In COVID Recovery, Dubai Must Fight Corruption to Regain Investor Confidence


Included among the collateral damage of the COVID pandemic is anti-corruption efforts trying to take hold in the developing world, as both the IMF and The Hill have warned, and the plague of corruption will endure long after COVID has been treated. This is a particularly bad catch 22 for developing countries, as corrupt leadership scares away foreign partners, leaving such nations underdeveloped and unable to join the modern world.

Despite efforts to reform, the United Arab Emirates is struggling to get out of this cycle. Indeed, the UAE actually leads the Middle East/North African region in incidents of corruption, according to a recent report by the Association of Certified Fraud Examiners (ACFE), with 46 separate cases of occupational fraud. Now it could be that more cases were found in the UAE, and there’s much more corruption elsewhere that is simply going unpunished.

Regardless – there will never be a light display at the Burj Khalifa bragging about the country’s unreliable business practices.

One particularly egregious instance of this, which has been written on before, is the scandal surrounding Dubai’s Tameer Holding Investments, which was valued at $5 billion USD before its proposed IPO valuation in 2007 by the Gulf International Bank (GIB). Its principal, the Canadian entrepreneur Omar Ayesh, was a self-made billionaire – until he was swindled out of his company by members of Saudi Arabia’s powerful Al Rajhi family, who took everything.

In a pattern of highly sophisticated racketeering activity, the Saudi family transferred or “sold” Tameer assets to shell companies they owned to wipe out the value of Tameer overall and Ayesh’s quarter share in probably the biggest case of fraud in Middle East history. The Al Rajhis’ actions constitute fraud, embezzlement, conflict of interest, breach of fiduciary duty, and misappropriation of assets.

Regardless, the Al Rajhis have avoided paying Ayesh his due. Family patriarch Abdallah Al Rajhi, is chairman of the world’s largest Islamic bank and who has dropped off the list of the world’s richest following the recent Saudi corruption purge.

But there are too many unresolved issues for them to avoid justice forever.

Now GIB is backtracking on its initial valuation of Tameer and its claim that it used verbal information from Ayesh personally to reach its conclusions – on a $5 billion deal. Ayesh presented evidence of months of correspondence and financial records used to reach the valuation, but GIB is now refusing to submit its side – and has avoided being held in contempt of court. While there is no documentation to prove this directly, this approach reeks of collusion – and the kind of regional corruption ACFE is warning about.

Why GIB might prevaricate like this is a mystery, until one realizes it is effectively owned by the Saudi government through its Public Investment Fund in the same jurisdiction as KSA’s current Minister of Labor: Ahmed Al Rajhi.

Cluttons performed a valuation of Tameer in 2014 as part of the plan to expropriate assets out of Tameer by undervaluing and “selling” them to shell companies owned by the Al Rajhi brothers. The process relied on “special assumptions” that Tameer executives mandated. These included a 0-3 month sales window, often referred to as “distress sale,” as well as cutting the properties’ built-up areas and applicable price per square foot by half. These assumptions are in breach of regulations from the Royal Institution of Chartered Surveyors.

Yet fixed valuation alone wasn’t enough. The Al Rajhi team, upon submitting this report to the real estate expert, al Sheryani, conveniently omitted the page that states “special assumptions” had been applied in the translation to Arabic (the official court language). This was done in an attempt to hide the fact that they violated the judge’s order to provide “fair market value” assessments.

All of these agreements were made without the consent of Ayesh, who despite the ongoing legal boondoggle, remains a shareholder in Tameer. For such agreements to be permissible in an ongoing dispute further highlights the flaws in the UAE legal system.

Compensating Ayesh for his lost time and money at last isn’t just the moral thing for the UAE to do, but it’s the best thing to do for themselves. The Emiratis want to invite the world to create a post-oil economy – but they don’t seem to willing to do the hard work necessary for that.