This past Saturday, May 7, the Egyptian press announced that an administrative court annulled the deal privatizing the retail chain Omar Effendi five years ago. The ruling cited numerous legal violations regarding the sale of public assets, especially when such assets include architectural and cultural icons — as the Omar Effendi sale did.

Even as it was sold in 2006, allegations of fraud cast a shadow on the transaction. A whistleblower accused then-Minister of Investment Mahmoud Mohieldin of forcing through the sale to a Saudi investor at a fraction of the chain’s real value. The press in Egypt reported that Mohieldin was the primary pusher behind the deal.

Like Mohieldin, the International Finance Corporation (IFC) of the World Bank Group was a cheerleader for the privatization of Omar Effendi, praising the agreement as a measure that will enhance growth in the country.  The IFC was also an investor. On its website, the IFC announced:

  • $40 million in debt and equity financing, supporting an important privatization that will pave the way for future privatizations.
  • Guidance: IFC’s experience with other international chains helped Omar Effendi revive its brand.
  • Job retention and creation as demand grows for local sourced goods.
  • Benefits for the country’s retail sector, which is a catalyst for further economic growth.

Only the $40 million actually materialized, however. As the Bank Information Center has reported:

  • this was hardly a model for other privatizations;
  • the Omar Effendi brand continues to languish;
  • thousands of jobs were lost rather than retained or created.

Most importantly, if the Omar Effendi sale had anything to do with the kind of economic growth that continued in Egypt, this is a link that the IFC should probably minimize rather than advertise today.

But the IFC is not the only World Bank connection to Omar Effendi. Mohieldin himself joined the Bank as Managing Director on September 8, 2010. He had been named to the post two months earlier, but purportedly would not accept the assignment until then-President Hosni Mubarak approved. Mohieldin owed a lot to Mubarak, and not just to the President, but also to his son Gamal Mubarak.

In September 2002, Gamal took control of the Policies Council of the National Democratic People’s Party (NDP) and began shifting the Egyptian economy rapidly toward free-market capitalism. Mohieldin, who would later join the President’s cabinet, sat at the time on the Board of HSBC Bank-Egypt, which lined up at the privatization trough to cash in on the deals generated by the Policies Council under Gamal.

In 2004, Gamal Mubarak promoted his close associates to membership on the Policies Council of the NDP, and Prime Minister Ahmad Nazif filled key economic posts with Gamal’s “reformers.”  The new group, known collectively as “the economy group,” included Finance Minister Youssef Boutros-Ghali, Foreign Trade and Industry Minister Rashid Muhammad Rashid, and the new Investment Minister, Mahmoud Mohieldin, all appointed on Dec. 31, 2004. Together they were called “Gamal’s Trio.”

Today, Gamal Mubarak is in jail, pending corruption charges. Boutros-Ghali fled the country on February 11, and faces arrest on corruption charges in Egypt. Abroad, he is sought by Interpol. The Egyptian Illicit Gains Authority has frozen the Swiss bank accounts of Boutros-Ghali and Rashid. And Mohieldin? There are only rumors — he’s under investigation, his assets have been frozen, he will soon be charged, etc. But while formal steps have been taken against Gamal, Boutros-Ghali and Rashid, Mohieldin remains in the clear.

Seems peculiar. Especially now. The Omar Effendi deal unraveled due to multiple violations of law, according to the legal filings. The principal shortcoming in this deal was the undervaluation of the chain, allegedly arranged by Mohieldin. And while his closest associates face intense legal scrutiny, Mohieldin does not. As Gamal Mubarak went to jail, Boutros-Ghali went on the lam and Rashid lost access to his offshore bank accounts, Mohieldin was traveling to Sri Lanka and assuring the President there of the World Bank’s continued support.

Odds are that he’s assuring the Egyptian government of the Bank’s continuing support, too. Last month, Egypt’s new Finance Minister, Samir Radwan, was in Washington seeking $2.2 billion in soft loans from the World Bank, according to Bloomberg and MENA, the state news agency. The situation is pressing.

So the circle closes. Mohieldin, as Minister of Investment, sold off state assets at bargain prices, apparently benefiting business associates in Egypt and abroad and squandering public revenues. After the government that sustained him fell under the weight of official corruption, the new government found that it must approach the World Bank for concessionary loans because of the financial deficits incurred by “Gamal’s Trio.” But one of the trio is running the World Bank. And Bank President Robert Zoellick blandly announced that he is not aware of any investigation of Mohieldin.

But documented allegations of corruption involving Mohieldin and the Omar Effendi deal were submitted to the Prosecutor General on February 22. On May 7, the court annulled the deal for legal violations. The circumstances beg the question: who in the Prosecutor’s office decided not to investigate Mohieldin and why?

Beatrice Edwards is International Reform Director for the Government Accountability Project, the nation’s leading whistlebloweradvocacy organization.