Corruption cases swell as Dubai bubble bursts

Dubai probes embezzlements of millions of dollars


Dubai is trying to combat the fraud cases that surged during the past years of boom and rapid economic growth in a bid to boost its status as a regional business hub in face of a sudden economic slowdown.

Several high-profile bribery cases have nabbed former executives of major firms, suspected of embezzling hundreds of millions of dollars, though the clean-up campaign has stirred controversy as some have been held for months without charge.

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 penalize the press for publishing "misleading news that could harm the national economy" in the Emirates.

Economic boom

The economic boom of the past several years appears to be the main suspect in these cases. The economy of Dubai, which is part of the oil-rich United Arab Emirates but has relatively few oil resources, 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 last year hit unprecedented records, creating a massive cash surplus in the region.

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

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

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

It was a boom market. Everybody gets greedy and you have corruption

Eckart Woertz, Gulf Research Center

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. Nakheel declined to comment on the case.

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

Improving the business environment

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

Dubai's prosecution said that Shahin and other suspects had embezzled more than 98 million UAE dirhams ($27 million).

But the largest corruption case appears to be an alleged scheme to defraud the Dubai Islamic Bank of $501 million, 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.

It is to their credit that the (Dubai) authorities have decided to forcefully attack this problem, despite any negative publicity

Ali Shihabi, Rasmala

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. The clampdown has badly affected 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," he added. "These actions against corruption will strengthen the quality of the business environment in Dubai."