x Abu Dhabi, UAEFriday 21 July 2017

Death of al Braikan reveals cost of investing

The arc of Hazem Khalid al Braikan's short life story has yet to fully unfurl, but the end of it, at least, is starting to take shape.

The arc of Hazem Khalid al Braikan's short life story has yet to fully unfurl, but the end of it, at least, is starting to take shape. On Sunday, the 37-year-old was found dead at his home just south of Kuwait City, a three-storey, tan-coloured villa surrounded by hedges and a few palm trees. A single bullet, apparently fired by Mr al Braikan, was found lodged in his head. It was a sad end to his life. After all, the businessman turned accused con man appeared to have a passion for investing.

He mixed with some of the biggest players in global finance, and showed the glitz and gusto that one associates with the Gulf's most successful chief executives. By Sunday night, police in orange vests were processing the scene in what looked like a routine investigation. The inquiry into his death is continuing, police told The National. Mr al Braikan's death came just three days after the Securities and Exchange Commission (SEC), the US stock market regulator, launched an investigation into two cases in which false information was allegedly released about takeover bids by Gulf investors in American companies.

The chief executive of Al Raya Investment was at the centre of the allegations involving Textron and Harman International Industries. Two other companies, KIPCO Asset Management, Kuwait's largest investment firm, and United Gulf Bank, a Bahraini bank, were also named in the investigation. Mr al Braikan had worked at both of those companies and the SEC alleged that he had planted fake takeover news.

They describe what amounts to a classic "pump and dump" scheme. Earlier this year, Mr al Braikan is alleged to have bought a large number of shares in Textron, a small aircraft and defence company based in Rhode Island. He then allegedly sent word to Al Watan, a Kuwaiti newspaper, in April that some Gulf investors, including Emiratis, were interested in acquiring the company. The newspaper published the story, and the company's stock more than doubled in price in anticipation of a possible takeover.

The story with Harman International Industries, a global maker of high-end audio equipment, was a similar one. According to the SEC, Mr al Braikan planted rumours of a takeover and the company's stock price jumped. He was reportedly a skilled operator at manipulating rumours, a vital trait for anyone who wants to pump up the value of investments. His modus operandi involved calling reporters with major scoops, giving his word that it was bona fide news.

According to Ulf Laessing, a Reuters reporter who worked in Kuwait for two years before recently moving to Saudi Arabia, Mr al Braikan would call up often with juicy-sounding titbits. "Hi, Hazem here. I have a major scoop for you" was his line, according to Laessing. Had it not ended in an apparent suicide, Mr al Braikan's alleged fall from grace might have warranted a footnote in the financial pages.

It is all a far cry from a year ago, when he was rubbing shoulders with business leaders such as Sir Winfried Bischoff, then chairman of Citigroup, who visited Kuwait after his company bought 10 per cent of Al Raya. Twelve months later, Mr al Braikan has been associated via the allegations with the anything-goes culture of financial excess that helped plunge the world into a recession. Just days before his death, it looked like that was the way it was shaping up.

"I have nothing to say," he told Reuters when the SEC complaint was first filed. "It is in the hands of the lawyers now." Then he said in a statement that he had hired a lawyer in the US to defend him. "I would like to confirm on the soundness of my legal situation," he said. In a way, it is easy to see why Mr al Braikan might have thought he was on a firm legal footing. The financial system in Kuwait, and indeed most of the Gulf, lacks the strong legal oversight common in the US and other developed countries. Kuwait's stock exchange does not even have a regulator akin to the SEC, hence no authority to stop rumours and false information spreading like wildfire.

Across the Gulf, the prevalence of rumours makes it hard for investors, observers and reporters to know what to believe and what to disregard. The lack of oversight also nurtures a culture where pump-and-dump schemes do not seem so far fetched. Disclosure and oversight needs to improve in the Gulf's markets, and Mr al Braikan's brief life certainly serves as a reminder of that. More than anything, though, his death adds a distinctly human element to what has largely been an intellectual debate in the Gulf over regulatory reform and the financial fallout of the global economic crisis. It is about more than money.

Meanwhile, the SEC's investigation may continue in spite of Mr al Braikan's death. "Because it's a civil suit, the SEC can still continue its efforts to pursue collecting the alleged ill-gotten gains," Jacob Frenkel, a former SEC lawyer, told Bloomberg. Those gains, amounting to more than US$5 million (Dh18.36m), are now stored in accounts that have been frozen, according to newspaper reports. afitch@thenational.ae