New court documents reveal in finer detail the sweeping extent of a Dubai Government investigation into possible financial misdeeds at the Dubai International Financial Centre (DIFC) as it undergoes a strategic overhaul. The investigation, which started last year, has grown to involve at least four separate accounting firms, consultants and government agencies looking for evidence of financial irregularities.
It is part of a wider effort in Dubai to root out corruption in government departments and government-owned companies, helping restore investor confidence and position the emirate for recovery from the global downturn. Executives at property companies, banks and the DIFC have already been arrested as a result of the probe. McKinsey, the global consulting firm, is spearheading a new strategy for the DIFC aimed at keeping its edge against regional financial hubs. Meanwhile, DIFC Investments (DIFCI), a subsidiary with interests in property and financial services, has hired the accounting firm KPMG to prepare an investigative audit. The Dubai Government audit team has also been investigating, according to court documents, as has the Dubai Police.
The multi-pronged investigation has emerged piecemeal in news reports and in a case originally filed in the DIFC Courts by Bisher Barazi against DIFCI, his former employer. Mr Barazi, who was managing director until December of last year, is seeking almost Dh1.8 million (US$490,000) in unpaid salary, court fees and damages from DIFCI. But DIFCI alleged in a defence and counterclaim made public yesterday that Mr Barazi and DIFCI had been under investigation by the Dubai Government audit team at least since early last year.
The audit team was already looking into Mr Barazi and DIFCI by the time Dr Omar bin Sulaiman, the former governor of the DIFC, was arrested in March last year and charged with embezzling Dh50m disguised as annual bonuses, the papers say. Dr bin Sulaiman has since repaid the money he allegedly embezzled and was released from police custody in May. "It has been reported ? that on or about March 2009, Dr Omar was detained in connection with charges of corruption, misappropriation of funds and abuse of power in performing his duties as the governor of the DIFC," the DIFCI's statement of defence says.
"During this time, the audit team was investigating the affairs of the [DIFCI] and its employees to assess, among other things, whether any crimes had been committed by any of the [DIFCI's] employees." When DIFCI learned of the audit team review, it hired KPMG to do an "independent investigation into the conduct of its employees, including [Mr Barazi]", the statement says. "The KPMG investigation, which is still continuing, has revealed that [Mr Barazi], during his employment, breached his fiduciary duty to [DIFCI] and conducted himself in ways which would warrant his termination without any entitlement to any notice period, gratuity payment and/or vacation entitlement," the documents say. KPMG completed a preliminary report on March 31.
Mr Barazi declined to comment, citing the ongoing legal proceedings. A DIFC representative did not respond to requests for comment. As the audit team and KPMG reviews continued last year, the DIFC hired McKinsey to take its own measure of the centre and seek a new way forward in the aftermath of the global financial crisis. @Email:firstname.lastname@example.org