Was PwC Mixed Up In The Middle East Worst Real Estate Swindle?
The last two years have seen great economic news. But it’s time to start paying attention to the players behind the scenes who can either help keep the economic engine running or drive it off a cliff. Some of the world’s big accounting firms are plagued by dodgy ethics and conflicts of interest that can undermine business transactions and hobble economic growth. One in particular to watch is PricewaterhouseCoopers. It may have played a role in one of the biggest real estate swindles in the modern Middle East. Also, contributing to a culture of impunity for powerful corrupt actors that threaten investment, trade, and prosperity.
Dirty Deeds in Dubai
Canadian businessman Omar Jamal Ayesh was looking to become the next Dubai success story in 2008 when the company he’d built, Tameer Holding, was gearing up for an IPO. The Gulf International Bank had evaluated the company’s portfolio as $5 billion USD, and Ayesh was a 25 percent owner. But after a highly sophisticated embezzlement scheme, his business partners swindled him out of his share.
Ayesh’s partners were the powerful Al Rajhi family of Saudi Arabia, whose five brothers include the chairman of Al Rajhi Bank – the world’s largest Islamic bank – and the recently appointed Saudi Minister of Labor and Social Development. They fraudulently transferred or “sold” Tameer assets to shell companies they owned to demolish Tameer’s value.
Ayesh sought justice, and the UAE Supreme Court (Ayesh v Tameer, Case No 1023 and 1027/2014) in 2018 held in Ayesh’s favor. But what’s particularly disturbing is this isn’t just the malfeasance of corrupt Saudi elites. In 2011, Ahmed Al Rajhi commissioned a PwC partner to prepare an expert opinion report for the arbitration proceedings. Which concluded that “The current value of Tameer Group is nil and has been since before May 2008” (emphasis added), contradicting the Gulf International Bank’s valuation for the same period.
The Bank had reached its valuation after a year of review based on projects currently under development and potential growth of future projects.
But years later PwC, in a matter of months, concluded that the company worth nil because the liabilities exceeded the value of the assets. Even though, Al Rajhis had stopped issuing audited financial statements since 2007. Meanwhile, Tameer had 16 plots and towers under construction in one of the most economically vibrant cities in the world – it wasn’t an empty shell.
One might wonder: why one of the largest business families in the region would buy 75% of a company worth nothing?. As it happens, over a decade after the fraud began six independent court experts recently valued the company at over $5 billion; the fraud amounted to between $1.2 billion-$1.8 billion.
A Long History of Scandal
PwC has a history of involvement in accounting scandals, including dozens of cases in the last decade alone, spurring Fortune Magazine to do a feature on five of the company’s worst. These include driving Tyco, Taylor Bean & Whitaker Mortgage, and MF Global to bankruptcy using “tricky accounting recommendations” and $100 billion worth of money laundering for Iran, Sudan, and Myanmar – states blacklisted for terrorism or human rights abuses – at the request of the Bank of Tokyo-Mitsubishi.
Fancy footwork in developing markets seems to be one of PwC’s specialties, such as the Satyam Computer Services scandal in India, where their auditors engaged in such fraudulent behavior that the government arrested PwC’s CEO and barred them from auditing any publicly listed company for two years. Now PwC involved in similar shenanigans with the Tameer swindle in the nearby United Arab Emirates – and this time they’re getting away with it, empowering the Al Rajhi party to corrupt judicial proceedings with false and misleading reports.
“And I had all the documents, all the evidence to get my rights, but yet, I couldn’t get my rights. And I came to know that hundreds of victims are going through the same thing.” Ayesh told the audience at a recent DC event where he unveiled his Global Justice Foundation to fight this kind of corruption. “Despite having those documents and providing them to the court, but yet not able to get my rights. Why? Because simply not everybody is under the law. There are some people probably as I see above the law, using their political and financial influence to steal from people and to abuse the justice system.”
According to Ayesh all PwC needs to do to remove any suspicion of involvement in this affair is disclose any financial statements from any time from 2007 on that were used to conclude their value of “nil,” and demonstrate that no conflict of interest exists between them and the Al Rajhis, a crucial condition for an independent report.
PwC, which did not respond to any questions about the issues in this article, has a very close relationship with the Saudi Kingdom, where the accounting giant has served as financial advisor to the Al Rajhi family and others. Given the millions (or even billions) of dollars at stake, one might wonder whether the company is engaged in a conflict of interest. PwC has already come under considerable criticism for its relationship with the Kingdom, where it’s streamlining and modernizing its military – despite the fact that said military is right now engaged in an “absurd and futile” war in Yemen.
With so many high-profile scandals, perhaps PwC is strategically turning its attention to countries where its reputation will pose less of a problem. This isn’t just bad for individuals who end up collateral damage, but for the entire country where the fraud happens. Crooked leaders who allow fraud against foreign investors scare away potential future ones, and leave their countries impoverished. The UAE doesn’t want this, and most of Saudi Arabia probably doesn’t either.
The original article was published on The Economic Standard; however, the link is no longer available. Inquiries may be directed to the author.