x Abu Dhabi, UAEMonday 24 July 2017

Success story ends in flight from debt

Blue Banana founder took gift experience company to giddy heights, but global downturn crippled cash flow.

Simon Ford rode into Dubai in 2004 with little to his name but an entrepreneurial spirit and a couple of suitcases. Within three years, he had met his wife, started a family and founded a "gift experience" business, Blue Banana, that grew with the emirate's booming economy. He was named one of the country's "Hot 100" entrepreneurs by the socialite magazine Ahlan! in 2007.

But this week, with debts mounting in the wake of the global financial crisis, he fled back to the UK with his pregnant wife and three children to escape potential criminal charges and alleged threats on his life by creditors. Mr Ford's situation is a high-profile example of the dozens, if not hundreds, of cases in which businessmen face criminal charges for bouncing cheques or having difficulty making payments as a result of the downturn, lawyers say.

In an emotional "letter to the Dubai public" circulated yesterday, he sought to explain the "desperation" that had led him to leave and pledged to "repay every last dirham to everyone who is owed money from bluebanana.com". Mr Ford, 34, said he had been forced to leave because bankruptcy laws were not developed enough to handle his situation without considering him a criminal. "I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions," he wrote.

In a telephone interview last night, Mr Ford said his company owed more than Dh1 million (US$272,300). His sudden departure and outstanding debt mean he may never be able to return to the country. "Last Thursday, everyone left the office and I sat there by myself and talked to my wife," he said. "It certainly wasn't a light decision to make." Officials and economists have in recent months been urging reform of the region's insolvency laws, in part to encourage people in circumstances like Mr Ford's to find compromises with creditors instead of fleeing mounting debts in the face of possible criminal charges.

"The real core of the issue is that fraud, which is criminal in all countries, is linked here to bounced cheques," said Sameer Huda, a partner at the law firm Hadef & Partners. "But fraud requires criminal intent, effectively deception to secure an unfair or unlawful gain. If a business suffers a downturn because of the macroeconomic climate or failure of its own business model, then this shouldn't be linked to fraud if there was no intent to deceive on a payment obligation."

This issue is prevalent in the UAE because businessmen and other borrowers tend to use postdated cheques as a form of security of future payments. For Mr Ford the troubles started late last year, when he hired new staff and moved into more expensive offices in hopes that the holiday season would see business triple, as it had in previous years. But with the economy slumping, big sales never came; Mr Ford has spent the last seven months trying to keep up with loan repayments. Blue Banana's niche was offering more than 170 gift packages, ranging from a day at a spa to a Dh57,750 flight in a MiG jet.

"I'm not saying I made no mistakes as a businessman," he said. "But when you are thriving in a growing market, you can be quite arrogant and manage the business as if there will always be a positive cash flow rather than monitoring overhead ... You can be a little bit blind to the reality of what happens when that growth slows down." There are laws covering the treatment of companies near insolvency. Firms are required to file for bankruptcy within 30 days of not being able to make good on financial obligations to creditors and suppliers. Legal structures also exist for restructuring debt.

Lawyers say that in practice, however, struggling companies usually skirt the courts and work towards compromises with creditors privately, largely because the legal system remains untested when it comes to bankruptcies. Going to court can also take a long time: according to a World Bank report, it takes an average of 3.5 years to close a business in the Middle East, compared with just 1.7 years in developed countries.

Lt Gen Dahi Khalfan Tamim, Dubai's top police official, has called for the civil courts to deal with cases in which people defaulted on debts or bounced cheques. "Sadly now, as a police force, we have been involved in a matter that shouldn't have been under our mandate, and we are concerned more than we should, because this could escalate," he said in March. Still, Mr Ford said, his situation would have been different if the laws were more understanding of business cycles.

"There should have been more options," he said. "We were still making sales. It was just that the cash dried up and we needed more time." Peter Kollar, director of Balloon Adventures Emirates, said that his company was owed money by Blue Banana and that this was not the first company to leave his business holding unpaid invoices. He said the company owed Balloon Adventures a "substantial amount of money".

Mr Ford said he would start a new business to pay his debts in Dubai. "I have nothing at all left, and I am supporting a family," he said. "But I'm still young and I have lot of opportunities for business in other parts of the world. I'm incredibly sorry that I've left people with these financial burdens." * The National