The European Union's house bank invested in funds that directly benefited the Middle East's ruling cliques even as it preached the importance of human rights and democracy, claims a new report obtained by Ahram Online.
The families and associates of Egypt's Hosni Mubarak, Syria's Bashar Al-Assad and Palestine's Mahmoud Abbas all gained from non-transparent transactions conducted with the European Investment Bank (EIB), with Cairo-based investment bank EFG Hermes playing a leading role, says a draft of the report by Counter Balance, a coalition of non-governmental organisations, Ahram Online reported.
Provisionally titled "The EIB's sleazy investment partners in the Middle East and North Africa: A look at who is being enriched by the EIB's strategic partnerships in the region", the investigation will be published on 25 January.
EIB is owned by the 27 member states of the European Union and is the continent's largest public lender.
Under scrutiny in the report is EIB's business partnership with Egypt's EFG Hermes bank and its related private equity firms, as well as Gamal and Alaa Mubarak, the two sons of the country's deposed president.
The investigation tracks 10 years worth of financial investments made by the EIB in Egyptian private equity funds. All of these funds, claims the report, have links to the Mubarak family and convicted industry and trade minister Rachid Mohamed Rachid.
The report looks at four investments made by EIB, a self-proclaimed non-profit financial institution, between October 2000 and May 2010, alleging the transactions benefited key figures in the Egyptian regime via EFG Hermes Private Equity.
Two EIB transactions involve 4.5 million euros with the Jordan High Tech fund in October 2000 and 6 million euros with the Middle East Technology fund in February 2001. Both funds were set up and managed by EFG Hermes Private Equity.
The other two transactions were a 6.3 million euros risk capital facility extended to EFG Hermes Holding Company in December 2005, and a 39 million euros co-investment with EFG Hermes Private Equity into the InfraMed Infrastructure Fund in May 2010.
Counter Balance's investigation questions the European Union's bank's involvement in these funds in the light of widely publicised information that Gamal Mubarak had an 18.5 per cent stake in EFG Hermes Private Equity and was on their board of directors. This means he would have directly profited from the EIB's injections of cash.
The NGO coalition also asks why the EIB associated itself with the InfraMed Infrastructure Fund when the strategic board chairman at the time was minister Rachid Mohamed Rachid.
The former minister for trade and investment has since been sentenced in absentia to 35 years in prison and ordered to pay a $237 million fine for profiteering, misusing public funds and corruption.
The investigation makes further connections between the EIB and Mubarak's ruling clique by looking at Gamal Mubarak's close associate Walid Kaba.
Kaba, who set up Bullion Ltd with the ousted president's son, not only managed Gamal's private offshore business interests but also sat on the boards of the parent company of EFG Hermes investment bank and its private equity division that ran the funds in which the EIB invested.
The money may also may have contributed to the associates of other repressive regimes in the region, the report says.
EFG Hermes's subsidiary in Syria is a joint venture with Syrian businessman Firas Tlass who is widely believed to belong to President Bashar Al-Assad's inner circle.
Counter Balance also connects the EIB with the Palestine Growth Capital Fund. This fund was allegedly misused by the President of the Palestinian National Authority Mahmoud Abbas to further his own political interests and has reportedly lost vast sums of money.
The report contrasts the EIB's behaviour in the Middle East with statements it has made about its goals and philosophy.
The bank has previously said it promotes "human rights and democracy projects, the fight against poverty and education and training" across the MENA region.
The report also questions why the EIB has chosen private equity funds as its strategy for development, claiming that as a financial product they are "inherently non-developmental."
Counter Balance's investigation also criticises the apparent lack of due diligence performed into those involved in chosen funds.
Formed in 2007, Counter Balance is a European coalition of development and environmental NGOs set up to challege the EIB which it claims lacks transparency and binding social and environmental standards.
Counter Balance claims the EIB does not fulfil the mandates for sustainable development by which it is legally bound.