State: Egypt Tax Case Shouldn't Affect Iowa Plant

In this Nov. 19, 2012 photo Egyptian billionaire Nassef Sawiris, left, CEO of Cairo-based Orascom Construction Industries, Iowa Secretary of Agriculture Bill Northey, center, and Iowa Republican Gov. Terry Branstad sign their name in concrete during a groundbreaking ceremony for a fertilizer plant in Wever, Iowa. State and local officials promised Orascom $200 million in tax breaks to build the fertilizer plant in southeast Iowa without knowledge of a pending lawsuit alleging one of the company's subsidiaries defrauded U.S. taxpayers out of millions of dollars, officials told The Associated Press. (AP Photo/The Hawk Eye, Brenna Norman) MANDATORY CREDIT

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By Aaron Hepker

IOWA CITY, Iowa (AP) — High-profile allegations of tax evasion against an Egyptian company and its billionaire CEO shouldn't affect plans to build a $1.4 billion fertilizer plant in southeastern Iowa with generous public subsidies, state officials said Tuesday.

The Iowa Economic Development Authority said it is aware of and is gathering more information about allegations of evading $2 billion in taxes against Orascom Construction Industries CEO Nassef Sawiris and his father. But based on the facts available so far, the situation does not affect the more than $200 million in state and local incentives awarded last year, spokeswoman Tina Hoffman said.

"If new information comes to light, our contract has provisions that can be triggered to allow IEDA to reevaluate the award," she said in a statement. "The fertilizer plant in Lee County is moving ahead as planned, and we continue to work closely with the company."

The legal case comes as IEDA Director Debi Durham has pushed back against criticism that the subsidies were too generous for a foreign company, and that her team did not do enough research before awarding them to Orascom. She says the plant will create 165 full-time jobs and more than 2,000 temporary construction jobs and save farmers hundreds of millions of dollars on fertilizer.

Durham told lawmakers last week that her staff knew that an Orascom subsidiary was being sued by the federal government for alleged contract fraud, but no one told her because the case was not seen as significant. The lawsuit alleges an Orascom subsidiary conspired with other companies to improperly win $338 million in U.S.-funded construction projects Egypt; the company denies the allegations. Durham had earlier told The Associated Press the state was unaware of the lawsuit and, "I'm not sure how anyone would have found that."

A leading critic of the subsidies, Sen. Joe Bolkcom, D-Iowa City, said he wasn't sure what to make of the tax evasion allegations.

"This is a very sophisticated company, and we've found that out. They are expert negotiators," he said. "We're playing with the big boys here."

Egypt's state news agency reported Sunday that the country's public prosecutor has ordered Sawiris and his father be barred from traveling abroad. The move came after Egypt's finance minister requested a criminal case be expedited against them for allegedly evading taxes on profits on the 2007 sale of a subsidiary, Orascom Building, to France-based Lafarge.

Orascom issued a statement Monday saying it "is confident that it did not violate any laws pertaining to the sale." The company says it is appealing the Egyptian Tax Authority's claim that it owes takes on the sale.

Nassef Sawiris appeared with Gov. Terry Branstad last fall to break ground on the fertilizer plant, which has been awarded more than $200 million in state and local incentives.

Branstad spokesman Tim Albrecht described the latest allegations against Orascom as a disagreement between the company and its government that was being worked out.

"The governor continues to have full faith and confidence in Debi Durham and her team, and is proud to be leading the fight for the thousands of jobs that this great project will bring to Lee County," he said.

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