x Abu Dhabi, UAEFriday 19 January 2018

More arrests likely as police widen corruption investigation

The strictness with which some violations have been dealt confirms the Government's commitment to maintaining the highest global standards.

DUBAI // As Dubai authorities continue their sweeping anti-corruption investigation, investors and observers say an opaque legal system and undeveloped regulatory requirements have them guessing about what activities authorities are looking into and how companies with executives under investigation may be affected. More arrests are expected in the coming days in one of Dubai's highest profile efforts to stamp out business corruption, according to people familiar with the investigation. "There will be more arrests in the ongoing investigations into irregular financial dealings by companies that are expected to be concluded by next Thursday," a spokesman for the Dubai Public Prosecutor's Office said yesterday. The prosecutor planned to outline the alleged improprieties at that time, the spokesman said. So far, no details or evidence about the activities under investigation have been revealed. The investigations, which have steadily widened since the arrest of the chief executive of a major property developer earlier this year, have been closely watched as they have ensnared current and former executives from several major companies. The prosecutor's office on Thursday said that "fighting corruption is at the top of the [Dubai] Government's priorities". The unusual public statement, released through the media office of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, was the first formal acknowledgement that Dubai authorities are conducting a co-ordinated series of investigations aimed at alleged white-collar financial improprieties. "The strictness with which some violations that emerged in the recent past were dealt with confirms the Government's commitment to maintaining the highest global standards in fighting corruption and enhancing its achievements in the economic, financial and legislative fields," the statement said. Dubai's corporate clean-up started with the arrest of Zack Shahin, the former chief executive of Dubai Islamic Bank's property development affiliate, Deyaar. Mr Shahin has been in jail since early April. He has maintained his ­innocence.

Dubai Islamic Bank was the second listed corporation to come under the microscope when it confirmed in June that one of its former vice presidents is being investigated on fraud and bribery charges. Last week, Adel al Shirawi, the former chief executive of Tamweel and vice chairman of the Dubai Government-owned investment firm Istithmar World, was revealed to be the subject of a police investigation on charges of fraud and corruption along with the firm's chief financial officer, Feras Kalthoum. Nakheel, the large Government-controlled property developer, has said that one former and one current executive were implicated in the investigations. The spokesman for the Dubai prosecutor's office said authorities planned to hold a press conference at the conclusion of the investigations to provide more public information. But at least until then, investors are unlikely to learn more details about the alleged wrongdoings under investigation. Companies have all issued statements declaring that their businesses are not under investigation and their bottom lines will be unaffected. Many have said they were not able to release further information due to the investigation itself. Meanwhile, prosecutors and police have carried out their investigations behind the scenes, and released almost no information about the alleged fraudulent activities in court proceedings. Observers say more information about the investigations could increase confidence in the market. Robert McKinnon, the head of research at Al Mal Capital in Dubai, said disclosure of investigations of wrongdoing within companies was "a critical issue" for the UAE's markets. "Anything that adds uncertainty diminishes the value of the company," he said. "When there is uncertainty, investors assume the worst. Most companies would benefit by saying: 'Here's what happened, here are the numbers, here's how it affected us and let's move on.'" Companies do not like to disclose bad news, but they should realise that it is better for their share prices and their relationships with investors to disclose the news, rather than let uncertainty simmer, Mr McKinnon said. That is one of the reasons why the shares of some of the named companies have fallen, investors say. DIB share prices fell 17.24 per cent since early June, when the bank confirmed that its former vice president, Rafatul Islam Usmani, was under investigations by Dubai authorities. Mr Usmani has since been detained in Dubai's Al Aweer prison. DIB shares are down 19.85 per cent since the beginning of this year. Deyaar is down 32.17 per cent since the beginning of the year and 18.88 per cent since April, when Mr Shahin was arrested. Tamweel is down 12.19 per cent since the beginning of the year and has taken a hit of about 28.83 per cent from its peak in June. Khaldoun Amro, a brokerage manager at Damac Securities, said regulators should work harder to force companies to disclose investigations to investors. "Foreign investors look for security in the market, so they need to know about any threat to their investments," he said. * Additional reporting by Andrew Foxwell

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