaining the
Jamal Abdel Razek Abdel Sadek and Ahmad				circumstances that led to the said conflict.
Mahmoud Ahmad Yacoub have been referred to the				One can read in the report that the conflict between
Penal Court by the General Prosecutor (financial				the two Saade brothers as the major shareholders
section), and the second hearing is set for November				of the CMA-CGM Group is mentioned by the media
9th for a contradictory debate and confrontation				as a family feud due to Jacques Saade’s
with the prosecution’s witnesses who will appear				statements, but Johnny, who owns 48.44% of
before the court for corruption and misappropriation				CMA’s shares accuses his brother of hiding
of public funds.				information in general and more specifically regarding
The most surprising aspect of this case it seems is				transactions initiated by Jacques Saade in France and
that Ali Massaad’s successor as head of the				elsewhere.
Damietta Container Company is following the same				The conflict actually starts by the lack of
methods as his predecessor, a matter which				transparency during the acquisition of CGM by CMA,
compelled the General Prosecutor to launch a second				and Jacques Saade’s attempt at controlling the
investigation pertaining to the period following Ali				group for his sole personal benefit.
Massaad’s management of the company. This				The preliminary investigations undertaken by Gaudino
investigation has been postponed following the				on August 29th 1997 at the request of Mistral
juridical holidays and the promotion of prosecutor				holding, revealed that the management system
Wadih Hanna Nached.				established by Jacques Saade on behalf of CMA
Ali Massaad, known as the “Bey”, is now in				made Johnny Saade fearful, as major shareholder, of
prison.				the company’s future.
This case is about corruption, account manipulations,				With further investigations, various fiscal irregularities
financial fraud and a plot between the Damietta				and others have been discovered, and are part of
Container Company and French company CMA-CGM				the conflict between the brothers.
presided by Lebanese national Jacques Saade whose				The main historical stages of this conflict are the
corporate headquarters are in Marseille. The file that				following:
is being dealt with by the Court of State Financial				The Limited company CMA (Compagnie Maritime
Security in Egypt pertains to the misappropriation of				d’Affretement) was created by brothers Johnny
funds that could reach up to 20 million dollars.				and Jacques Saade on September 8th 1986 and
The main accused is being held in temporary custody				registered at the RCS of Marseille on April 8th 1987
while awaiting the outcome of this case.				under number 340 353 911.
This case is of major interest in its Egyptian,				The initial capital was FFr.250,000. It was to be
Lebanese and French ramifications.				increased following various share capital increases in
The Egyptian media has released important pieces of				1986, 1987 and 1993 as well as on May 26th 1994
information revealing that this is not an isolated				further to an extraordinary general assembly to
corruption matter in the shipping sector in Egypt. The				reach FFr. 60,000,000 divided in 600,000 shares with
former General Prosecutor Maher Abdel Wahed has				a nominal value of FFr.100.
already ordered the chairman of the board of				At the latter date and according to the
directors of the Damietta Container Company, Ali				shareholders’ registry, the shares were
Massaad, to be placed in custody and his personal				distributed between three Lebanese companies: Merit
assets seized until the end of the investigation; the				s.a.l., owned by Jacques Saade, 48.41%; Mistral
latter decision has been notified to the Central Bank				Holding s.a.l., owned by Johnny Saade, 48.41%.
of Egypt, the Finance Directorate and the land				The six shares attributed to the “Jacques Saade
registry.				Family” are held by Mr. Jacques Saade, his spouse
The General Prosecutor opened an investigation				Mrs Nayla Salem, his daughter Tania, his son
following a declaration presented by the president of				Rodolphe, his brother-in-law Mr. Farid Salem and
the Central Accounting Agency regarding the				Mr.Tristan Vieljeux.
statements of accounts pertaining to the company				The three Lebanese companies are all registered at
owned by the holding company for land and shipping				the Beirut registrar of Companies and domiciled in the
transport presided by the General Mohammad				same city and the same address.The company
Youssof already indicted in the case of the seizure of				Rodolphe Saade & Co is owned by Jacques Saade
the “Salem 2” vessel in the port of				and Johnny Saade, 50% of the shares each,
Alexandria. The president of the Court of Appeal of				respectively through Merit s.a.l. and Mistral Holding s.a.l.
the district of South Cairo, Adel Joumaa had set the				CGM s.a. (Compagnie Generale maritime), with a
next hearing to last May 29th in order to take a				capital of FFr. 1,275,948,600 and registered at the
decision as to the verdict of the General Prosecutor.				RCS of Nanterre under number 562 024 422, has
The investigations have revealed a plot between				been transferred by the French government to the
engineer Ali Massaad and the managers of the				private sector by ministerial decision on October 21st
foreign shipping company regarding the signature of				1996.
an agreement according to which the foreigh				The capital of CGM is distributed as follows: 90% of
company could benefit from exceptional rebates to				the shares came to be held by CMA, 6% personally
the detriment of the Damietta Public Company that				by Jacques Saade and 4% between three other
could reach up to 5,5 million dollars.				shareholders.
This scandal is worrying Egyptian public opinion as well				CMA got 96% of the CGM shares whereas the 4%
as the political scene, as it happens to occur after				remaining were held by three other shareholders; and
other scandals such as the one related to the				Jacques Saade’s stake reached 51% whereas
Directorate of Transport, the Bank of Cairo and the				Johnny’s, through Mistral holding, did not reach
robbery of steal and other metals.				49.9%.
The investigations have proven the existence of a				The first findings revealed a certain number of
plot between the first accused Ali Massaad Saad and				irregularities, the most important of which related to
the President of the foreign shipping company, which				general assembly meetings.
resulted in the disappearance of 6 million dollars from				An extraordinary general assembly was held at CMA
the Egyptian treasury. It has been established,				head offices on December 12th 1996 without letting
following the house search, that the accused regularly				Mistral Holding s.a.l. have the opportunity to
received briberies from France.				participate. This assembly was aimed at granting the
In a surprising rebounce, the investigation revealed				board of directors the right to increase the share
that the managers of the international shipping				capital, in one or many times. This authorization to
company based in Marseille (France) reimbursed the				the board of directors was valid for a period of five
amount of 3,1 million dollars by bankers cheque to the				years and aimed at increasing CMA’s capital from
Damietta Company following a compromise aimed at				FFr. 60,000,000 to a maximum of FFr. 135,000,000.
smothering the case, after that the General				The report added that until December 12th 1996
Prosecutor started a legal action against this				CMA’s management has always convened Mistral
company and seized the assets of Ali Massaad. This				holding s.a.l. by rapid courier (DHL) and simultaneously
payment did not put an end to the legal actions but				by fax, given postage delays to Lebanon. In an
led to the discovery of another aspect of this case				unusual manner, the convening to the extraordinary
namely the direct involvement of the French				general assembly meeting of December 12th 1996
company in corrupting Egyptian officials.				was sent to Mistral Holding s.a.l. on November 26th
Despite CMA-CGM’s denial of any involvement in				1996 by recommended letter with acknowledgement
this corruption case declaring that an internal				of receipt.
investigation is underway in coordination with the				Everything was done in order to prevent Johnny
Egyptian authorities, the Sunday Express newspaper				Saade to be informed in due time and therefore to
revealed that CMA-CGM presided by Jacques Saade,				participate to the main decisions to be taken including
paid 10,000 dollars per month to Massaad, and has				the share capital increase.
reimbursed as reparation 3.1 million dollars to the				It is within the above-mentionned context that
Egyptian port of Damietta.				Johnny Saade seized the Tribunal of Commerce of
In a statement made by Jacques Saade to the same				Marseille who designated on December 23rd 1996 a
newspaper, he mentioned that these people were				judicial “huissier’ in order to get the
paid by the CMA’s Egyptian subsidiary, that no				documents pertaining to general assemblies and board
transfers were made by the French head office and				of directors held by CMA.
that his company was investigating in coordination				Following this judicial decision, Mr Johnny Saade was
with the Egyptian authorities. Various managers were				able to raise various irregularities. Four Board of
heard including the accountancy manager.				Directors meetings were held on June 7th,
According to the Sunday Express, this is an				September 20th and November 14th & 15th 1996
extremely serious situation and other countries,				without Mistral Holding s.a.l. being ever convened
including the United States, are being worried. It				whereas the minutes of meetings stipulated that
seems that political pressures have been exerted in				Mistral Holding s.a.l. was “absent and
order to prevent CMA-CGM from acquiring from the				excused”.
English company P&O its shares in the American port				A general assembly was held on March 27th 1997 in
of Dubai for security reasons. The American				cancellation of the share capital increase decided by
authorities are undertaking an investigation regarding				the general assembly of December 12th 1996.
this matter.				This did not however erase the irregularities due to
Other pieces of information collected in parallel to the				the share transfers and the acquired majority to the
secret investigation indicated that many points in this				benefit of Jacques Saade which jumped from
case were still not clear. The most important element				48,41% to 50,001%.
that has been discovered until now is the false				Irregularities were noticed regarding the presentation
contract -which is the main aspect of the				of balance sheets. It appears from CMA’s
investigation- signed by Farid Salem, CMA-CGM				balance sheets in the offer for the acquisition of the
general manager and brother-in-law of Jacques Saade.				CGM of October 3rd 1996, that CMA was in good
It has been revealed that Abdel Razek is the financial				financial health, that it increased its shareholders’
manager of CMA-CGM in Egypt, presided by Jacques				equity funds, reaching FFr. 700 million and the CGM
Saade, as indicated by the social security registers.				acquisition project would allow the financial
All the evidence indicates that the financial offenses				rehabilitation of the latter no later than 1999.
have been perpetrated by the chairman of the				The findings made on certain accounting entries called
Damietta Company, in addition to the irregularities				in question the validity of the level of CMA’s
within the contract signed with the shipping line in				shareholders’ equity which were lower than the
Marseille.				reality. These shareholders’ equity funds were
In an Al-Ahram article of May 26th 2006, it seems,				much lower than the FFr. 200 millions and CGM’s
according to the investigations undertaken by the				takeover was a juicy business deal that Jacques
financial control services [official body], the principal				Saade wanted to keep for himself to the detriment
accused perceived important amounts on a regular				of his brother Johnny.
basis in exchange for those irregularities. The former				This report mentioned, backed by the necessary
General Prosecutor Wadih Hanna Nached issued				documents and figures, that the filed balance sheets
search-warrants in the offices of the said shipping				were false and did not reflect the truth about
company (CMA-CGM) in Alexandria, which resulted in				CMA’s accounts, a matter that was to
the seizure of numerous pieces of evidence				jeopardize the future of the company and the
confirming the transfer of important amounts from				interests of Johnny Saade, its main shareholder.
the accounts of the latter company in favor of the				This report mentionned that Jacques Saade made his
accused.				brother Johnny become a minority shareholder
According to the “magazine Rose El				through successive steps and by premeditation in
Youssof” that published the result of a long				order to prepare the acquisition of CGM to his sole
investigation on the subject, the chairman of the				personal benefit; the report also summarized the
Damietta Company is the owner of two palaces in				various attempts of Jacques Saade to escape legal
the city of Damietta on the river Nile as well as a				proceedings which were accumulating every day.
dozen estates and three villas in the touristic village				Of importance in this conflict is the re-opening of a
of Yasmina in Port Said, in addition to five hectares				financial investigation by the Paris Tribunal regarding
of agricultural land in the latter city, 20 million Egyptian				the accounting irregularities and fiscal fraud
pounds deposited in bank accounts in his name, his				perpetrated by Jacques Saade in managing
wife’s and children’s and a number of bank				CMA-CGM.
accounts abroad which inventory is not yet known.				Other information indicate that Egyptian courts of law
It was mentioned in the article that Ali Massaad had a				are entangled in an important corruption file involving
nickname, “the Bey”, to the order of whom				the Port of Damietta since the 90s and are
checks were drawn up.				attempting to determine the scale of corruption
The investigations revealed that the number of				involving the representatives of the French shipping
containers CMA-CGM sent in transit through the port				line on behalf of their managers in France. While
of Damietta, did not exceed 70,000 teus for the last				awaiting new developments, the director of the Port
12 months allowing the French company to benefit				of Damietta has in the meantime been arrested.
from rebates of the amount of 5,5 million dollars. This				On another level and following the penal lawsuit filed
led them to illegally modify the contract with the				by Mistral Holding, Paris Tribunals (France) have
Damietta Company by paying briberies in addition to				launched legal investigation regarding the CMA-CGM
the monthly remuneration of Ali Massaad.				balances sheets that are allegedly false. The
Rose El Youssof added that Ali Massaad pretended				investigation has been entrusted to two prominent
that he made his fortune in Saudi Arabia, where he				magistrates in France. The aim of this investigation is
worked for 12 years, and in Bahrein, where he				to shed light on the possible fiscal fraud and
worked 5 years; but was not able to keep the				concealment of the real profits, a matter that goes
evidence that would clear him.				back to the signature of the contract that has put an
A surprising aspect is that he appeared before the				end to the conflict between brothers Jacques and
court, which ordered the seizure of his assets and his				Johnny Saade.
wife’s, wearing bad quality clothes, in an attempt				Finally, we can add to this multi-faceted judicial file
to conceal his wealth. The most astonishing is that				that is surrounding Jacques Saade, a matter that is
the law firm handling his defense is one of the major				worrying investigators near the General Prosecutor
firms specialized in shipping matters in Egypt.				of Lattakia in Syria. It involves the falsification of
The investigation is moving forward with the hope to				official documents, the use of false documents and
shed light on other thorny aspects of this case.				usurpation of legal capacity, involving Choucri el
There is a strong probability that the General				Khoury that seems to have acted on behalf of
Prosecutor would prosecute Jacques Saade, chairman				Jacques Saade.

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Cma-cgm: Jacques Saade’s Involvement in “damietta Gate”

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