Casino Esq., Bruce. “Billion Dollar Middle East Fraud Goes Uninvestigated: Suggestions for Improving UAE Legal and Prosecutorial System in Fraud Cases.” Washington, D.C., 80 pp.(Download Full Report)
The article provides an independent, legal analysis of the corruption case of Tameer Holding Investments, a company in which Ahmed AlRajhi, current Saudi Minister of Labor, acquired a 75% majority shareholding and which Canadian citizen Omar Ayesh established circa 2003. Whistleblower documents subsequently revealed that upon securing majority control, AlRajhi and brothers orchestrated the expropriation of assets from the company, leading to its effective collapse.
The matter has been in litigation for 13 years, during which 25 court-appointed experts in seven committees have reviewed the details. Several experts were unable to reach conclusions due to abuse of process; yet despite the obstruction, panels issued threereports in favor of Ayesh with awards of 4.2 billion, 6.8 billion and, as recently as November 2020, 1.6 billion UAE dirhams plus penalties, which would amount to approximately half a billion United States dollars. The case is in the appeals process and has been referred to the Dubai Ruler’s Court as of May 2021.
Casino reviews Ayesh’s establishment of Tameer Holding Investments (THI) and the subsequent partnership with Ahmed AlRajhi in two agreements (2005 & 2007). He also introduces whistleblower documents which provide a framework for the analysis (page 9). These were leaked several years after the AlRajhis had begun rejecting Ayesh’s claims of shareholding; and their revelation exposed the premeditated expropriation of assets out of THI.
The AlRajhi conspiracy to defraud Ayesh included a plan to deny the latter’s shareholding, then accept it (p. 19), then deny it, and in 2021 following the virtual completion of extracting assets and rendering THI indebted, acknowledge his shareholding in an ostensibly bankrupt company. Asma Khan, the AlRajhi’s Chief Legal Officer, designed a multi-company structure within the context that “Tameer is intended to die” (p. 16). She provided a lawful façade for a specific fraud scheme to render Tameer valueless through the establishment of shell companies and transferring or “selling”
them Tameer assets (p. 20). Federico Tauber, the president of Tameer was given 9 months of broadly scoped power of attorney to rapidly establish several new companies, open bank accounts, transfer bank financing, and complete land transfers to new companies to execute the plan (p. 21).
Casino outlines the complexity of the embezzlement involved by discussing a selection of projects mentioned in the leaked documents. These include 6 plots in the Emirate of Dubai (p. 22), a revenue redirection scheme involving the company’s Imperial Tower (p. 23) and the expropriation of Tatweer shares, a joint venture with the emirate of Umm al Quwain’s government (p. 27). The plan also included one of the company’s landmark projects, Tameer Towers in Abu Dhabi, and was laid out in a presentation detailing a 2022 exit plan to defraud individual buyers as well as Ayesh (p. 25). The TT project garnered regional attention when investors won in arbitration and others refused Tameer management’s “half money” offer; yet even those with court orders have yet to obtain compensation.
Tameer’s Princess Tower & Elite Residence within the Dubai Marina, United Arab Emirates
The article then details the illegal activity to conceal fraud (p. 28). The revelations include the ease with which an employee of an Abu Dhabi royal apparently used forged identity papers to get a government agency to renew corporate licenses without requisite documents, which allowed the AlRajhis to remove Ayesh as an obstacle to expropriation. The forgery extended to use of backdated and false board resolutions that had AlRajhi employees, including a bewildered human resources staffer, to be “appointed” to the Board and sign resolutions dated before they knew they were assigned (p. 30).
Fraudulent financial reports, representations and financial manipulation are shown to be at the core of the calculated corruption at Tameer (p. 33). Casino analyses leaked documents that demonstrate the AlRajhi brothers were not only aware of, but directed, efforts to evade internal and external audit of Tameer, contrary to Emirati law (p. 34).Even when legal proceedings were in progress, discovery irregularities such as management noncompliance with audit access to IT systems and financial records allowed the AlRajhis to conceal evidence of the fraud (pp. 71, 35).
Corrupting and undermining judicial procedures extended beyond denial of discovery with evidence of threatening potential witnesses (p. 38). Such tactics extended not only to former Tameer employees, but even experts appointed by the court, including the equivalent of a magistrate judge in the United States (p. 39).
In 2018 Ahmad AlRajhi retained external auditor Ali Al Kaitoob to complete financial statements from 2008 to 2016, such a belated procedure itself one of numerous infractions of International Auditing Standards (IAS) and International Financial Reporting Standards (IFRS) given that trade license renewals demand submission of annual audits (p. 43). Irregularities discussed include the fact that the group’s 2008 opening balance did not match the Ernst & Young audited 2007 closing; as well as there being a significant imbalance in the trial balance of 2008; lack of reference made to transfer of plots among related parties (IFRS 24 violation); maintaining an unrevised, year to year provision of liabilities and losses of more than a billion dirhams (IFRS 37 v.); another infraction was the fact the no revenue was “recognized” for delivered projects, and a figure of 3 billion UAE dirhams was registered as liabilities rather than revenue, gross violations of IFRS 15; and accepting transference of Ahmed AlRajhi’s shareholder obligations to a “loan” account (IFRS 32 v.) (p. 45).
Omar J. Ayesh, Tameer’s Founder & Ahmed S. AlRajhi, Current Saudi Minister of Human Resources & Social Development Prior to Takeover
Notwithstanding the evidence of corruption detailed in the report, Casino reports that on 25 March 2018, the Court of Appeals adopted the unanimous determination of the five Experts in their report to the trial court in Ayesh vs Tameer deciding in Ayesh’s favor (p. 47). They concluded that Tameer was indebted to Ayesh for an amount of AED 125,852,757.97 (USD $34 million) in addition to AED 4.132 billion (USD $1.13 billion) representing the value of his 25% share in Tameer. The expert report outlined the rationale for their decision as well as the challenges faced in obtaining information to reach their conclusions.
The award was not enforceable; and further litigation ensued in the Ayesh vs. AlRajhi civil case (p. 48) which saw several experts resign, including one under threat. Another was Mustapha al Sheryani, the real estate expert whose impartiality was questionable given that Tameer was in possession of 52 assets when Ayesh departed, yet he only valued a few of those plots. AlSheryani had initially endorsed the expert committee’s preliminary report in favor of Ayesh stating the financial statements were unreliable, that the transfer of assets was done at below fair market value and agreed with Ayesh’s rights at 6.8 billion AED. Yet in the final report, he completely changed his position, now accepting the financial statements previously criticized and considering the asset transfer as commercially sound, even though no new evidence was introduced to justify the suspicious turnaround (p. 49). He then resigned under dubious circumstances during the appeals process, which led to the court seeking to appoint an eighth expert committee, a development that reverted the case back to square one after 13 years of litigation (p. 55).
Casino includes in his analysis matters of direct relevance as well as case studies of comparable crimes. Where the AlRajhis are involved in similar corrupt practices, Casino details the Qatar Scheme: Bridgehouse Capital (“BHC”) The Pearl Island Case (p. 56). He then provides case studies and references such as Enron, the Abraaj Group and Madoff (pp. 62 – 65).
Casino concludes with a review of challenges in pursuing litigation in the UAE and outlines lessons that can be learned from the loopholes which are regularly abused by lawyers and their influential clients (pp. 71 – 75). The judicial process in the UAE has strong merits, yet has also led the US State Department’s Mission UAE to express concern about the prevalence of procedural abuses noting: “Some firms might feel compelled to exit the UAE market as they are unable to sustain the pursuit of legal or dispute-resolution mechanisms that can take months or even years to reach resolution.” Casino concludes that while Dubai has clear goals of equity, its judicial process is open to abuse with limited mechanisms of expediency and accountability (p. 77).
About the Author
Bruce J. Casino is a compliance and white-collar crime expert and a litigator with extensive experience in litigation including white collar defense, False Claims Act, customs duties and customs fraud, export controls, and Foreign Corrupt Practices Act (FCPA) matters. Mr. Casino has represented a broad range of individual and corporate clients in compliance and civil and white-collar criminal litigation and investigations matters. He chairs the ABA’s Export Controls and Economic Sanctions Subcommittee. He has served as lead counsel on compliance and white-collar matters for several prestigious companies including Panasonic Avionics Corporation, Booz Allen Hamilton, and Symantec as well as several law firms. He has earned a preeminent rating in the Martindale-Hubbell® Peer Review Ratings, a practitioner-based ranking for attorneys, and is a Fellow of the Litigation Counsel of America, the trial lawyer honorary society.
He is a frequent lecturer on corruption as well as numerous papers on compliance and corruption, including co-authoring works such as “International White-Collar Enforcement, 2016 edition: Leading Lawyers on Preventative Measures, Regulatory Compliance, and Litigation.” He has also served as an adjunct professor at the George Washington University Law School, teaching the university’s course on white collar crime for 14 years. He is a member of and thought leader in the American Bar Association, authoring papers about compliance and international business. He earned his Juris Doctorate from Georgetown University Law Center.