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UMMA / The Majidigate: a textbook case of corruption in Morocco
Date of publication at Tlaxcala: 31/07/2012
Original: Majidi business : cas d’école de la corruption au Maroc
Translations available: عربي 

The Majidigate: a textbook case of corruption in Morocco

Ahmed Benchemsi أحمد بن شمسي

Translated by  John Catalinotto

 

EXCLUSIVE INVESTIGATION. How a Moroccan public company planned to spend taxpayer money in a private business owned by the king’s secretary and his American partner... with the government's blessing!

Says “L’Economiste”, Morocco’s premier business daily: “The period between 2009 and 2011 was the most difficult in the history of Royal Air Maroc (RAM)"(1). By the end of 2010, the national air transportation company known as RAM had recorded an abysmal deficit of 930 million dirhams, more than $115 million. In order to save the state-owned company from bankruptcy, the government decided in September 2011 to bail it out with 1.6 billion dirhams ($200 million) of taxpayer’s money. Of course, RAM’s CEO Driss Benhima pledged to cut costs to the bone to balance the books. As a result, 1,560 staff would be laid off (2) and the company would divest non-strategic assets while focusing on its core business (3).

 
A year earlier, the atmosphere was very different. Despite the looming historic deficit, RAM’s management was still feeling adventurous. On September 14, 2010, the company’s board decided to acquire 24 percent of Baysys Morocco, the subsidiary of an American company that provides aerospace luxurious accommodations. Rather far from RAM’s core business, this small industrial niche consists of customizing wealthy clients’ aircrafts, by equipping them with luxurious lounges, bedrooms and even bathrooms. Alongside RAM, said the board’s decision, US parent company BaySys International would hold 51 percent of the new entity, leaving the remaining 25 percent to an unknown Moroccan private company called New Assets.
 
New Assets is a company with a share capital of 100,000 dirhams. It is owned 100 percent by the portfolio management company FC Holding, which is owned 100 percent by Mounir Majidi the private secretary of King Mohammed VI and the man most feared, courted and detested by the Moroccan business community. But what is the businessman of the royal family doing as operating privately in the aviation industry? His reputation is in display advertising and real estate development, but from where does his new interest in the amenities of luxury aircraft arise?
  

 

 Mounir Majidi. Business representative of Mohmammed VI never forgets his personal interests

 
The story goes back to 2010 when, under circumstances that remain to be determined, Mounir Majidi came into contact with Steve Walton, CEO of BaySys International LLC, a U.S. American aerospace supplier operating in Virginia. By Mr. Walton's admission, "Baysys International is a company with limited visibility. We bring the aircraft into a hangar, we close the doors, and nobody knows what we are doing."(4) This propensity for secrecy is due to the confidential nature of orders, which are often submitted by leaders of Third World states who prefer to remain discreet about their lavish spending. At the time the company made contact with the secretary of Mohammed VI, it was in a hangar leased from NASA, putting the finishing touches on the remodeling of the interior of an Airbus A-340 ("like a Bedouin tent ") for a Gulf emir.
 
The U.S. manufacturer, at the time, was going through a serious financial crisis. After the death in June 2009 of a major customer, the dictator Omar Bongo of Gabon, his successors refused to pay a bill of $10 million. BaySys International was forced to lay off 60 employees and cut salaries of the rest by 20 percent. Although the contract with Airbus Gulf gave it a way of staying alive, the U.S. company was still in serious trouble. The rental price of the NASA hangar, in particular, was hardly bearable. The company had to make changes urgently, and its CEO said clearly: "We need two things: a hangar and a financial partner" (5).
 
In June 2010, Steve Walton seems to have found what he wanted … in Morocco. In Reuters (wire service) he states that BaySys International "signed an agreement with a regional strategic investor to install an industrial platform in Casablanca with a view to manufacture aircraft interiors for VIP and heads of state" (6). But who's this mysterious "regional strategic investor"? Not RAM, since its board of directors did not give the green light for this operation until three months later. There remains only Mr. Majidi, in the role of the "business provider." But the private secretary of King Mohammed VI was clearly trying to keep his identity secret, especially in front of the Moroccan business community, who always accused him of taking advantage of his position with the king to obtain conditions and benefits that were out of the reach of ordinary investors (7). What follows clearly demonstrates the relevance of this charge: a perfect case study of "Majidi business," with strong hints of influence peddling.
 
On August 19, 2010, a company called BaySys Morocco was discretely listed in the trade register of Casablanca. With a capital of 50,000 dirhams, the new company was 100- percent owned by Mounir Majidi through two shell companies, New Assets and FC Holding. The SARL company whose corporate purpose is "The development and maintenance of aircraft" has no local office or personnel, and its head office is domiciled at FC Com, an advertising company owned by Mr. Majidi (8), in the business district of Sidi Maarouf in Casablanca. Its only officer is Said Hassani, 40, also the director of CF Com. He was clearly not a professional experienced in "the development and maintenance of aircraft ..."
 
Apparently Mr. Majidi, who knows nothing about the aviation industry, was content with creating an empty shell that can be used at the appropriate to receive dividends on a joint venture between specialists. BaySys International will bring its management and expertise, but who will provide "the hangar and the financial partner" of which Mr. Walton needs? Certainly not BaySys Morocco, given its obvious quasi-clandestine character and undercapitalization. That leaves only RAM. …
 
But there's a twist: RAM is a state-owned company, which cannot invest in a private company without official permission from the government. In early 2011, this authorization was even more difficult to obtain given the almost bankrupt state of the airline , which lost nearly a billion dirhams in one year. So it was really not the right time to engage in fantasies like the customization of luxury aircraft ... Such a project, for sure, would be sharply rejected by any serious government accountable for its actions. It seems that the present government does not match this definition ... and Mr. Majidi has an outsized power of persuasion.
 



Finance Minister S. Mezouar and Prime Minister A. El Fassi. In the best-case scenario, they know nothing about what a business plan should be.

 
On February 1, 2011, Moroccan Prime Minister Abbas El Fassi and Minister of Economy and Finance Salaheddine Mezouar jointly sign a government decree authorizing RAM to acquire 24 percent of "the company Baysys Morocco with a $1.5 million capital." At the time of the decree signing, BaySys Morocco is still a company with a 50,000 DH ($6,000) capital. The idea is, therefore, as soon as the government's approval is obtained, to transform the limited liability company into a state-owned corporation and to increase its capital (by multiplying it by 250!) through a contribution of the partners. Compared to business volume of the RAM, the expenditure required to control 24 percent of the future entity is not very big, barely $360,000 (2.8 MDH). But the Driss Benhima's company has ambition for its new subsidiary; a global investment of $31 million (248 million dirhams) will be devoted, of which two thirds to build the famous hangar which Mr. Walton needs. The total investment is over 250 million dirhams! So eager are they to please Mr. Majidi, MM. El Fassi and Mezouar still require a minimum of arguments to justify the expense - especially if it must be granted by a state company on the brink of bankruptcy, and for the rescue of which the government is preparing to pay 1.5 billion dirhams.
 
Suddenly, the official decree that authorizes the operation presents surprising justifications. We learn that Baysys Morocco expects to show a profit of $5.4 million in 2011, its first year of business, based on sales of 57$ million ... while the hangar and amenities, that is to say the main working tool of the company, does not exist yet! Better: in 2015, the decree of the Prime Minister announces, the sales of BaySys Morocco will reach $249 million and net earnings $28 million ... that is, a continuous increase of nearly 50 percent annually! Are these astronomical figures credible? El Fassi and Mezouar do not seem to doubt it for a second. It's in black and white in their official decree (and also in an internal report of Bank Al Maghrib, which will include the decree verbatim two months later): "The profitability of BaySys Morocco is demonstrated, as shown by its business plan." Even the most inexperienced contractors will tell you: it is absurd to suggest that the profitability of a company that has not yet started is "proven"... with the only argument based on future projections whose assumptions are unknown.
 
 
The end of the story is that the joint venture BaySys-RAM-Majidi ... has never been carried out! The CEO of the RAM Driss Benhima, who the author of this article was able to telephone, spoke of a "stillborn" project, while blaming the U.S. Americans who did "not provide the volume of Business promised."At a time when these lines are published, BaySys International officials were unreachable.
 
There remains a fundamental question: is it ethically defensible that a public company on the brink of bankruptcy should decide to invest Moroccan taxpayers' money (up to 250 million dirhams!) on a project belonging to the private secretary of the king, and, with the official authorization of the government?
 



Driss Benhima, CEO of RAM. The man who doesn't know what he's investing in

 
The writer asked Driss Benhima that question directly. He provided this surprising answer: "Oh, the person you mention (note: in reference to Majidi) was a partner in this operation? That's news to me!" So the CEO of a state company chairs a board of directors authorizing a financial partnership, which then sends a letter to the government requesting official permission to enter into this partnership, while he ignores the identity of his partner?! "I do not know who sent the letter to the government," the CEO of RAM threw out. Confronted with the name of that partner, he added: "New Assets? Now that you mention it, it rings a bell in my head, but nothing more. I have thought that they were Americans, since the name is in English ..." Of course, we don't have to take Benhima at his word. But even if we do, his "lack of curiosity" is at least gross negligence in the management of public money for which he is responsible ...
 
Although it never got off the ground, the BaySys case was acted on, in a way that couldn't be more official, by a decree from the prime minister. Indeed, what was in fact a "case"? This simple fact: The Government of Morocco had given the green light to spend taxpayer money in a phantom company with fantasy numbers. Who else but Mr. Majidi could have obtained such a green light under such conditions? There is clearly a matter for investigation of violation of Article 36 of the Constitution, which prohibits influence peddling. At a minimum, we have a topic for an oral question in Parliament ... provided, of course, that a Moroccan MP that has the courage to publicly discuss a case involving the private secretary of the king.
 
The author of this article also contacted Said Hassani, right-hand man of Mounir Majidi and administrator of BaySys Morocco, New Assets and FC Com. Hassani said, after being informed of the purpose of the call: "I am in a meeting, call me later. . Then he no longer answered the phone.
 

Notes

1. Hassan El Arif, "RAM is returning to the heart of its trade," L'Economiste of Dec. 15, 2011.

2. "RAM's social program: 790 layoffs already underway," L’infomédiaire, Dec. 16, 2011.

3. Bachir Thiam, " Le plan de cession d’actifs démarre,” L'Economiste, Dec. 15, 2011.

4. “BaySys International caters to the ultra-rich,” Virginia Business magazine, August 30, 2010. 

5. Carol Vaughn, “BaySys transforms Airbus into flying embassy”, the Daily Times – Salisbury, Md., Feb. 3, 2011. 

6. “BaySys International, LLC Announces Morocco Joint Venture”, Reuters, news market wire, June 8, 2010. 

7. All thoughout the first decade of the 21st century Morocco's independent press, esprecially the magazines TelQuel andt Le Journal Hebdomadaire, largely echoed the abuse of his dominant position by Majidi — most often carried out in the name of his royal boss, but also sometimes in his own name. 

8. FC Com's competitors and the press regularly accuse it and its boss of abusing his dominant position --- for influence peddling. Due to the proximity of Majidi with King Mohammed VI, FC Com benefited from extremely advantageous financial conditions offered by municipalities and the Moroccan public companies. To give an example, FC Com had a monopoly on advertising displays in all the stations and airports of the kingdom for 30 years.

 

UPDATE : RAM's response -- and ours

A few hours after this article was published, a communiqué from Royal Air Maroc was distributed to the press. This document requires four comments.
 
Primo, it had nothing to do with the fundamental subject raised by the article: the ethical problem posed by investing public funds in a private enterprise owned by the private secretary of the king. There, the only (vague) allusion to the communiqué can be found in this passage: "(RAM) has taken steps along with (...) Baysys International (...) to create a joint company, with a round table of Moroccan investors and industrialists chosen by Baysys." Benhima continues here on the same two-track argument begun on the phone with the author of this article: first, feign ignorance ("I did not know that the Moroccan partner of the operation was [Mounir Majidi]"), then, pass the buck his subordinates ("I do not know who among us has [handled this dossier]") ... Now he dumps on the Americans: it is they, not he, who would have "chosen" to invite Majidi to the round table. The truth is that the Americans had presumably made deal months earlier with Majidi, and it is the latter who has "chosen" Benhima, CEO of a richly endowed state company and who could do nothing to refuse the wishes of the private secretary of His Majesty.
 
Secundo, the statement from RAM says: "It should be noted that there are indeed worries regarding the advance sales and profitability that led to discontinuation of the Baysys Morocco project." Now, that's a laugh! But who has "advanced" this sales projection (remember, 456 MDH in the first year of business!)... if not RAM itself? Who spoke of "proven profitability" (remember, 43 MDH profit from the start!)... if not RAM itself?! Benhima says he harbored "worries" ... about RAM's own projections?! Maybe the CEO of RAM is implying that it is BaySys International who initially provided these hardly believable figures. It's quite possible -- it would then explain also why they are listed in dollars, even on the official decree. But it is certainly not the U.S. company that has applied for authorization of investment to the government, on the basis of these figures. Even if he had received them from a third party, it was the duty of Mr. Benhima to ensure the credibility of these numbers before they are sent to the Minister of Finance. The minister of Finance too, incidentally, should also check them before they are endorsed by the Prime Minister in an official decree. The governor of the Central Bank, too, should have checked the figures before publishing them in the bank's newsletter of March 2011 under the label "information drawn from the best sources." This is a chain of avoidance of responsibility that we have in front of our eyes, at the highest state level. Why have none of these very senior officials done his job? Was it incompetence? There is another explanation, much more credible when we know how the royal government operates: from the moment the all-powerful secretary of the king is involved in a procedure, each one signs what he is asked to sign, no questions asked. Imagine the situation, it's pretty amazing: a U.S. company provides absurd figures and, for the sole reason that Majidi is behind the operation ... these numbers go through, as they are, four levels of high-level verification of the Moroccan state to end up, unchanged, on the Official Bulletin of the kingdom ... and in dollars, because nobody dared to touch it, not even to convert them into the national currency! Influence peddling, corruption, primal fear of the royal palace... call it what you want.
 
Tertio,"(The project BaySys) was three million dirham investment for RAM," the statement said. False. Simply return to the decree of the Prime Minister. Three MDH (the equivalent of "360,000 U.S. dollars" of the decree), it is only the sum that the RAM had to pay to control 24 percent of BaySys Morocco. After that, the project involved an investment of 248 million dirhams ($31 million). Who should pay? The Americans? Certainly not. At that time, BaySys International was in crisis (see the article above), and its CEO Steve Walton stated openly it was seeking a "financial partner" to save the business. Who is left? Majidi's company? Possible. But let's admit that a company willing to invest a quarter of a billion dirhams does not generally possess only 50,000 DH in capital, housed with another company just to avoid paying rent. And putting up 100 percent of the investment capital in a company that he holds only 25 percent of, does not look at all like the extremely thrifty Mounir Majidi we know. What looks more like Majidi, however, is putting public money (that of the RAM in this case) in the service of private interests: his own and those of his patron, King Mohammed VI. It's not the first time that this has been done, but that's another topic ...
 
Quarto, Benhima's news release tries to convince us that the BaySys project in no way contradicted the refocusing of the RAM on its core business -- a policy adopted in consideration of the public rescue of the national carrier with 1.5 billion dirhams. The statement said: "As part of its policy of focusing on the core of its business (...) the company plans (...) partnerships in three areas: maintenance, catering and handling." As far as we know, the transformation of aircraft cabins in luxury bedrooms "for VIP customers" (it's the decree that says it) does not match any of these categories.
 
A. B

 





Courtesy of Tlaxcala
Source: http://ahmedbenchemsi.com/majidi-business-cas-decole/
Publication date of original article: 13/06/2012
URL of this page : http://www.tlaxcala-int.org/article.asp?reference=7844

 

Tags: MoroccoMajidigateMounir MajidiRAM الخطوط الملكية المغربيةBaySysAllal El FassiDriss BenhimaMakhzenM6Mohamed VICorruptionSalaheddine Mezouar
 

 
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