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Sainsbury's rejects Egypt legal case against CEO Coupe

* CEO Mike Coupe found guilty of embezzlement by Egypt court

* Sentenced in absentia to 2 years in jail

* Sainsbury's "strongly refute" allegations

* Egyptian court hearing adjourned to May 3 (Adds detail, background, Sainsbury's comment, shares)

LONDON, April 29 (Reuters) - British supermarket Sainsbury's on Wednesday rejected all allegations against its chief executive after it emerged he was sentenced in absentia last September to two years in an Egyptian jail after being found guilty of embezzlement.

Chief Executive Mike Coupe attended a court hearing in Giza last Sunday to try to overturn the conviction which related to the collapse of an Egyptian business which Sainsbury's had invested in over a decade ago.

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However, that hearing was adjourned, with another set for May 3.

"We are aware of media coverage today outlining a legal case in Egypt brought against our CEO, Mike Coupe," Sainsbury's said in a statement.

"This relates to a historic commercial dispute in which Mike Coupe had no involvement and we strongly refute all the allegations."

Sainsbury's said Coupe was not employed by the company at the time of the original business deal in 2001, having not joined until 2004, and had never met the complainant, who it named as Mr El-Nasharty.

The court's ruling could be seen as a setback to Egyptian government efforts to win back foreign investors by clearing up disputes with settlement agreements rather than court rulings.

In 1999 Sainsbury's invested in a company called Edge that was owned by El-Nasharty. The joint (NasdaqCM: JYNT - news) venture was wound up in 2001 with El-Nasharty agreeing to buy back Sainsbury's shares for about 40 million pounds ($61.6 million).

Sainsbury's said he paid with cheques that bounced.

It said El-Nasharty now claims Coupe was in Egypt on July 15 last year, six days after he succeeded Justin King as CEO, and personally seized the cheques.

"I can tell you what Mike was doing that day. He was in London, doing meetings as usual, we've got his diary," said a Sainsbury's spokeswoman.

"Nobody from Sainsbury's was there (Egypt), the cheques are still in the file. Our lawyers have them as part of our evidence."

Coupe, who was unaware of his conviction until December, attended the Giza court hearing on Sunday to appeal the conviction. If confirmed, it would put him at risk of arrest in Egypt or any country with an extradition treaty with Egypt.

There is currently no arrest warrant out for Coupe and he will not attend the May 3 hearing, said the spokeswoman.

"Either the same panel of judges on Sunday will hear the same appeal and then hopefully it will get thrown out or it might get heard by another panel of judges in a different court at a different date."

El-Nasharty could not be reached for comment.

The issue is an unwelcome distraction for Coupe as Sainsbury's is grappling with falling sales, food price deflation and a brutal price war.

He is due to present 2014-15 results next Wednesday, with pretax profit forecast to fall 17 pct to 659 million pounds.

Shares (Berlin: DI6.BE - news) in Sainsbury's, down 20 percent over the last year, were up 0.4 percent at 267 pence on Wednesday. ($1 = 0.6499 pounds) (Reporting by James Davey and Kate Holton, additional reporting by Shadi Bushra in Cairo; editing by Jason Neely and Keith Weir)