US$165 million (Dh606m) in unauthorised property transactions were uncovered at the jewellery group, whose CEO resigned this week.
Damas in property deals
Tawhid Abdullah, the former chief executive of the Middle East's biggest jeweller, quit Damas after US$165 million (Dh606m) in unauthorised property transactions were uncovered, it has emerged. Mr Abdullah resigned on Monday after disclosing the irregularities to the board of directors. The transactions at the centre of the controversy involved investments with an unidentified property company, said Gaetano Cavalieri, a Damas board member, in an interview from Italy.
Mr Cavalieri said a deal had already been reached to recover the funds, in the form of property assets, from the company. "We are planning a board meeting as soon as possible," he said. "Obviously, the company now is going to be driven in a different direction. My personal thinking is that we are going to recover all of this money." Mr Cavalieri, who is also the president of the World Jewellery Federation, said an investigation began after a closer look at the financial statements showed "something was not perfect".
"So we did an inquiry and the inquiry was not fully satisfied," he said. "We decided to favour complying with national and international laws. In this case, everybody agreed to take action." A Damas spokesman declined to comment yesterday. The company has already announced the creation of a committee that would fully investigate the transactions. Damas is hiring an auditing firm and a law firm to handle the investigation, a person familiar with the matter said.
Mr Abdullah declined to comment to The National on Tuesday, but said in an interview with Reuters that "the news about me making unauthorised transactions is not true". Damas shares fell 3.1 per cent yesterday to US$0.31, after falling 13.5 per cent on Tuesday. The stock has lost more than half its value this year. The group's majority shareholders would "repay in full any unauthorised transactions", Damas told investors on Monday.
"The Abdullah brothers, being founding members and current owners of more than 50 per cent of the shares of the company, fully stand behind the company and have agreed to commit the necessary assets to secure and repay in full any unauthorised transactions." While Damas officials would not give any details on the transactions, analysts yesterday pointed to large loans taken out by the directors of the company that were recorded in its last earnings report.
As of March 31 this year, Damas directors owed more than Dh259.5 million to the company, according to its latest financial statements. But that would represent less than half of the $165m of transactions under review by the company. The "unauthorised transactions" at Damas emerged more than a year after it became a publicly traded company. In July last year, it sold about 29 per cent of the firm to investors, with the remainder being held by members of the Abdullah family, Al Fahim Group and the private-equity company Amwal Al Khaleej.
Mr Cavalieri, said the transactions in question were made in "good faith" but did not take into account regulations and laws required of executives at a publicly traded firm. "When a private company, especially a family company, becomes a public company everything changes," he said. "The commitments are different. The board is committed to protect its shareholders first." Damas, with origins dating back to 1907, now has more than 450 stores in 18 countries and is in the middle of a major expansion across the Middle East, Japan, Italy and India.