Corruption cases mushroom in Dubai

March 29, 2009
Shares

, DUBAI, Mar 29 – Faced with a sudden economic slowdown, Dubai is trying to combat the fraud cases that surged during the past years of rapid economic growth in a bid to boost its status as a regional business hub.

But the clean-up drive has stirred controversy as several former executives of major firms, suspected of embezzling sums which total hundreds of millions of dollars, have been held for months without charge.

The economic boom of the past several years appears to be the main culprit.

"It was a boom market. Everybody gets greedy and you have corruption,"
economist Eckart Woertz of Dubai-based Gulf Research Centre told AFP. "You have the opportunity to cash in some bribes, and you do it."

The economy of Dubai, which is part of the oil-rich United Arab Emirates, had been growing at a breakneck speed.

The main engine has been the real estate sector, after foreigners were allowed to own freehold property in 2002, while oil prices shot up last year to unprecedented records, creating a massive cash surplus in the region.

But the global financial crisis threw the spanner in the works of Dubai\’s economy, as a liquidity shortage and weak confidence applied the brakes on growth in the realty sector.

Most of the recorded and alleged corruption cases are linked to this sector.

Earlier this month, seven men appeared in court in two trials against former business executives charged with demanding bribes — the first corruption trials since the fraud cases surfaced last year.

One case involves four former executives from Sama Dubai, a property developer belonging to the vast Dubai Holding conglomerate, and an executive from Damac Properties.

The other case embroils two former sales executives at the government-controlled giant property developer Nakheel, according to press reports.

Bribes in the case of Sama Dubai executives amounted to 8.35 million dirhams (2.28 million dollars), while they amounted to 5.14 million dirhams (1.4 million dollars) in the Nakheel case.

Nakheel, contacted by AFP, declined to comment on the case.

In February, police reportedly arrested three other senior managers at Nakheel — the company which shot to world fame for its projects to develop three palm-shaped islands and a world map-shaped cluster of islands off Dubai.

The longest-serving top executive in police custody is Deyaar Development\’s former chief executive, Zack Shahin, an American of Lebanese origin, who has been held since March 2008 without formal charges.

Dubai\’s prosecution charged in late February that Shahin and other suspects had embezzled more than 98 million dirhams (27 million dollars).

An Internet website called "Save Zack Shahin" says the man has been tortured in custody and it has posted photos of him in hospital.

But the largest corruption case appears to be an alleged scheme to defraud the Dubai Islamic Bank of 501 million dollars, over which seven persons have been charged, according to court documents.

Two of the suspects are still at large.

The alleged fraud was committed between 2004 and 2007 and involved two former DIB executives and five businessmen linked to a trade finance company and a real estate project in Dubai.

Meanwhile, the Dubai prosecutor\’s office has issued an arrest warrant against a top executive of Dynasty Zarooni, according to a local daily.

Al-Shaali law firm, which is acting on behalf of investors in Dynasty Zarooni projects, told AFP it has lodged complaints worth a total of nearly 82 million dollars.

The clampdown has rocked the business environment in the emirate.

But "it is to their credit that the (Dubai) authorities have decided to forcefully attack this problem, despite any negative publicity," said Ali Shihabi, CEO of Rasmala investment bank.

"The traditional Arab approach is to sweep such issues under the covers or ignore them completely … These actions against corruption will strengthen the quality of the business environment in Dubai," he said.

Some UAE newspapers have been active in reporting corruption cases.

But the freedom to cover the cases could be curtailed by a proposed media law which would penalise the press for publishing "misleading news that could harm the national economy" in the Emirates.

"I would seriously advise them against it (passing the law) … It won\’t achieve the aim of impeding negative reporting… You will have blogs," said Woertz of the research centre.

Shares

Latest Articles

Stock Market

Most Viewed