Forget the allegations that former Egyptian president Hosni Mubarak and his family stashed billions of dollars abroad, much of it in Swiss bank accounts and real estate in London and Manhattan. The ailing Mubarak, reported to be suffering from heart problems, may be much closer to his money as he recuperates in the presidential suite of a pyramid-shaped hotel in the glitzy, sun-splashed Egyptian resort town of Sharm al-Sheikh.
Western diplomats and law-enforcement officials tell NEWSWEEK that many of the secrets of the Mubarak family’s wealth may be revealed along the palm-fringed streets of this town—Egypt’s equivalent to Orlando or Las Vegas, where sprawling Western-style luxury hotels, shopping centers, and Starbucks and McDonald’s outlets stretch for miles along the coastline of the southern Sinai Peninsula.
“You can be certain that—directly and indirectly, legally and illegally—the Mubarak family, especially Mubarak’s sons, have shared in the profits of the boom in Sharm al-Sheikh,” said a European diplomat who was based in Egypt until recently. “The family’s cronies own so much of it.”
Prosecutors have just gotten started, but they have plenty of material to work with—including evidence emerging almost daily of how Mubarak’s government awarded lucrative contracts and real-estate deals to his closest friends. Investigators appear to be paying special attention to a multibillion-dollar natural-gas deal with Israel handed to a company run by a man often described as Mubarak’s best friend.
The 82-year-old Mubarak, who preferred to spend his time in Sharm al-Sheikh instead of smoggy, overcrowded Cairo in his final years in office, fled to the Red Sea resort town once and for all after he was forced from power in February. He was rushed to a modern tourist hospital last week after complaining of chest pains that began—conveniently, perhaps—as he was being interrogated by Egyptian anti-corruption prosecutors. Investigators cut the interview short but also announced that Mubarak is now effectively under house arrest. (He was transferred to a military hospital late last week.)
Over the years, Mubarak has made his home in Sharm al-Sheikh in a spacious villa in a large beachfront hotel complex, close to a championship golf course and hidden from street view by 30-foot-high whitewashed walls. Among his neighbors: Bakr bin Laden, a half-brother of Osama and scion of the family’s multibillion-dollar construction fortune, whose home is much larger and flashier than the ousted Egyptian leader’s.
When the Sinai Peninsula was returned to Egypt from Israeli control in 1982 under the Camp David peace accords, “Sharm,” as it is known to many Western tourists, was a sleepy fishing village boasting three small Israeli-owned hotels and a snack hut. Today, there are nearly 200 hotels and resorts, many of them owned by close friends and confidants of Mubarak, whose government made development of the tourism industry in the southern Sinai a national economic priority.
Sharm al-Sheikh draws hundreds of thousands of mostly European tourists each year with the promise of uninterrupted sunshine and some of the world’s best scuba diving. In the weeks since Mubarak went into exile, Western diplomats say it has been difficult to track his health and state of mind, although there have been consistent reports that he is suffering from near-suicidal depression and was so outraged over his sudden fall from power that he refused to take prescription medicines for his heart problems, claiming he preferred instead to die.
In his first public statement since his ouster, Mubarak said in an emotional prerecorded speech this month that he amassed no great wealth during his 30 years in power. He claimed to have a single bank account in all the world—in an Egyptian bank. “I was hurt very much, and I am still hurting—my family and I—from the unjust campaigns against us and false allegations that aim to smear my reputation,” he said.
The statement appeared timed to the disclosure that prosecutors planned to question Mubarak and his family over allegations of corruption and abuse of power, including the murder and torture of antigovernment demonstrators during last winter’s uprising. The sons, Gamal and Alaa, both wealthy businessmen, were taken into custody in Sharm al-Sheikh last week and flown to Cairo, where they were jailed.
Egyptian news reports suggest that Mubarak’s free-spending sons have been at each other’s throats since their father’s fall, blaming each other for creating the public image of the family as corrupt and decadent.
Prosecutors are focusing on Mubarak’s ties to developers in Sharm al-Sheikh, especially Hussein Salem, an Egyptian spy turned businessman in his early 80s who is one of Mubarak’s closest friends. Salem is known as the “godfather of Sharm al-Sheikh” because of his early investments in hotels and housing developments in the southern Sinai. Prosecutors are expected to focus on the 2005 gas deal with Israel and why Mubarak handed the billion-dollar contract to Salem, whose whereabouts are a mystery, fitting for a shadowy former Egyptian intelligence officer and global arms trafficker. (He shelled out $3 million to the Justice Department in 1983 to settle criminal charges that he overbilled the Pentagon on weapons shipments to Egypt.)
Salem was reported to have fled Egypt for Dubai, and then Switzerland, days ahead of Mubarak’s fall. A friend of Mubarak’s since at least the 1960s, he is seen in Egyptian business circles as the Mubarak family’s investment adviser and “fixer.” The authoritative newspaper Al-Ahram reported last month that Salem’s personal assets in the country were frozen because of allegations of corruption. Spokesmen for Salem did not respond to requests for comment from NEWSWEEK.
Two Western diplomats who closely follow Egyptian affairs, speaking on condition that they not be identified by name, say that the Mubarak government is widely understood to have sold government land in Sharm al-Sheikh to businessmen like Salem at a tiny fraction of its value. “It was pennies on the dollar,” says one diplomat. “Then Mubarak and his family and their allies would see benefits in return, presumably some kickback or a share of the profits.”
Among diplomats and business leaders in Egypt, there is also suspicion that Mubarak and his extended family somehow profited massively from the gas deal with Israel—an agreement that has been hugely unpopular with much of the Egyptian public, given widespread hostility in the country toward Israel.
Ibrahim Oweiss, an Egyptian-born economist at Georgetown University who ran the Egyptian government’s economic mission to the United States in the 1970s, said in an interview that he was “absolutely suspicious” that a company led by Salem, who had no particular background in the energy business, was the Egyptian partner in the natural-gas deal.
“Everyone knows Hussein Salem’s closeness with Mubarak is unquestionable,” he said. “And the fact that Egypt would agree to this deal when Israel is attacking Gaza day and night? The average Egyptian would be absolutely opposed to this. Someone must be benefiting a great deal from this.”