Mubarak’s Son Manages his Funds from Prison

On November 14, 2011, a client at the U.S. PNC Bank received a payment of $112000 from Alpha Bank in Cyprus. This led PNC Bank to file a suspicious activity report (SAR) to the Financial Crimes Enforcement Network (FinCEN).

The report was filed against PNC customer Dmitry Cherkas and his business after the bank suspected from its research that ‘Med-Invest Ltd’, the company that had sent the money, was owned by Gamal Mubarak, the former Egyptian president, Hosni Mubarak’s, youngest son.

“Hosni Mubarak and his two sons, Alaa and Gamal, are the focus of allegations of corruptions and abuse of power,” PNC Bank wrote. The bank’s suspicions multiplied after an analysis of bank transfers between May 18 and November 28, 2011 revealed that the total funds sent to the U.S. company, based in the tax haven Wyoming, amounted to over $1.7 million.

The transfers took place while both Hosni and Gamal Mubarak were in custody in Egypt on charges of corruption and killing demonstrators that were filed against them, and a number of regime leaders following the outbreak of the January 2011 popular uprising that resulted in the fall of Mubarak's regime on February 11, 2011.

The documents obtained by BuzzFeed News and shared with ICIJ, ARIJ and other media partners, indicate that ‘Med-Invest Ltd’ sent U.S. company Medical Innovations & Technologies four transfers amounting $422797.02 over two weeks – from November 14 to November 28, 2011.

The Source of the Money

According to the documents, ‘Med-Invest Ltd’ was registered in Seychelles, specifically at the address 306 Victoria House, Victoria, MAHE SC, which is the registered address as headquarter for dozens of offshore companies, according to public records.

It was the company name’s similarity to that of the UK-based ‘MedInvest Associates Limited’, founded by Gamal Mubarak in 1996 (registration number 03188793), which raised the suspicion of the U.S. bank regarding the source of these funds.

“After Gamal Mubarak left his job at ‘Bank of America’, he set up an investment firm called ‘Medinvest Associates’ in London in 1996 with two partners,” PNC Bank wrote, citing a New York Times article.

Despite Gamal Mubarak’s resignation from the UK company in 2001, it remained active until February 2012, according to corporate records. The company was “quietly dissolved,” according to The Guardian newspaper, and may have placed its assets “beyond the reach of investigators”.

PNC Bank quoted the New York Times article, which stated that ‘MedInvest Associates Limited’ was “owned by an international securities fund in Cyprus,” Bullion Company Limited.

Bullion's shares are distributed among a number of shareholders, of which Gamal Mubarak owns 50% , according to a report by the Egyptian Initiative for Personal Rights (EIPR), which also reported that Bullion Company was owned by Pan World Investment, owned also by Gamal and his brother Alaa, according to documents from the Illicit Gains Authority affiliated with the Egyptian Ministry of Justice.

Bullion, according to EIPR’s research in cooperation with the British NGO The Corner House, acquired 35% of the shares in one of the Hermes Financial Group companies, EFG-Hermes Private Equity, a company registered in the British Virgin Islands.

A ‘Mada Masr’newspaper investigation reveals several facts about Mubarak’s investments and assets. Firstly, that that EFG-Hermes Private Equity materialised due to a partnership between Bullion and the holding group that owns the Egyptian Investment Bank EFG Hermes, which also owns 65% of the company registered in the Virgin Islands. `

The investment group EFG Hermes contracted EFG Hermes Private Equity for advisory services, according to Mada Masr. Gamal Mubarak contributed a sum of $1,750 towards its $10,000 (its setting up) capital according to Mada Masr, who also found that Gamal made the small initial investment and then huge profits through consulting contracts with EFG Hermes, even though the British Virgin Islands company was a shell company.

EFG-Hermes Private Equity owned several funds that were invested in a number of private companies in Egypt, according to EIPR. One of the investments that caught the headlines was the National Bank. As a result of that investment, Gamal, Alaa and others were accused of illegally obtaining over 2 billion Egyptian pounds before the court exonerated them in February 2020.

Additionally, Bullion established the investment International Securities Fund, located in Cyprus, according to reports by Egypt’s Al-Ahram newspaper. Alaa Mubarak’s company, Pan World Investment, owns 10% of its total shares, according to EIPR research.

The entirety of the Mubarak family’s assets, including their assets abroad, should have been frozen under EU Resolution 172 of 2011 issued in March 2011. A year after the decision, MedInvest Associates Limited was dissolved, according to public records.

The resolution did not state the size of the frozen funds in Europe. This was unlike measures taken by Switzerland, which announced that it had frozen $428 million collected from 12 influential members of the regime that was toppled by the ‘January’ revolution.

The freezing decision was upheld in November 2018 by the Court of Justice of the European Union (CJEU). However, the Panama Papers, published in the spring of 2016, among other investigations, reveal a lack of compliance by the British Virgin Island authorities with the decision to freeze the assets of offshore companies mainly located in Cyprus and the British Virgin Islands.

In spite of the freezing decision, legal amendments such as dissolution were made to companies owned by the Mubarak family, according to reporting by Daraj, in violation of the standard EU definition of the freezing of funds present in many resolutions which states clearly that “Freezing funds means preventing any transfer, transaction, modification, use, access to or dealing with funds in any way that could lead to changes in its size, quantity, location, ownership, possession, character or destination. Further, it prevents any other changes or modifications that would enable the funds to be used, including the management of the investment portfolio.”

The United States did not announce any measures to freeze the Mubarak family's funds and the US Treasury Department's sanctions website does not show that any of Mubarak’s assets are frozen.

The Receiving Companies

Med-Invest Ltd made four bank transfers valued at $422797.02, sent from Alpha Bank Cyprus Ltd to PNC Bank in the U.S. from November 14 to 28, 2011, according to the SARs.

Starting on that same day, Medical Innovations and Technologies, in turn, transferred the money from three transactions for a value of $440000 from November 14 to 29, 2011.

PNC had been contacted by the FBI, according to the SAR, which doesn’t explain the FBI’s interest in the case. Only when PNC realized that Medical Innovations & Technologies was receiving money from a company thought to be owned by the former president’s family did the bank dig into its customer.

Things got worse.

PNC found “no web presence” for Medical Innovations & Technologies, which it believed to be involved in medical equipment sector. PNC also discovered that the person who opened Medical Innovations & Technologies’ bank account in 2009 had used someone else’s social security number.

The flow of money confused PNC. Money was paid from Med-Invest in the Seychelles via a bank account in Cyprus. It arrived in the United States and almost immediately spun out to another Wyoming company, GTG Inc, a medical sales company that deals with the same US bank (PNC) and bank accounts in Denmark and the Netherlands.

Medical Innovation and GTG’s PNC bank accounts were both opened in 2009, and both registered at the same address at 78 Jasmine Street, Casper, according to PNC’s report.

Dmitry Cherkas signed for the accounts for Medical Innovation and Yury Chekalin signed for GTG. PNC knew little about either man. The bank said that it had no record of any other deposits made by Cherkas, or their companies. Chekalin’s address is registered at 2710 Thomes Avenue, Cheyenne, WY 82001 — the same address of the headquarter of the offshore companies, according to PNC’s suspicious activity report.

The bank’s suspicions were raised by the fact that “the client then used the funds to send” $100000 on November 14 and other transactions. Records showed that the transfer was sent by GTG Inc. from Bank of America to an account held in the same name at PNC Bank.

Both GTG and Medical Innovations are registered by Wyoming Corporate Services. In 2011, Reuters revealed that the address, Thomes Avenue, is the registration address of more than 2000 shell companies.

In 2010, the registration agent for Medical Innovations and Technologies and GTG Inc. moved to a company called Investment Tax International registered at 78 Jasmine Street, Casper.

Yury Chekalin was listed among the parties of Medical Innovations & Technologies, founded in 2009. Company documents from 2011 show how that year, the same year the transfers took place, the company’s listed director, president and treasurer was Sarah Petre-Mears in Nevis in the Caribbean. Petre-Mears is connected to over 1,200 other companies in global offshore destinations. PNC reported in its SAR that Dmitry Cherkas was the authorised signatory on Medical Innovations & Technologies’ bank account.

Medical Innovation and Technology merged with GTG Inc. in May 2015. Chekalin signed this deal on behalf of GTG Inc. In 2018, Chekalin resumed his work as a director of the merged company providing an address in the Czech Republic. In other corporate documents filed in Wyoming, Chekalin lists his address in Moscow, Russia.

In August 2012, Russia requested Chekalin’s extradition from Prague on criminal charges of fraud, according to a court document.

“Y. Ch. has long been engaged in the business of importing expensive medical equipment and machinery,” according to Czech court documents. “In order to achieve the greatest possible material prosperity, he placed his personal selfish interests above the legitimate interests of society.”

Chekalin provided tomographs in 2009 to regional Russian government-owned hospitals “at exorbitant prices to steal budget funds,” Russia alleged. “The accused successfully engaged in the implementation of high-tech medical equipment in the Russian Federation and participated in shaping the market supply of these devices.”

The Czech justice minister refused to extradite Chekalin, arguing that charges may not have amounted to a crime in the Czech Republic, the minister said.

ICIJ spoke to the registered agent of the company in Wyoming that we understand the FBI was interested in, Cindy Jackson.

Jackson said she had no knowledge of any alleged wrongdoing or any possible FBI interest in the company .

“No, I have no idea. I’m just a registered agent. I don’t get into the politics of what it does,” Cindy Jackson, the listed registered agent for Medical Innovations & Technologies Inc, told ICIJ.

“Everything that I do as RA is confidential. I just can’t speak out. Whatever info you have, is what you have. It would be a violation of privacy (to talk to you).”

Asked by ICIJ about what due diligence Jackson does on companies that she helps to register, Jackson said: “You know, I do research to see whatever might have come up. But generally, it’s only Wyoming-wide. I don’t search across the whole world to see what they might have been doing. If they had been doing something wrong, I would decline.”

Asked why someone would create a company in Wyoming, Jackson said: “You know, the majority of people who incorporate companies in Wyoming who don’t live here do it for tax purposes because Wyoming has the lowest corporations tax rates. Basically, that’s why people file to have an entity in Wyoming because it’s cheaper than Delaware of Nevada.

“We’re cheap.”

Ambiguous Systems

GTG and Medical Innovations, like other offshore companies, use ‘Registration Agents’ to conceal the identity of their original owners, and taking advantage of such systems in place within a number of States in the US, and few countries, and islands worldwide.

Owning, using or working for an offshore company is not illegal. However, authorities in many countries have accused offshore companies of involvement in money laundering, contraband smuggling, and suspected crimes under the cover of secrecy provided by offshore companies.

A red-flag for anti-money-laundering (AML) regulators is any transactions between related entities that do not seem to have any underlying commercial relationship. This is because the purpose of money-laundering is to obscure the true origin, ownership and beneficiaries of payments routed through various accounts, according to the Financial Action Task Force (FATF) an intergovernmental organisation that sets global standards on anti-money laundering best practices.

The obscure network of the above-mentioned companies conceals the ownership of beneficiaries. They transfer and send money to companies related to each other through related directors, with the purpose of moving the money through bank accounts to different destinations. Neither Medical Innovations and Technologies nor GTG Inc. appear to have any website presence, according to PNC Bank’s suspicious activity report. Med-Invest is a Seychelles registered company and held a bank account in Cyprus, the same jurisdiction in which companies associated with the Mubarak sons were registered.

ARIJ published an article regarding MI&T and its representatives, Mr. Chekalin and Mr. Cherkas, which contained factual errors. First, the article falsely reported that Mr. Chekalin was extradited from the Czech Republic after a 2014 verdict. In fact, Mr. Chekalin was not extradited and all charges against him were dismissed in Russia in 2019. Second, the article falsely reported that MI&T received money from Med-Invest Ltd. owned by Egyptian President Mubarak’s family, as detailed in the SAR in question. In fact, Mr. Chekalin and Mr. Cherkas' lawyers responded stating that Med-Invest has nothing to do with the Mubaraks. Third, the article reported on how the SAR filed on MI&T's representatives by PNC bank stated that persons opening PNC bank account for MI&T used someone else’s social security number. They responded claiming that, in fact, a tax payer identification number for MI&T was used, as requested by PNC Bank. No social security number was used at the account opening stage. ARIJ apologizes for the errors.