Some names that have tarnished DIFC in a very spectacular manner included Sarasin-Alpen CEO’s misselling criminal conviction that led to dismantling of joint enture of Sarasin-Alpen and the very first proven mis-selling conviction of a banker from around the entire world against it’s CEO in DIFC.
MAS Clearsight DIFC CEO has been missing after selling tomato farms to clients and the licence was suspended in June 2015 while Espirito Santo DIFC went bankrupt and has been under bankruptcy proceedings since Oct 2014.
ABN AMRO was hit with fines several times for breaking sanctions against Iran who shut in Dubai along with several exchange houses who also have been shut or fined.
ABN AMRO was hit with fines several times for breaking sanctions against Iran who shut in Dubai along with several exchange houses who also have been shut or fined.
Deutsche Bank was hit with a massive fine as well related to gold dealings.
Euram bank CEO was also fined by DIFC.
FFA Bank CEO was also fined for issuing a false letter.
We are unable to discuss details of Gold AE DIFC company scandal here.
Large banks like ABN AMRO, Lloyds, Societe Generale, Barclays, Dresdner, RBS, Fortis, Vontobel, EFG Bank, Clariden Leu etc have all shut from DIFC and departed while large funds like MAN, GAM and Old Mutual also collapsed. Even the Governor of DIFC, Dr Omar Sulaiman was caught in a major scandal during the 2009 crisis.
Now it’s the turn of the collapse of Abraaj Group that had become the largest Private Equity player in the world in Emerging Markets investing and had presence in 18 countries.
From the article:
“After Naqvi, 58, surrendered control of Abraaj in June, it was revealed that for years, its main revenues didn’t cover operating costs. Abraaj borrowed to fill the gaps and now owes creditors over $1 billion. Once lenders turned off the taps, the firm collapsed, leaving losses, lawsuits and shattered reputations in its wake.”
You can read today’s latest Bloomberg article here:
Major billionaires have been arrested or have run away from DIFC and Dubai turning all banks insolvent in the region.
However, the damage caused by Abraaj is the largest of them all since it cannot be hidden under the rug like all other scandals have been hidden underneath the shiny veneer and glamour of Dubai and DIFC.
It cannot be hidden because international investors, international companies, international investments, international auditors and international lawsuits under international laws of “DIFC”, UK, Cayman, Turkey etc have started bringing out exactly how many scandals were going on inside Abraaj.
This new Bloomberg article of today alleges that for several years, Abraaj did not have the cash flow to cover rents of DIFC and amounts above USD 1 billion are outstanding as debt in the company name, used for salaries, rents, lavish expenditures and other operating costs.
How was this anomaly of being insolvent never caught by the auditor or the regulator?
How was this anomaly of being insolvent never caught by the auditor or the regulator?
Never mind what is owed to investors and lenders that lies frozen in assets around the world and losing value every single day as the court cases keep piling up.
This indicates that like many companies, Abraaj could not deliver results as per expectations and as per their presentations which in turn indicates that they were LYING to investors, most employees, lenders and regulators while sustaining themselves on borrowings using audited reports from conflicted auditors.
This will have serious repercussions on all employees/owners, the shareholders, the regulators and the auditors.
What is also not coming out yet in courts is that KPMG Chairman of UAE, Vijay Malhotra’s son and at least 3 ex-KPMG UAE employees have worked in Abraaj.
This is a serious conflict of interest given that financial statements cannot be found (as you will read below) and that the regulator could not get a clue on what's happening inside a regulated firm.
Plus the CFO was an ex KPMG UAE employee who was one of the first to quit the sinking ship in March 2018 (a month after the scandal broke).
This is a serious conflict of interest given that financial statements cannot be found (as you will read below) and that the regulator could not get a clue on what's happening inside a regulated firm.
Plus the CFO was an ex KPMG UAE employee who was one of the first to quit the sinking ship in March 2018 (a month after the scandal broke).
There have been all sorts of frauds worldwide but it does not come to memory where an auditor firm’s owner’s son has worked in a multi billion dollar collapsed company and an ex employee has worked as a CFO with a client who is now dying under mountains of broken laws, frozen investments and being insolvent for several "years".
This could be the single biggest reason that the losses of Abraaj, new borrowings, comingling of funds etc could go on for as long as they did as per WSJ, Bloomberg and PwC allegations in various articles and now in the courts as well.
Everyone relied on audited statements that were probably compromised by KPMG UAE and it’s partner/owner.
Everyone relied on audited statements that were probably compromised by KPMG UAE and it’s partner/owner.
Conflict of interest seems to be the primary reason that between the DIFC regulator, Abraaj, KPMG auditors and now the PwC liquidators, no one has a copy of complete past financial statements.
One can only imagine the fright on the faces of investors, regulators and lenders and all of their lawyers.
One can only imagine the fright on the faces of investors, regulators and lenders and all of their lawyers.
This appeared in WSJ.
Submitted in Cayman Islands Court, this is what PwC had to say in the court:
“In a report prepared for the Cayman Islands grand court, officials at PricewaterhouseCoopers LLP, provisional liquidators for Abraaj's holding company, said they have "been unable to obtain standalone annual financial statements or management accounts" for the holding company, a situation they described as "highly irregular."”.
Under the circumstances, with multiple lawsuits around the world, it seems impossible for the company to sell any of it’s assets for years to come. Although a few die hards keep trying their luck without any success.
At least 9 banks (as per Bloomberg) have lost hundreds of millions of dollars who have not even filed cases thus far. The number of these banks could easily become 2-3 dozen or more when court cases start piling up worldwide.
The repercussions of the Abraaj collapse are also being felt in Karachi, Pakistan where one charitable foundation providing ambulance and other services being sponsored by Abraaj has almost collapsed due to lack of funding since this scandal broke out in Feb 2018.
This is apart from the frozen deal of Karachi Electric in which Abraaj is the owner.
This is apart from the frozen deal of Karachi Electric in which Abraaj is the owner.
Major UAE companies like Air Arabia and the following 6 companies are set to lose a lot of money besides Mashreq, CBD, Noor, FGB and Arab National Bank.
Another court case began in Turkey last week.
24 July 2018: Turkish dairy company sues The Abraaj Group
This article below appeared in the WSJ on July 3, 2018 where the conflict of interest between KPMG UAE and Abraaj is very well described.
“The ties to Abraaj run deep. KPMG Lower Gulf, the Dubai-based affiliate, is led by chairman and chief executive Vijay Malhotra. His son has worked at Abraaj. An executive named Ashish Dave alternated between stints at KPMG and as Abraaj's chief financial officer, a job he held twice. At least two other members of Abraaj's finance team in Dubai also previously worked for KPMG.”
The bribery scandals of every deal in emerging markets are yet to arise without which a deal is impossible to close in all emerging markets.
According to our information, several investors are still unknown and may not come out due to their own past. We may only find it slowly as they somehow find a way to try to get their money back from Abraaj investments.
We can expect billions to flow out of DIFC/Dubai in the next few months while it will be next to impossible to attract new money using the DIFC platform for anyone.
The Bloomberg article testifies to our views:
"Abraaj’s spectacular demise has dealt a severe blow to Dubai’s reputation as a global financial center. It rattled the trust of investors who included Bill Gates, the International Finance Corp. and U.S. and U.K. government agencies, triggered defaults on loans from at least 10 sources and set off lawsuits in the United Arab Emirates and Turkey."
It was really audacious for a DIFC based company to have acquired Bill Gates as one of their clients (through a UK acquisition in 2012) and then have the courage to mismanage his funds (and of several Govts) for a few years before they found out.
Imagine lying and "cheating" the richest man in the world! WOW!
Most companies would give their right arm to have him as their client and follow all the laws possible and more.
Most companies would give their right arm to have him as their client and follow all the laws possible and more.
This fiasco will now impact the Global Health Care goals for Sustainable Development by 2030.
This is what Arif Naqvi himself said about Bill Gates at Davos 2018:
Much more inglorious details are yet to emerge that will leave regulators running for cover, lenders frozen in court cases, investors drowning in massive losses swearing never to invest in Emerging Markets especially via Dubai as the "leader" of all Emerging Market PE investors has crumbled while caught with his pants down in breaking laws, cronyism, conflict of interest, operational losses and loss making investments.
Strong dollar is not helping on top of everything else.
So much for the "smart" private equity people who turned out to be not so smart after all.
Please do update us via comments below, if we missed any scandal or any FI that left DIFC or if you have any details to share on the unfolding Abraaj story.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.