PGESco fraud case shines light on corruption in Egypt’s power sector

A former Bechtel executive has pleaded guilty to charges linked to a scheme to manipulate the bidding process for power contracts in Egypt that netted him around US$5.3 million in kickbacks.

Asem al-Gawhary, 73, is a dual Egypt-US national and a former Bechtel vice president. From 1996 to 2011, he served as general manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and EEHC, the state-owned Egyptian Energy Holding Company.

As PGESco manager, Gawhary was responsible for helping EEHC select companies to be awarded sub-contracts. He had access to privileged information about the bidding process and competing companies, and access to and influence over the Egyptian officials who selected the winning bids.

“Mr. Gawhary allowed greed to compromise his business practices by taking kickbacks to provide unfair advantages to companies willing to pay for power contracts,” said Thomas Kelly of the United States’ Internal Revenue Service criminal investigation division in a press statement.

Gawhary has pleaded guilty to violating US law by lying to Bechtel and PGESco about his knowledge of fraud in the bidding processes, tax evasion and failure to declare his ownership of foreign bank accounts. He has also pleaded guilty to money laundering charges, for obscuring the source of funds used to purchase a $1.78 million house in the state of Maryland.

The crimes carry a maximum sentence of over 60 years in prison and a million dollars in fines. Sentencing is scheduled for March 2015.

The case prepared by US officials implicates Gawhary and his co-conspirators in serious crimes in Egypt as well.

His employer, Bechtel, is being regarded by US authorities as a victim of Gawhary’s corrupt practices. However, Gawhary pleaded guilty to accepting bribes from three other –  unnamed – firms to assist them in winning $2 billion in contracts from EEHC.

“Power Company A” is described in court documents as: “A French company engaged in the business of providing power generation and transportation-related services around the world, including in Egypt.” It has subsidiaries around the world, including in the US state, Connecticut. “Company A” made several bids through PGESco to work for EEHC, including contracts for the El Tebbin and Noubaria power plants.

Gawhary admitted to taking accepting more than $1 million in kickbacks between 2005 and 2008 from a consultant hired by “Company A.”

“Power Company B,” which is described in court documents as “a Japanese company engaged in power related services around the world,” won a contract for work on the Sidi Krir power plant.

The US government found evidence that a consultant for Company B made at least one payment to one of Gawhary’s Swiss bank accounts, a  $180,000 deposit in 2009. An email trail indicates other payments may also have been made.

In exchange, Gawhary provided “Company B” with privileged information about competing companies, and helped to secure an extension for submitting a bid.

The third company, “Company C,” is described as a Kuwaiti company engaged in power related services in the Middle East.  In or around 2010, it secured three projects for the EEHC, including at the West Damietta and El Shabab power plants.

Gawhary negotiated kickbacks from “Company C” via a British Virgin Islands-registered front company. “Company C” paid "consulting fees" into a Saudi Bank account set up by one of Gawhary’s relatives. On January 11, 2011, that relative emailed Gawhary to notify him that $1,688,995 in funds had been received. Those funds were used to buy the Maryland property.

Later, Gawhary, along with other unnamed PGESco employees, concealed evidence of the kickback scheme.

Charges have not yet been filed against the companies and other individuals referenced in the case against Gawhary, nor have they been publicly named. However, the descriptions of the companies involved are detailed enough to allow researchers to identify likely candidates.