Belt Buckles: The New Paradigm of Patriotism

For many years now, we Americans have been able to measure one another's patriotism by the presence or absence of an American flag pin on a lapel.  And the bigger a pin, the more patriotic.  

But perhaps we'd become complacent and so lost sight of the original intent of the Founders.

One man, David H Brooks, has shown that we can not only renew our patriotism but take it to a higher level:  the US$100,000 American flag themed belt buckle shown in the above picture.

Even though this idea was his, David didn't shrink from giving average citizens - at least those who pay taxes - the opportunity to join in making his vision a reality by defraying the cost along with $6 million in other expenditures.

As the NY Times reports:

DHB, which specialized in making body armor used by the military in Iraq and Afghanistan, paid for more than $6 million in personal expenses on behalf of Mr. Brooks, covering items as expensive as luxury cars and as prosaic as party invitations, Ms. Schlegel testified.

Also included were university textbooks for his daughter, pornographic videos for his son, plastic surgery for his wife, a burial plot for his mother, prostitutes for his employees, and, for him, a $100,000 American-flag belt buckle encrusted with rubies, sapphires and diamonds.

The expense-account abuse, the prosecution has said, represented a pittance compared with the $190 million that Mr. Brooks and another top employee are accused of making through a stock fraud scheme in which he falsified information about his company’s performance — including significantly overstating the inventory of bulletproof vests — to inflate the price of the stock before selling his shares in 2004.

Patriotism and family values!

Mr. Brooks appears to be using the Abdullah Brothers' defense.  And I suspect this may all turn out to be a tempest in a teapot.  A failure - if one were to be so uncharitable to use the term "failure" - to properly document some transactions. 

I'm also guessing - but don't know for sure - that the buckle is from Damas' Bur Dubai store.

Abdullahs Roll in Recovery for Damas

This is the actual headline in The National, though I suppose at some point the editor will change it to "role".  But the original headline is forever immortalized above.

Some quotes from the article which are just too good to pass up.

The three Abdullah brothers, whose family founded Damas jewellers and were held responsible for unauthorised transactions including about 50 property deals and two tonnes of gold borrowed from the company, are back at the firm – in charge of recovering money owed to the company.

Someone is definitely getting "rolled" here.  I suspect it's the hapless shareholders once again.

Though in light of this explanation from Damas' new CEO, shareholders will probably have a better understanding of the Abdullah Brothers' transactions.

“Not everything was well documented, which was very normal in the jewellery business. Most of the business was done on the basis of a handshake and based on the personal relationship between the management and the business partners … One of the three brothers was in charge of that file. Without his assistance, any progress on the recoveries front would have been impossible.”

An interesting explanation for what might charitably (and AA is always charitable) be described as theft.  It's always very important to be sure the documentation is properly prepared when you take someone else's assets.

In any case it's pretty clear from the above quote that the new CEO has an apparent keen understanding of  the intricacies of corporate governance.  There isn't the slightest doubt in my mind that he will be looking out carefully for their interests.  And making sure any related documentation is in tip top shape.

AlGosaibi v Maan AlSanea - Fortis Bank v Abu Dhabi Islamic Bank In Re Awal Bank

Asa Fitch over at The National has an interesting article on Fortis Bank's suit against ADIB for some US$40 million for ADIB's failure to honor its confirmation of an Awal Bank LC which was the basis for Fortis adding its own confirmation.  

The underlying transaction appears to one of those fairly common "Islamic" transactions - a loan disguised as a commodity purchase transaction carefully to  meet "Shari'ah compliant" banking "principles".  Yes, those quotations marks mean exactly what you think they do.

ADIB is asserting fraud in the inception by Mr. AlSanea as its defense against payment to Fortis.

Where have I heard that legal defense before?

And this is as good place as any to note that Mr. AlSanea denies any wrongdoing.

In any case, I'll post a bit more on this in a day or two once I regain my composure.  I can't stop laughing.

I thought the letters of credit that Ahli Bank Kuwait issued for TIBC were a howl.   ADIB's "letter of credit" is beyond that.  

As an extra bonus for your patience, I'll also post on BNPP Bahrain's suit against ADIB for some US$44.9 million involving letters of credit issued by TIBC that BNPP confirmed against ADIB's irrevocable undertaking.  

GCC Oil Fims Accused in Kickback Scheme

You may have seen articles like this one recently.

I don't know about you, but AA is doubly shocked.

  

Shocked at allegations of corruption, though at least I suppose I can rest easy knowing that there is nothing untoward going on with oil exports from the GCC states.  No special deals, no personal discounts or the like.

In one sense this is old news, the US Department of Justice issued a press release last year July on the case in which CCI entered into a plea bargain with the DOJ.   The allegation is for fairly widespread activity: 200 payments in 30 countries from around the globe not just the GCC.

I'd of course hasten to add that while CCI has admitted wrongdoing as far as I know no representative from any of the name countries has admitted guilt.  Nor have any such parties be judicially determined to have taken a bribe.  

As the DOJ notes in its press release (link above): 

"An indictment is merely an accusation and the defendant is presumed innocent until and unless proven guilty at trial beyond a reasonable doubt."

The recent resurfacing of this story has to do with the extradition to the United States of a foreign national former employee of CCI who is accused of participating in the scheme.

WallSt WTF "Appreciation" of Damas Saga

Ken over at WallSt. WTF has an "appreciation" of the Damas saga.  Well worth a read if you haven't seen it.

AlGosaibi v Maan AlSanea - Trowers and Hamlins Statement

One of my new and frequent commentators mused whether the fact that Trowers and Hamlins had launched a lawsuit against AHAB represented any sort of determination by T&H about the guilt or innocence of the parties involved in the case.

I had speculated that T&H was merely doing its job - going after the registered debtors of TIBC and pursuing collection of funds without making any such judgments.

That left us in a stand-off of opinions.

So, I posed a question to T&H through Hill and Knowlton.  Today I received the following response which I quote verbatim.

A Trowers and Hamlins spokesperson said: “Our investigations to date and other extrinsic evidence provided by third parties - which we are still considering - would suggest that there were irregularities in the manner in which the business of TIBC and other institutions connected with the AHAB / Saad situation was conducted.  However, investigation of fraud or other criminal activities and/or other material non-compliance by officers or other stakeholders of TIBC with the law or regulatory requirements essentially remains the remit of the public prosecutor and the CBB respectively and it is therefore not appropriate for us to comment or speculate further.”

As you'd expect a law firm to do, this statement is carefully crafted to avoid creating any unwanted legal problems for T&H.

There are several points I think are worthy of comment:

1. That at this point what T&H has seen suggests - though not conclusively - that there were "irregularities in the manner in which the business of TIBC and other institutions connected with AHAB / Saad situation was conducted".
2. That investigation of fraud, criminal activities or material non compliance with regulations is not T&H's responsibility but that of the "Relevant Authorities" in the Kingdom of Bahrain.
3. Accordingly, T&H will not comment on such matters.
   

Damas - Enforceable Undertaking Latest Developments

A rather enigmatic press release from Damas on Nasdaq Dubai this morning.

Three points of note:

1. Damas International Limited ("DIL") is negotiating a Cascade Agreement with Damas Investments Limited and Damas Real Estate Limited, the Abdullah Brothers who own both companies, and their respective creditors.  "The purpose of the Cascade Agreement will be to effect an orderly realisation of the assets of the Abdullah Brothers Group. DIL and its board will at all times continue to act in accordance with their legal duties."
2. "DIL notes that its undertaking to recover amounts owing from the Abdullah Brothers at paragraph 17.37 of the DIL Enforceable Undertaking is expressed to be subject to any stand-still, restructuring, security, cascade or similar agreement with the Abdullah Brothers Group and their creditors, including DIL. DIL further notes that in the enforceable undertaking given by the Abdullah Brothers dated 21 March 2010 (the "Abdullah Brothers Enforceable Undertaking") the obligation to repay the Drawings Amount (as defined therein) to DIL at paragraph 15.11 is expressed to be on terms and conditions either already agreed or to be agreed with DIL. Further, the obligations of the Abdullah Brothers to use the net proceeds of realisation of assets to repay the Drawings Amount at paragraph 15.12.1 of the Abdullah Brothers Enforceable Undertaking is expressed to be subject to the terms of any settlement, stand-still, restructuring, security, cascade or similar agreement with creditors (including DIL)."

It sounds as though Damas is in the process of revising the original repayment schedule agreed with the Abdullah Brothers.  No doubt legally required in terms of the rights of all creditors.  What it probably means for DIL is a longer payback period.  And depending on the assets, perhaps less than 100% payout.  From what I've read it seems likely that many of the investments may be problematic to sell at original cost.

Hashem al-Dabal Released After Repayment of AED130 Million

Business Maktoob reports that Hashem al-Dabal, former Chairman of Dubai Properties, has been released after repayment of AED130 million he allegedly embezzled in his former position.

Damas Engages Abdullah Brothers as Senior Advisors

Here's an interesting bit of news from Business 24/7.

"At a time when Damas is going through a period of transition and pursuing a renewed strategy for its sustainable growth, the involvement of the Abdullah brothers in an advisory capacity provides us [with] significant depth of knowledge and insight," a spokesperson for Damas International Limited (DIL) said.

Presumably they've been engaged to give advice on marketing and design and not on corporate governance or financial matters.

Fugitive Banker Gives His Side of Story re TIBC

Frank Kane over at The National conducted an interview with Glen Stewart which was in the June 8 issue of The National.

To set the stage, as I understand it, there are two contentions central to the TIBC/Awal/AlGosaibi/Saad Group saga:

1. That there was massive fraud at the these entities which was the direct cause of their apparent collapse.
2. That Mr. AlSanea was improperly exercising control over TIBC and certain AlGosaibi units (the entity mentioned most was AlGosaibi's Money Exchange).  As noted in the article, a charge that Mr. AlSanea strongly disputes.

In his interview Mr. Stewart addresses the second.  He flatly contradicts the AlGosaibi's assertion that Mr. AlSanea was not authorized to exercise control over TIBC and the Money Exchange

What he does not appear to address in this interview is the first allegation.

I would also be very interested in Mr. Stewart's thoughts on the Ernst and Young report.  As per that report, it seems the CEO of TIBC had very limited authority.  Mr. Stewart deferred to Mr. AlSanea on decision making on just about every matter.  Beyond that there was the curious case of payment approvals.  E&Y stated that Mr. AlSanea used Mr. Stewart's password to release payments.  As I noted at the time I commented on the E&Y Report, it is very unusual for a CEO to be involved in  the operational aspects of releasing payments.  And giving another person one's password is generally considered a violation of segregation of duties and dual control.  

It would be highly useful to know how Mr. Stewart:

1. Saw his role as Chief Executive Officer at TIBC  and how that might compare and contrast to CEO's at other banks.  What precisely were the duties of TIBC's CEO and what were those of  Mr. AlSanea?  Is it good form for a CEO to give his password to a third party?  What does it mean when a person in the position of CEO apparently has no power to make any material decision? 
2. Understood  the requirements of Central Bank of Bahrain regulations regarding corporate governance. And, what if any, disclosures regarding Mr. AlSanea's role were made to the Central Bank.

Perhaps, Mr. Kane will have the opportunity to do another interview with Mr. Stewart.

One thing is abundantly clear from this interview and that is the emotional pain and suffering of Mr. Stewart.  Adding to that distress, we learn in this article that he felt abandoned by his own country in the midst of the "arbitrary actions and retaliations of the Bahraini legal system".   

Al Boom Holdings

Here's an account from The National of the trial of the head of the Al Boom Holdings.

An Emirati property magnate spent almost Dh960 million of his investors’ money on parties, boats and luxury cars, a special fraud tribunal heard yesterday.

Abid al Boom, the chief executive of Al Boom Holdings, and his six co-defendants cheated some 3,700 investors out of their savings.

Only one per cent of the embezzled money was recovered, the prosecutor, Younis al Baloushi, told the tribunal.

As reported in the article, Mr. Al Boom's counsel did not offer a defense.

Former Tamweel CEO Sentenced to Jail

Maktoob Business reports that a local court sentenced Adel Shirawi, former CEO, and three other officials to jail terms ranging from three to one years for financial crimes during their tenors at Tamweel.  Mr. Shirawi's sentence also includes a fine and the repayment of funds.

As noted, lawyers for three of the convicted parties (Messrs. Shirawi, Abdul Razak, and Khalthoum) said they would appeal the sentence.  There was no statement regarding the fourth party (Abdullah Nasser, former Deputy CEO), but presumably, he is appealing as well. 

Dr. Omar Bin Sulaiman Freed After Repaying Dh51.5 Million in "Bonuses"

The National reports that Dr. Bin Sulaiman has been released after repaying Dh51.5 million in funds he was alleged to have misappropriated as bonuses during his tenure as head of the DIFC.  

As the article notes, the Dubai anti-corruption law provides an "out" if the funds are returned.  It's unclear if the return of funds constitutes an admission of guilt or is equivalent to a "nolo contendere" plea.

For more on this topic, you can check out Ken's post earlier this week at WallStWTF.    

Damas - Update on Enforceable Undertaking

From Nasdaq Dubai.

Damas International Limited (The Company) announced today that it is taking all reasonable steps to secure and recover the drawings amount owed to the Company by the Abdullah brothers.

The Company is working with the Abdulla brothers within the overall timeline, to recover the drawings amounts, as agreed in the Settlement Agreement and the Share Pledge Agreement (the "Agreements"). Given the complexity involved in transferring / selling the assets declared to the Company, it is taking more time to affect the recoveries as per the timeline mentioned in the previous announcement by the Company on 4 November  2009. The delay in payments does not constitute an event of default under the Agreements.   However, the amount of US$55 million to be paid by the Abdullah brothers to The Company on or before 30th April 2010 will be carried forward and settled in accordance with the terms and conditions of the Agreements. Active efforts are underway by the Company and the Abdulla brothers to repay the amounts either in cash or by transfer of assets.

The Company is constantly engaged with the Abdulla brothers to ensure expeditious realization from the sale of assets to settle their drawings. These efforts are on going and the Company will report to its shareholders and the market on a regular basis as to its efforts, and the effectiveness of its efforts in recovering all amounts due to the Company by the Abdullah brothers.

The Company, having clarified this matter and informed the market of the developments requests an immediate reinstatement of the trading on its shares.

 Some reactions.

1. Sounds like the recovery isn't going particularly well.  Old hands in the banking business will tell you it's not a good sign when the obligor can't make the first scheduled payment on a deal he's recently negotiated with you.  I have good reason to believe that this rule applies pretty much around the world - even in Dubai. 
2. The Brothers took cash and a "bit" of gold from Damas.  The company is unable to pay its lenders. 
3. When I read comments about transfers of assets (even with a new presumably alert and scrupulous board), I worry about the transfer of illiquid and potentially duff assets.  If the Brothers can't liquidate the assets, why should Damas presume that it can?  And if the debt is extinguished at transfer and not upon realization, why should Damas bear the liquidity risk (that the price they actually get will be much less than the transfer value) and the costs of carrying the asset until realization.
4. As noted above, the Brothers took cash and a "bit" of gold.  Their obligation is to return the company to the position before the "withdrawal".   The goal should be to avoid a BPPN "settlement" that lets the obligors skate away scot-free.

New Graft Case at Nakheel

As reported by the Khaleej Times.  Some rather expensive non existent pens.

More on Omar Bin Sulaiman

Here's an update on Dr. Omar Bin Sulaiman by way of a press item from WAM, the Emirates Official News Agency.   

It seems the AED 50 million consists of bonuses he awarded himself for his performance while Governor of the DIFC.

What's highly interesting is the last sentence in the press release.

He also said a number of similar cases will soon be referred by the Public Prosecution to the court of justice.

Not because I'm particularly shocked that there was corruption but that it seems to be being pursued.   

In an article based on this press release, Gulf News comments:

A number of high-profile corruption cases have gone to court with the Dubai Court of Cassation handing irrevocable imprisonment and a fine of millions of dirhams to two former Nakheel executives.
The same court handed a similar jail term and fine of about Dh14 million to an Emirati former executive of Dubai Industrial City.
The Cassation Court will issue its ruling against five officials involved in the same graft case.
The Appeals Court and the Court of First Instance are looking into ten cases of corruption involving more than a dozen officials of companies such as Deyaar, Tamweel, Waterfront, Nakheel, Mizin and Dubai Islamic Bank.
Some have been sentenced and others are being questioned in court. Gulf News has learnt that Deyaar's former CEO could be facing a fifth case.

Four Nakheel Employees Under Investigation for Corruption

AlQabas reports that six individuals are under investigation for corruption - four employees of Nakheel and two from a private company over the payment of bribes.    Quoting "The Emirates Today", AlQ says that the investigation is preparatory to formal charges.

They are accused of demanding bribes and forging certain documents (unclear to me what these are) and then using them.  Perhaps, sale documents for properties.

The chief accused the former Head of Marketing for Nakheel is accused of having received AED 930,000 (note the article does not state the currency) according to investigations carried out by the Public Prosecutor during his imprisonment from last June to January.

According to the article this is the fourth corruption case at Nakheel.

With all the hot money sloshing around Dubai during the boom years, it's no surprise that there was corruption of this sort.   It would have happened in almost every other place in the world.

Former Head of DIFC Arrested on Corruption Charges

Yesterday the Gulf News reported the arrest of a former prominent individual at the DIFC  for abuse of his post and AED 50 million (US$ 13.6 million) in financial irregularities.  At that point identified only with the initials OS.     

This morning he's been identified in the press - but not by the authorities - as Dr. Oman Bin Suleiman.  You'll recall last November Shaykh Mohammed relieved Dr. Omar from his position as Governor of the DIFC.

Those who remember their history will recall that back in 2004 the then Head of the DFSA Philip Thorpe and one of his colleagues were summarily ejected from their posts because of their temerity in raising some questions about real estate deals done by the DIFC with related parties. 

Damas - The DFSA Report in Detail

In my previous post I made the comment that the DFSA enforcement actions revealed three themes:

1. An almost unbelievable  pattern of  disregard for the health of DIL and the rights of minority shareholders and other stakeholders by the Abdullah Brothers.  They treated the company as their personal "piggy bank" withdrawing funds when it suited them and then "repaying" the Draws by selling the company assets. 
2. A profound failure of corporate governance at the board, senior officer and auditor levels.   The Board seems to have failed to ask the most basic of questions and to have the most basic of procedures.  Senior management was aware of the Abdullah's practice of "Drawing" funds and other shortcomings, but did not advise the Board.  In March 2009, a DIL Internal Audit Report stated "a large scale diversion of funds from the company by the directors.  The total exposure stands at a whopping AED525.19 million as on 30th  September  2008".  The Report was only circulated to the DIL Managing Director (one of the Abdullah Brothers) and the CFO, but not to the Board or Audit Committee.  In both cases it's hard to understand why independent directors were not notified.
3. A transaction connected with Damas IPO which raises some troubling questions about the involvement of DIG and some of its affiliates, all of whom are part of Dubai Holding.

Given what went on at DIL, I think a detailed review of the DFSA's findings outlined in their Enforceable Undertakings is worthwhile.  Let's step through the Enforceable Undertaking with Damas International Limited ("DIL").  The one for the Abdullah Brothers repeats the same findings. 

Section 6.1:  Board Meetings 

1. Inadequate or no financial info given to Board to enable it to assess DIL's situation.
2. Board packs given to directors only at the Board meetings.  Not before.  Information in packs  insufficient to make decisions.
3. Board minutes poorly maintained and did not accurately reflect decisions and discussions.

Section 6.2:  Audit Committee

1. Did not meet formally during the 2008-2009 fiscal year. It's first formal meeting was 26 July 2009.
2. "Failed at all material times" to meet with Damas Internal Audit team.  Did not receive nor ask for any internal audit reports.  See no evil, hear no evil ...
3. The AC didn't set its own Terms of Reference or establish procedures for Internal Audit reporting to it or the Board.
4. Failed to monitor the Internal Audit function.  

Section 7:  Directors' Draws

1. The Abdullah Brothers treated DIL as their personal "piggy bank" and withdrew money from company accounts with apparent little concern for the impact on the company itself or shareholders even after they had taken the company public.  Only the Brothers were entitled to make such Draws.
2. DIL's Board, Finance Department, Internal Auditor and external auditor were all aware of this practice. More importantly there were no controls on the amounts or purposes for drawings until October 2009.  That is, until after the abuses had become so large they could no longer be ignored.. 
3. Between 1 July 2008 (sale of shares was ongoing at this point) until 27 October 2009, the Brothers made some 2,200 draws for relatively trivial amounts (fuel expenses) all the way to substantial  sums for personal investments, personal loan repayments, etc.  A total  AED 600 million was withdrawn and then retroactively settled by what appear to be questionable netting transactions, reducing the Directors' Draw to AED 365 million.  Tawhid Abdullah borrowed 1,940,250 grams of gold to repay his third party personal gold loan. DIL has yet to be repaid by Tawhid.

Section 9:  DVG Transaction (DIFX Listing)

1. When it was clear that DIL's IPO was not going to get enough investor take-up to secure the 25% free float required for a listing on the DIFC (now Nasdaq Dubai), Tawhid Abdullah arranged to create artificial demand.  He approached Dubai Investment Group, Dubai Ventures and Dubai Financial, apparently proposing that they buy shares in their own names but that the Brothers would provide the funding.  Either that or that they would "lend" their names and front for the Abdullah Brothers.  These three entities subscribed for some 100,000,000 shares in toto - roughly divided equally.
2. As a side note, this amount represented 37% of the total Offering.  Original Offer Circular here.
3. The three Abdullah Brothers withdrew a total of AED293,843,000 from DIL accounts during July 2008 and transferred AED275,480,000 to DIG and AED 18,363,000 to Dubai Ventures.
4. This transaction was documented as a US$100,000,000 personal loan from Tawhid Abdullah to Dubai Ventures dated dated 19 August 2008 (the "First Loan").  Unclear why the loan was for this amount as the cost of the shares was roughly US$80 million.
5. In March or April 2009, a series of subsequent documents were drawn up but backdated to August 2008 and some forward-dated to August 2009.  The purpose of these documents was to disguise the nature of the transaction and to reduce the Directors' Draws used to fund the share purchase.
6. The First Loan was assigned to Damas Jewelry in an assignment dated 20 August 2008.  Mr. Tawhid signed both on behalf of himself  as original lender and on behalf of Damas Jewelry to legally document the assignment!  That is, he signed for both parties in the transaction: assignor and assignee.  This assignment effectively reduced the Directors' Draw.  Note despite its date, it was actually signed in March/April 2009.
7. The First Term Loan was replaced by a Second Term Loan between Damas Jewelry and Dubai Ventures for US$80,000,000 via a document back dated 21 August 2008.  In a document dated 22 August 2008, the Second Term Loan was assigned from Dubai Ventures to DVG (a related company).
8. Then there was an exchange of letters actually signed in March/April 2009 but dated 19 and 20 August 2009 to convert the loan to an investment arrangement.

It's pretty clear that at inception this was a fraudulent transaction designed to trick the DIFX into believing  that the IPO had sold enough shares to the public to meet the Exchange's listing requirements. The subsequent  loan agreements, assignments, and investment management agreement were designed to cover up the draws by the Abdullah Brothers and provide "cover" for reducing their Director Draws.

Frankly, many out there reading this saga are going to have some pretty fundamental questions about the behavior of DIG and its subsidiaries - all entities owned by the Government of Dubai's Dubai Holdings.  How they came to be involved.  And what sort of business judgment and ethics they employed in participating in this transaction.

Section 10:  The Sharjah Transaction

1. Damas Real Estate ("DRE"), a company owned by the Abdullah Brothers, purchased land in Sharjah for AED5,141,700 in January 2005.  This predates the July 2008 share flotation. 
2. Between January 2005 through 25 March 2009, the Abdullah Brothers used an unspecified amount of Damas Company funds to develop the property including erecting a building.
3. Around 25 March 2009, Tawhid Abdullah, former Managing Director of DIL, proposed to the Board to sell DIL the land for AED70,000,000 to AED90,000.000.  The clear goal was to use the transaction to reduce Director Draws prior to the issuance of the year end financials.  The Board was not told that Damas funds had been used to develop the project. 
4. At least that's what the DFSA says. As I read this transaction and others, it's hard not to have the nagging suspicion that the Board may have realized that it was critical to regularize (reduce) the Directors' Draw situation as soon as possible. And was so delighted at any transaction that would lead to a reduction that they didn't look too closely. 
5. The Board agreed to the sale after a Cluttons valuation and paid some AED85,000.000.  Instead of paying cash Directors' Draws were reduced by an equal amount.
6. As part of the transaction, the project was supposed to be developed for staff to live in with investment opportunities offered to staff.  As per the DFSA up to 21 March 2009, Tawhid did not formulate or implement the employee residential property investment scheme.

 Section 11:  AlWasl Transaction

1. AlWasl DMCC (owned by Tawhid and Tamjid Abdullah and a third party) bought two plots of land in the DMCC free zone in June 2007, again well before the DIL IPO.
2. In December 2008, Tawhid Abdullah proposed to the Board that DIL buy the plots, but did not inform the Board of the Brothers' interest in AlWasl.
3. No reasonable due diligence was done.   Board approved the purchase.
4. DIL acquired the land by paying AED46,200,000 - though again there was no cash outflow.  The asset was put on the books and the Directors' Draws reduced by an equivalent amount.

Section 12:  DRE Transaction

1. In December 2007, Damas placed an AED150,000,000 deposit with United Arab Bank ("UAB")  to secure a loan of an equivalent amount made by UAB to DRE.  In January 2008, the deposit was legally pledged as collateral.  The Board was not advised.  This was before the IPO.
2. In October 2008, UAB used the deposit to repay the loan.
3. Presumably, but not mentioned, this was also treated as a Directors' Draw. 

Section 13:  Mashreq Bank Loan

1.  On 13 July 2008 (after the IPO), DRE received an AED70,000,000 loan from Mashreq.  The loan was drawn on 14 July with proceeds transferred to a personal account of the Brothers at First Gulf Bank.
2. On 11 September 2008, Tawfique Abdullah authorized the transfer of AED70,000.000 from a Damas account at UAB to Mashreq to pay off the loan.
3. Again presumably treated at DIL as a Directors' Draw though this is not specified.

Section 14:  Gayrimenkul Transaction

1. In August 2008 (after the IPO) in a series of transactions the Brothers withdrew AED66,301,560 from a Damas account at UAB and transferred it to Gayrimenkul to buy real estate in Turkey.
2. These withdrawals were not advised to the Board until October 2009.

Section 15:  AED42.5 Million Directors' Draw

1. On 18 July 2008, Tawfique Abdullah authorized the transfer for AED42,500,000 from a Damas account to a bank account held by the Brothers.
2. The withdrawal was not disclosed to the Board. 

Section 16:  Gold "Borrowing"

1. In December 2007, Tawhid Abdullah borrowed 2,000 kilograms of gold from a third party.
2. On 1 September 2009, he allowed the lender to take 1,940250 grams of gold from DIL to repay his personal "gold loan".  No disclosure was made to the Board.
3. Tawhid has not yet restored the gold to DIL.

This is a damning report on the Abdullah Brothers and many others involved in the running and monitoring of the company.

I had posted this back in December.  The DFSA Report only re-emphasizes the importance.

When investing in a family company make sure you've got adequate control  at the Board over the family members' management of the company and signature authorities (enhanced requirements for Board approval is one technique), robust corporate governance actually implemented, and of course detailed disclosure of company affairs.

Dubai: Calls to Lift Immunity of Officials

Copyright The National Abu Dhabi

“If we want to recollect the wasted public money, everybody guilty has to be held accountable and those suspected need to be questioned regardless of their rank,” Gen Tamim told a press briefing. 

With a relative handful of cases - eleven - the Government of Dubai appears to have found DH3.58 billion ($975 million) in "lost" money.   So far 63 individuals have been identified, excluding those Lt. General Khalfan Tamim wants stripped of immunity.

This latter group is key for two reasons.

First, it doesn't include SR from Canada or JK from England.  But rather locals.  Very senior locals if they hold immunity.  If the Government of Dubai is serious, it is precisely this group that it needs to prosecute.  But in doing so it faces the problem of the societal disruptions this may cause.  The recent law to encourage the restitution of stolen funds may  well be an attempt to avoid or minimize such problems.  

Second, much larger sums are likely involved given these individuals' positions.   With US$60 to $80 billion of easy money sloshing around the Emirate there were ample occasions for "commissions",  bribes, overcharging, tag-along deals.  I suspect it's going to be quite easy to find individuals who by themselves are AED 3.58 billion men.

All this shouldn't be a surprise to anyone with a knowledge of regional business practices or anyone who was paying attention to the early signs - Philip Thorpe's comments in 2004 and the first round of corruption that became evident in 2008.  

Sadly, the Government of Dubai has not given strong anti-corruption signals in the past.  Thorpe's abrupt and harsh dismissal was a very clear message that the "old ways" of doing business were just fine even at the "Western" DIFC.  The pardon of the former Head of Dubai Customs another.  Though to be perfectly fair:  if we're going to be casting stones at corruption, we can focus on more local targets.  It's harder to throw a stone all the way to the UAE with the same velocity and impact as one closer to home.