Wednesday, 11 February 2009

More on the Dubai fraud investigation

Wednesday, Feb 11, 2009
Financial Times: by Simeon Kerr in Dubai

Authorities have detained senior managers at Dubai Waterfront, one of the emirate's most ambitious property developments, as part of an investigation into bribery allegations. The detentions come amid a series of emirate-wide probes into alleged fraudulent activity at state-backed property developers and banks that has rocked Dubai in the past 12 months.

One of those detained, Matt Joyce, was managing director of the vast waterfront project until he was made redundant last month. Dubai public prosecution records show that Mr Joyce, an Australian national, and two others have been detained for questioning in relation to allegations of bribery.

The Australian foreign ministry has confirmed that two of its nationals were detained after questioning on January 25.

Nakheel, the government-owned parent company of the Dubai Waterfront entity, said it had "no information" about Mr Joyce.

The arrest of more real estate executives will, however, increase investor concerns about probity among Dubai's big developers, which are shedding staff as they attempt to cut costs in the midst of a price crash. A year-long clampdown on corruption and fraud has left more than 20 executives in jail on allegations mainly surrounding the former management of developer Deyaar and its parent Dubai Islamic Bank, but also extending into other parts of 'Dubai Inc'. None has yet been charged and no trial dates have been set.

Nakheel, which is also the developer of offshore ventures and has an $80bn (€62bn, £54bn) portfolio of projects, admitted some staff had been detained for questioning on fraud allegations last summer.

Government-linked developers Sama Dubai and Mizin have also had executives detained on allegations of financial irregularities.

It is unclear to what extent these investigations are linked.

The sprawling graft probe reflects the seriousness which the government has placed on cleaning up the real estate sector, but concerns have also been raised that some suspects have now been detained for almost a year without charge.

Morgan Stanley estimates that $263bn of real estate projects in the United Arab Emirates have been delayed or cancelled because of the global financial crisis.

But Nakheel insists that the waterfront development, a reclamation scheme that is about 30 per cent complete, is not one of them.

A property lobbying group has called on the government regulator to prevent a complete collapse in the real estate market by cancelling projects such as Dubai Waterfront until demand returns. Twice the size of Hong Kong, Dubai Waterfront is located on the border with the neighbouring emirate of Abu Dhabi. It is intended to house about 1.5m people, which is roughly Dubai's current population, on reclaimed land and alongside excavated canals cut through the desert.

Mr Joyce's position was last month merged into a neighbouring project, Palm Jebel Ali, as the developer delayed other projects and made hundreds of staff redundant.

The moves were part of a broader streamlining initiative to allow Nakheel to cut costs ahead of the refinancing of a $3.6bn Islamic bond in November.

Property freefall

Dubai real estate, the darling of foreign investors since the ruler opened the door to non-Gulf ownership in 2002, has plunged into freefall since last autumn when the global credit crunch finally punctured the property bubble.

HSBC estimates that house prices fell 23 per cent between the third and fourth quarters of 2008.

Brokers say prices on some of the higher-end developments have plunged even further as speculators, who had been used to "flipping" properties for a quick return, seek to exit their investments.

About half of the emirate's developments have since been put on hold or cancelled.


  1. I have to wonder about all the smaller private developers also...

  2. Your post of 12 February which I have abridged for reasons I'll explain below began "I know those arrested personally and I can tell you those guys are squeaky clean.....I have witnessed the dark side of that place (Dubai) too many times, which is why I am no longer there......"

    Thank you for your comments. While many may agree with you, if I published your posting in full in a public forum, which a blog is, the incendiary nature of your comments could jeopardise my ability to continue my blog. As you have lived here, I'm sure you understand.