Monday, May 10, 2010


Apologies for the tabloid headline. I’ve been wanting to use that photo for months and I just got the chance.

So while I was distracted by watching the Eurozone melt down and then today melt up I missed a very important story in Dubai. The Abdullah Brothers have missed their first payment of $55 million of the $165 million and two tons of gold they stole from their public shareholders.

If you have been reading my blog for a while I have written extensively about massive theft from the shareholders of Damas by the Abdullah Brothers. I began with a two part article about how the theft was undermining the confidence of the DIFC. I wrote a few other pieces about the ridiculousness of the fact that the Abdullah Brothers were allowed to negotiate with themselves the terms of their repayment. I begged the DFSA to do something and then I celebrated the DFSA when they did in fact take action.

Well, it might be time for a bit more action to be taken. The Abdulla Brothers were supposed to make a $55 million payment at the end of April and they have not done so. In fact from what I can gather from the various news sources they haven’t even made a partial payment. Damas put out a statement saying that the payment was missed because of the complexity involved in liquidating the assets. They also point out that under the terms of the confidential agreement between the Abdulla Brothers and Damas the missed $55 million did not constitute an event of default.

Now let me get this straight. In their Enforceable Undertaking with the Abdullah Brothers the DFSA mandated that they had to repay the money they stole from Damas according to the terms of their original agreement. At the time that agreement was written one of the Brothers was in fact the Chairman and another was the MD responsible for daily operations. The CEO was non-Emirati and so presumably had little say. Now it comes out that A.) missing a payment of $55 million does not constitute an event of default and B.) the agreement is secret?

You have got to be kidding me. The DFSA signed off on a secret agreement whereby non-payment is not an event of default? If non-payment is not an event of default what the heck is an event of default. Of course we’ll never know for sure BECAUSE THE AGREEMENT IS A SECRET! Was it a secret from the DFSA at the time they agreed for it govern the restitution to Damas? I do have to say that it was very forward thinking of the Abdullah Brothers to negotiate this agreement WITH THEMSELVES and then make it confidential.

And what is the reason for the delay? Complexity? You have to be kidding me. According to an earlier article in the National they own four boats. How complicated is it to sell a boat in Dubai? I’m pretty sure they get sold all the time. What is this about Damas “working with the Abdulla Brothers?” Why are they working with them? Why are they not simply holding a massive auction and blowing out of all the Abdullah Brothers assets to the highest bidder until they get to $165 million? How complex would that be? There’s even a company in Dubai that Damas could hire to do it. Or better yet the DFSA should be doing it.

The signatory to the Enforceable Undertaking (EU) on behalf of the DFSA is Steve Glynn. I know Steve and I think he’s a good guy. I think he should do the following. I think he should find the nearest telephone booth in the DIFC. He should enter said telephone booth as his mild mannered self and emerge as his regulatory super-hero alter ego: THE ENFORCMENT UNDERTAKER and he should enforce the enforceable undertaking.

He should make the repayment agreement a matter of public record first of all so that the poor long suffering shareholders of Damas can know what they’re in for. Then if there is in fact no circumstance in which the Abdullah Brothers can be put into default he should declare that the agreement does not meet the requirements of the Undertaking and should invoke article 17 of the Undertaking. This would enable him to declare them in default and use the remedies he has under law to enforce the lien on their assets and start auctioning them off until they get to $165 million and the shareholders are made whole. If the Abdulla brothers are bankrupted or reduced to penury by this then those are the breaks. Maybe the next guy who does an IPO on the DIFX won’t rig the book building process and then steal the proceeds.

Sometimes I really don’t understand Dubai. Here you have Dr. Omar in jail and all he did was pay himself $15 million dollars for what, at the time, seemed like a good job of attracting firms to the DIFC. These guys STEAL $165 million, more than ten times what Dr. O gave himself, from their shareholders and are walking around free men with the liberty to choose among their four yachts on which to indulge their passion for fishing all the while missing the first payment deadline imposed on them by the regulator. The Damas fraud is a bigger black eye for Dubai than Dr. Omar times a thousand.

Dubai is worried that firms are leaving the DIFC and have hired McKinsey to find a way to attract firms to the Center. I’m going to write something more in depth on this but I’ll save them a few million dollars on their McKinsey fee right here: the only advantage that Dubai has as a financial center to counter the fact that it has NO money is the idea that the DIFC has a regulatory regime which is more attractive than any of the other Gulf States.

The letter of the legal and regulatory system really IS qualitatively better for executing financial transactions than the surrounding jurisidictions. But in law as in life the letter is only as good as the spirit. By letting the Abdullah brothers make such an obvious mockery of it that I can write articles like this for months Dubai is destroying its only advantage. If you want to keep people in the DIFC don’t let favoured Emiratis rob shareholders blind and then so obviously get away with it that I can write article after article for months saying out loud what everyone in every bank is thinking.

Come on Dubai. It’s time to step up, there’s a game on here. You took the crown from Bahrain, do you have what it takes to keep it?


Sultan Sooud Al-Qassemi said...

Hey Ken

Love the blog. Please consider changing the black back ground since it's heavy on the eyes.

Keep up the great work

Ken said...

Done. Thanks for the tip. My sister has been saying the same thin for months.

Rupert Neil Bumfrey said...

News Update.

1) The ants have been removed!

2) Ironically during "Art Week" a 20ft container was dumped on the DIFC lawns.

3) I agree the chaps of DFSA are jolly nice, I was always puzzled why, when I met them, they were mystified when I introduced SICAV and UCIT's to the conversation!

4) Dubai Holding have, according to FT, appointed advisers!

DIFC Exile said...

Classic Dubai instincts. Your own family asks you to do something, you get distracted and ignore their wishes.

Some random Emirati national mentions he doesn't like the colour, you change it in a heartbeat. Did you used to work for Nakheel, by any chance?

(Only teasing - great work with the blog).

Sultan Sooud Al-Qassemi said...

That was quick! Thank you Ken.

I'm also following you on twitter: @sultanalqassemi

Sultan Sooud Al Qassemi

Khaled said...

I think you missed out the bigger value of this whole "theft". The dollar value of the 2 tons of gold, is where the big questions mark should be placed.

Anonymous said...

Hi ken.

Great write up.Just in case you wanna write again on the abdullahs,here is a yet another story of a non payment by the abdullas.

Anonymous said...

Hi ken.

Do you know the bilateral extradiction treaties between the USA & UAE?

Why am i asking this?

Because the brothers abdulla are US citizens!