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[December 18, 2006]

CMA-CGM: The Jacques Saade case

Jacques Saade’s involvement in “Damietta Gate”

New developments in the case of the Damietta company next November

The General Prosecutor launches new investigations in relation to public funds and other irregularities perpetrated after the arrest of Ali Massaad

The appearance of the accused and the lifting of the sequestrations are the main issues of this case


This case locally known as the “great corruption case of the Damietta Containers” and internationally named the “Damietta Gate” has shaken the Egyptian, Arab and international public opinion.
From the first audience, three of the six accused confessed, the third, the fifth and the sixth and acknowledged having been involved in the briberies paid to Ali Massaad, whereas the latter denied at the beginning the whole matter.

The six accused, Ali Massaad, chairman of the board of directors of the Damietta Container Company, Jihad Anis Dagher, employee of Leader Company, Nabil Elie Bassil, CMA-CGM regional Finance and administrative director, Mostapha Mohamad Khalil Abdel Monhem, Director of the Damietta subsidiary, Jamal Abdel Razek Abdel Sadek and Ahmad Mahmoud Ahmad Yacoub have been referred to the Penal Court by the General Prosecutor (financial section), and the second hearing is set for November 9th for a contradictory debate and confrontation with the prosecution’s witnesses who will appear before the court for corruption and misappropriation of public funds.

The most surprising aspect of this case it seems is that Ali Massaad’s successor as head of the Damietta Container Company is following the same methods as his predecessor, a matter which compelled the General Prosecutor to launch a second investigation pertaining to the period following Ali Massaad’s management of the company. This investigation has been postponed following the juridical holidays and the promotion of prosecutor Wadih Hanna Nached.

Ali Massaad, known as the “Bey”, is now in prison.
This case is about corruption, account manipulations, financial fraud and a plot between the Damietta Container Company and French company CMA-CGM presided by Lebanese national Jacques Saade whose corporate headquarters are in Marseille. The file that is being dealt with by the Court of State Financial Security in Egypt pertains to the misappropriation of funds that could reach up to 20 million dollars.

The main accused is being held in temporary custody while awaiting the outcome of this case.

This case is of major interest in its Egyptian, Lebanese and French ramifications.

The Egyptian media has released important pieces of information revealing that this is not an isolated corruption matter in the shipping sector in Egypt. The former General Prosecutor Maher Abdel Wahed has already ordered the chairman of the board of directors of the Damietta Container Company, Ali Massaad, to be placed in custody and his personal assets seized until the end of the investigation; the latter decision has been notified to the Central Bank of Egypt, the Finance Directorate and the land registry.

The General Prosecutor opened an investigation following a declaration presented by the president of the Central Accounting Agency regarding the statements of accounts pertaining to the company owned by the holding company for land and shipping transport presided by the General Mohammad Youssof already indicted in the case of the seizure of the “Salem 2” vessel in the port of Alexandria. The president of the Court of Appeal of the district of South Cairo, Adel Joumaa had set the next hearing to last May 29th in order to take a decision as to the verdict of the General Prosecutor.
The investigations have revealed a plot between engineer Ali Massaad and the managers of the foreign shipping company regarding the signature of an agreement according to which the foreigh company could benefit from exceptional rebates to the detriment of the Damietta Public Company that could reach up to 5,5 million dollars.

This scandal is worrying Egyptian public opinion as well as the political scene, as it happens to occur after other scandals such as the one related to the Directorate of Transport, the Bank of Cairo and the robbery of steal and other metals.

The investigations have proven the existence of a plot between the first accused Ali Massaad Saad and the President of the foreign shipping company, which resulted in the disappearance of 6 million dollars from the Egyptian treasury. It has been established, following the house search, that the accused regularly received briberies from France.

In a surprising rebounce, the investigation revealed that the managers of the international shipping company based in Marseille (France) reimbursed the amount of 3,1 million dollars by bankers cheque to the Damietta Company following a compromise aimed at smothering the case, after that the General Prosecutor started a legal action against this company and seized the assets of Ali Massaad. This payment did not put an end to the legal actions but led to the discovery of another aspect of this case namely the direct involvement of the French company in corrupting Egyptian officials.

Despite CMA-CGM’s denial of any involvement in this corruption case declaring that an internal investigation is underway in coordination with the Egyptian authorities, the Sunday Express newspaper revealed that CMA-CGM presided by Jacques Saade, paid 10,000 dollars per month to Massaad, and has reimbursed as reparation 3.1 million dollars to the Egyptian port of Damietta.

In a statement made by Jacques Saade to the same newspaper, he mentioned that these people were paid by the CMA’s Egyptian subsidiary, that no transfers were made by the French head office and that his company was investigating in coordination with the Egyptian authorities. Various managers were heard including the accountancy manager.

According to the Sunday Express, this is an extremely serious situation and other countries, including the United States, are being worried. It seems that political pressures have been exerted in order to prevent CMA-CGM from acquiring from the English company P&O its shares in the American port of Dubai for security reasons. The American authorities are undertaking an investigation regarding this matter.

Other pieces of information collected in parallel to the secret investigation indicated that many points in this case were still not clear. The most important element that has been discovered until now is the false contract -which is the main aspect of the investigation- signed by Farid Salem, CMA-CGM general manager and brother-in-law of Jacques Saade.

It has been revealed that Abdel Razek is the financial manager of CMA-CGM in Egypt, presided by Jacques Saade, as indicated by the social security registers.

All the evidence indicates that the financial offenses have been perpetrated by the chairman of the Damietta Company, in addition to the irregularities within the contract signed with the shipping line in Marseille.

In an Al-Ahram article of May 26th 2006, it seems, according to the investigations undertaken by the financial control services [official body], the principal accused perceived important amounts on a regular basis in exchange for those irregularities. The former General Prosecutor Wadih Hanna Nached issued search-warrants in the offices of the said shipping company (CMA-CGM) in Alexandria, which resulted in the seizure of numerous pieces of evidence confirming the transfer of important amounts from the accounts of the latter company in favor of the accused.

According to the “magazine Rose El Youssof” that published the result of a long investigation on the subject, the chairman of the Damietta Company is the owner of two palaces in the city of Damietta on the river Nile as well as a dozen estates and three villas in the touristic village of Yasmina in Port Said, in addition to five hectares of agricultural land in the latter city, 20 million Egyptian pounds deposited in bank accounts in his name, his wife’s and children’s and a number of bank accounts abroad which inventory is not yet known.
It was mentioned in the article that Ali Massaad had a nickname, “the Bey”, to the order of whom checks were drawn up.

The investigations revealed that the number of containers CMA-CGM sent in transit through the port of Damietta, did not exceed 70,000 teus for the last 12 months allowing the French company to benefit from rebates of the amount of 5,5 million dollars. This led them to illegally modify the contract with the Damietta Company by paying briberies in addition to the monthly remuneration of Ali Massaad.

Rose El Youssof added that Ali Massaad pretended that he made his fortune in Saudi Arabia, where he worked for 12 years, and in Bahrein, where he worked 5 years; but was not able to keep the evidence that would clear him.
A surprising aspect is that he appeared before the court, which ordered the seizure of his assets and his wife’s, wearing bad quality clothes, in an attempt to conceal his wealth. The most astonishing is that the law firm handling his defense is one of the major firms specialized in shipping matters in Egypt.

The investigation is moving forward with the hope to shed light on other thorny aspects of this case. There is a strong probability that the General Prosecutor would prosecute Jacques Saade, chairman of CMA-CGM; one more element that adds up to the conflict as to the ownership of this company and increases the legal stranglehold around Jacques Saade.

Damietta “Gate” to date is the last link in a series of legal proceedings facing Jacques Saade.

If this case is taking an official aspect in Egypt given that it involves a number of irregularities, corruptions and misappropriation of public funds, other legal proceedings have been launched in many countries in which the conflict between the brothers Jacques and Johnny Saade is raging around the ownership of CMA-CGM, the first shipping company in France and the third worldwide.

Six years after the signature of a contract on September 16th 2006 between the two parties aimed at ending the conflict but which deprived Johnny Saade of his legitimate rights due to a deceitful set-up, new facts could reveal unexpected developments in the coming months very probably in favor of the latter.

The internet site www.mistralholding.com owned by Johnny Saade’s company Mistral Holding s.a.l., contains a huge amount of documents, compromising reports and legal evidence, that explains in detail the conflict between the two brothers which is being reported at the top of the news in the Lebanese, arab and international press. Among these documents a report issued by the financial expert Antoine Gaudino explaining the circumstances that led to the said conflict.

One can read in the report that the conflict between the two Saade brothers as the major shareholders of the CMA-CGM Group is mentioned by the media as a family feud due to Jacques Saade’s statements, but Johnny, who owns 48.44% of CMA’s shares accuses his brother of hiding information in general and more specifically regarding transactions initiated by Jacques Saade in France and elsewhere.

The conflict actually starts by the lack of transparency during the acquisition of CGM by CMA, and Jacques Saade’s attempt at controlling the group for his sole personal benefit.

The preliminary investigations undertaken by Gaudino on August 29th 1997 at the request of Mistral holding, revealed that the management system established by Jacques Saade on behalf of CMA made Johnny Saade fearful, as major shareholder, of the company’s future.

With further investigations, various fiscal irregularities and others have been discovered, and are part of the conflict between the brothers.

The main historical stages of this conflict are the following:

The Limited company CMA (Compagnie Maritime d’Affretement) was created by brothers Johnny and Jacques Saade on September 8th 1986 and registered at the RCS of Marseille on April 8th 1987 under number 340 353 911.

The initial capital was FFr.250,000. It was to be increased following various share capital increases in 1986, 1987 and 1993 as well as on May 26th 1994 further to an extraordinary general assembly to reach FFr. 60,000,000 divided in 600,000 shares with a nominal value of FFr.100.
At the latter date and according to the shareholders’ registry, the shares were distributed between three Lebanese companies: Merit s.a.l., owned by Jacques Saade, 48.41%; Mistral Holding s.a.l., owned by Johnny Saade, 48.41%.
The six shares attributed to the “Jacques Saade Family” are held by Mr. Jacques Saade, his spouse Mrs Nayla Salem, his daughter Tania, his son Rodolphe, his brother-in-law Mr. Farid Salem and Mr.Tristan Vieljeux.
The three Lebanese companies are all registered at the Beirut registrar of Companies and domiciled in the same city and the same address.The company Rodolphe Saade & Co is owned by Jacques Saade and Johnny Saade, 50% of the shares each, respectively through Merit s.a.l. and Mistral Holding s.a.l.

CGM s.a. (Compagnie Generale maritime), with a capital of FFr. 1,275,948,600 and registered at the RCS of Nanterre under number 562 024 422, has been transferred by the French government to the private sector by ministerial decision on October 21st 1996.
The capital of CGM is distributed as follows: 90% of the shares came to be held by CMA, 6% personally by Jacques Saade and 4% between three other shareholders.

CMA got 96% of the CGM shares whereas the 4% remaining were held by three other shareholders; and Jacques Saade’s stake reached 51% whereas Johnny’s, through Mistral holding, did not reach 49.9%.

The first findings revealed a certain number of irregularities, the most important of which related to general assembly meetings.

An extraordinary general assembly was held at CMA head offices on December 12th 1996 without letting Mistral Holding s.a.l. have the opportunity to participate. This assembly was aimed at granting the board of directors the right to increase the share capital, in one or many times. This authorization to the board of directors was valid for a period of five years and aimed at increasing CMA’s capital from FFr. 60,000,000 to a maximum of FFr. 135,000,000.

The report added that until December 12th 1996 CMA’s management has always convened Mistral holding s.a.l. by rapid courier (DHL) and simultaneously by fax, given postage delays to Lebanon. In an unusual manner, the convening to the extraordinary general assembly meeting of December 12th 1996 was sent to Mistral Holding s.a.l. on November 26th 1996 by recommended letter with acknowledgement of receipt.
Everything was done in order to prevent Johnny Saade to be informed in due time and therefore to participate to the main decisions to be taken including the share capital increase.

It is within the above-mentionned context that Johnny Saade seized the Tribunal of Commerce of Marseille who designated on December 23rd 1996 a judicial “huissier’ in order to get the documents pertaining to general assemblies and board of directors held by CMA.

Following this judicial decision, Mr Johnny Saade was able to raise various irregularities. Four Board of Directors meetings were held on June 7th, September 20th and November 14th & 15th 1996 without Mistral Holding s.a.l. being ever convened whereas the minutes of meetings stipulated that Mistral Holding s.a.l. was “absent and excused”.

A general assembly was held on March 27th 1997 in cancellation of the share capital increase decided by the general assembly of December 12th 1996.
This did not however erase the irregularities due to the share transfers and the acquired majority to the benefit of Jacques Saade which jumped from 48,41% to 50,001%.

Irregularities were noticed regarding the presentation of balance sheets. It appears from CMA’s balance sheets in the offer for the acquisition of the CGM of October 3rd 1996, that CMA was in good financial health, that it increased its shareholders’ equity funds, reaching FFr. 700 million and the CGM acquisition project would allow the financial rehabilitation of the latter no later than 1999.

The findings made on certain accounting entries called in question the validity of the level of CMA’s shareholders’ equity which were lower than the reality. These shareholders’ equity funds were much lower than the FFr. 200 millions and CGM’s takeover was a juicy business deal that Jacques Saade wanted to keep for himself to the detriment of his brother Johnny.

This report mentioned, backed by the necessary documents and figures, that the filed balance sheets were false and did not reflect the truth about CMA’s accounts, a matter that was to jeopardize the future of the company and the interests of Johnny Saade, its main shareholder.
This report mentionned that Jacques Saade made his brother Johnny become a minority shareholder through successive steps and by premeditation in order to prepare the acquisition of CGM to his sole personal benefit; the report also summarized the various attempts of Jacques Saade to escape legal proceedings which were accumulating every day.
Of importance in this conflict is the re-opening of a financial investigation by the Paris Tribunal regarding the accounting irregularities and fiscal fraud perpetrated by Jacques Saade in managing CMA-CGM.
Other information indicate that Egyptian courts of law are entangled in an important corruption file involving the Port of Damietta since the 90s and are attempting to determine the scale of corruption involving the representatives of the French shipping line on behalf of their managers in France. While awaiting new developments, the director of the Port of Damietta has in the meantime been arrested.

On another level and following the penal lawsuit filed by Mistral Holding, Paris Tribunals (France) have launched legal investigation regarding the CMA-CGM balances sheets that are allegedly false. The investigation has been entrusted to two prominent magistrates in France. The aim of this investigation is to shed light on the possible fiscal fraud and concealment of the real profits, a matter that goes back to the signature of the contract that has put an end to the conflict between brothers Jacques and Johnny Saade.

Finally, we can add to this multi-faceted judicial file that is surrounding Jacques Saade, a matter that is worrying investigators near the General Prosecutor of Lattakia in Syria. It involves the falsification of official documents, the use of false documents and usurpation of legal capacity, involving Choucri el Khoury that seems to have acted on behalf of Jacques Saade.

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