x Abu Dhabi, UAEMonday 22 January 2018

Dh1.8 billion fraud trial that rocked business

Six men were sentenced to 10 years in a major embezzlement case that has played out over three years.

Pedestrian traffic in front of Dubai Islamic Bank on Airport Road in Abu Dhabi.
Pedestrian traffic in front of Dubai Islamic Bank on Airport Road in Abu Dhabi.

DUBAI // The jailing this week of six men who embezzled more than Dh1.8 billion from Dubai Islamic Bank was the climax of a remarkable legal drama that had gripped the financial community for the past three years.

The six were each sentenced to 10 years, the heaviest penalties to be handed out to date in a fraud case. And they were jointly fined Dh1.8bn and ordered to return the cash they embezzled to the bank.

The hearings put a spotlight on corruption that prosecutors said had harmed both the bank and the Government. The vigour with which the case was pursued and the severity of the sentences signalled the authorities' determination to root out wrongdoers and make them pay for their crimes.

The first the world knew of what was to become of the country's biggest fraud trial came around mid-2008, as Dubai's property boom was nearing its peak and the world was just months away from the global economic meltdown.

It started when Dubai Islamic Bank (DIB) confirmed that a former vice-president was under investigation by the authorities over suspected bribery and fraud.

The news emerged as Dubai conducted a crackdown on business corruption that saw executives from leading companies arrested, and a special task force was set up to investigate fraud in government-backed firms.

It was later reported that the DIB case alone accounted for almost half of the Dh3.7bn identified by anti-corruption investigators as stolen or used for bribes.

The scale of the DIB case was confirmed in March 2009 when it was revealed that prosecutors had charged seven people with defrauding the bank of Dh1.8bn. They included the former senior DIB executives RU and OM and the businessmen CM, RL, EN and ZU.

AF, the director of the Dubai-based property developer Plantation Holding, was charged with aiding and abetting.

EN and ZU, who evaded arrest and remain at large, were tried in their absence. The five in custody denied all the charges.

The prosecutors said they set up fake companies and persuaded the bank to lend money by presenting fabricated documents.

The case was heard by the Dubai Criminal Court of First Instance, and in August 2009 a senior DIB executive said RU and OM had facilitated credit agreements for a Turkish company called CCH that defaulted on loans.

"We found out that CCH had not used the funds provided according to the investment agreements set between us," investment banking CEO Saad Zaman told the court. And he said the bank's main contact at CCH was another of the men, CM.

The prosecutors said RU and OM received bribes of US$950,000 (Dh3.5m) and $750,000 respectively from CCH to help arrange more credit for the company.

Two months later, the court heard startling evidence from DIB's chief executive Abdullah al Hamli, who told Judge Hamad Abdel Latif that the bank's board had reacted with indifference when told of the allegations in 2007.

"Their reaction shocked me; they were indifferent to the findings," Mr al Hamli said. "They did not take immediate legal action, which infuriated me. They are supposed to do so when it's an amount like $500 million [Dh1.8bn]."

In May 2010, the lawyer Dr Habib al Mulla, who was defending RU and OM, sprang a major surprise when he claimed that the blame for the fraud lay with four high-ranking DIB executives. He launched a civil suit against the four, saying it would have been impossible for the fraud to take place without their knowledge.

Last August, after the case had been running for 17 months, the prosecutors suffered a massive blow when Judge Abdel Latif ordered them to reinvestigate the case. He said they had made accusations in court that were not on the charge sheet.

He told the prosecutors to investigate accusations of "causing intentional harm to the bank" and "the facilitation of embezzlement".

The judge said that, while the case was built on such accusations, the prosecutors failed to include them on the arraignment sheet, and added that the court would be forced to acquit the men if the claims were not included.

In October, the case was presented to the court for the second time, with Judge Fahmy Mounir Fahmy presiding. Prosecutors presented new charges that included embezzling public funds, deliberately helping others to embezzle public funds, and inflicting intentional loss on the government and its interests. AF was accused of aiding and abetting.

Prosecutors did not charge the four high-ranking DIB executives whom the defence had said were responsible for the fraud.

The men finally learned their fate on Wednesday. CM, RL, RU, OM, EN and ZU were all found guilty. They will be deported when they complete their sentences.

For AF, his three-year ordeal was over as he was acquitted.

However, the verdicts may not be the end of the saga as the convicted men were told they could appeal within 15 days.


* With additional reporting by Salam al Amir and Awad Mustafa