Corruption inquiries total Dh3.6bn

source The National

DUBAI // More than a year ago, Dubai quietly launched a wide-ranging anti-corruption investigation to revitalise investor confidence in the emirate.

The results of the operation so far, revealed to The National, are staggering: 11 investigations or court cases are under way; 34 executives are either in court or on their way there; and Dh3.58 billion (US$950 million) has allegedly been stolen or used as bribe money, according to files from public prosecutors that give the first overview of the whole operation.

Since March 2008, investigators appointed by the Dubai Government have been looking into executives from some of Dubai’s leading real estate and financial firms, a move acknowledged by the Government for the first time a year ago this week. In an online question-and-answer session earlier this year, Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, said the reason was simple: “No one in the Emirates is above the law and accountability.”

“These cases are a sign of the Government’s clear interest in improving management of firms and its commitment to principles of proper accountability,” he added.

“In all corruption cases, people are not only prosecuted and punished, administrative and legal holes that they exploited to commit their crimes are plugged.”

An independent team from the Dubai Government’s financial department was appointed to take on corruption and given unprecedented powers. Its investigations – which continue – have included some big names.

The biggest case involves the government-owned Dubai Islamic Bank, which officials say has been defrauded of Dh1.82bn.

The next biggest involves the chief executive officer of Al Boom Holdings, who has been indicted for defrauding 3,700 investors of more than Dh900m.

Recently, the investigators have focused on another high-profile property developer who is suspected of having defrauded investors of more than Dh600m.

In all, at least eight major firms, six of which are owned by the Dubai Government, have had several of their senior executives indicted.

The sweep came on the heels of criminal investigations into 10 Dubai businessmen, including the vice chairman of Istithmar World, the former chief executive of the mortgage provider Tamweel, and the lender’s former head of investments.

The general manager of sales at Nakheel, and another former employee at the company, were also arrested along with four senior executives at Sama Dubai. Their arrests in August 2008 followed that of the former chief executive of Deyaar Developments, in April 2008. All were accused of financial irregularities.

A former board member at Tamweel was also arrested on charges of misconduct in the Deyaar case and later faced charges of corruption in Tamweel.

At the time, the Public Prosecutor’s Office said “fighting corruption is at the top of the [Dubai] Government’s priorities”.

Soon after the first announcement of the corruption sweep last year, the first effects of the global financial crisis were felt in the development sector. Tatweer-owned Mizin quickly moved to the centre of police investigations when its former chief executive was arrested.

The executive denied accepting Dh1.98m in bribes from a second defendant, an Arab investor, at a court hearing in May, and was granted bail.

Nakheel surfaced in the investigations again in February, when two senior staff members of the company’s Waterfront development were arrested on fraud charges. Two Australians were charged in July and will face court on September 15. Both have been in jail since their arrest.

In June, Deyaar’s former chief executive pleaded not guilty to accepting bribes in exchange for granting discounts and other facilities amounting to Dh56.6m to a former federal minister of state and finance.

The Deyaar executive took six million shares in the company, 380,000 Tamweel shares, 145,000 Dubai Islamic Bank shares, and Dh17.9m as a bribe from the former minister, prosecutors say, then allowed him to take control of funds belonging to Deyaar and Dubai Islamic Bank.

Meanwhile, the four former senior Tamweel executives, including the former chief executive, appeared in court last month, charged with making Dh44m from illegal land deals involving company-owned properties. The four denied the charges. Three were granted bail; the next hearing is set for September 6.

So far, only one of the suspects arrested has been cleared: the former chief executive of Sama Dubai’s Lagoons development was found not guilty last month of a range of charges, including bribery, but still faces an appeal by the prosecution.

Three of his junior colleagues were found guilty of accepting bribes and each sentenced to a year in prison.

As most of the cases continue, property lawyers and analysts say the massive investigation will improve investor confidence.

“Although the initiative predates the start of the economic crisis, and is not merely a reaction to it, it will help to bolster investor sentiment going forwards,” said Lisa Dale, a partner at Al Tamimi & Company, a law firm.

“Investors will be able to feel more confident that they are transacting in a fair, transparent and accountable environment.”

Ms Dale added that the law firm had noticed property companies paying closer attention to detail in their day-to-day dealings.

“It is certainly having an impact on the way that these businesses are run,” she said.

But building transparency and an atmosphere of trust and accountability takes “trial and error to implement”, according to Saud Masud, a property analyst at UBS, a Swiss bank.

“I would assume sweeps would get people’s attention and would be perceived as incrementally positive,” he said.

“However, investor confidence is a tough thing to earn and will likely take several years, along with visible examples of enhanced disclosures and reforms.”

Amid the financial crisis, the corruption investigations are an added challenge for property firms, causing them to be overly cautious, according to Ian Albert, the regional director of Colliers International, a property consultant.

“It’s one of many issues that, to a certain degree, the developers are struggling with,” he said.

“It’s very easy to point the finger at developers, but the reality is like everybody else, they’re suffering from lack of finance and late payments. And then within the scheme of things there might be litigation going on, either within their own company or one they’re associated with.

“It’s a contributing factor to delay within those organisations, because they have to go back and look at their own records and perhaps sort some aspects of their financial history out, should it want to be inspected.”