The DFSA shows its teeth

The Dubai Financial Services Authority has shown that it has teeth, imposing fines and banning the Abdullah brothers from acting on the board of any DIFC company for 10 years.  A regulator doing its job is a good sign for business in the UAE.  However, as there are two parallel systems here the brothers could set up outside the DIFC at some time in the future.  The National newspaper reports that Tawhid Abdullah, the former Damas chief executive, “borrowed” almost two tonnes of gold from the company’s vaults. The gold, which has not yet been returned, was used to make “certain personal investments”.
Source: ArabianBusiness.com 21 March 2010
Photo: Sanabisdailyphoto
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The Dubai Financial Services Authority has banned the Abdullah Brothers from the board of any DIFC company for 10 years and fined them a total of $3m after they were found to have withdrawn Damas funds for their own personal use without disclosing it to the board.
“The sanctions include financial penalties against Damas, Tawhid, Tawfique and Tamjid Abdullah, and voluntary bans, for periods up to 10 years, on the Abdullah Brothers from acting as directors of Damas or any company in the Dubai International Financial Centre,” the regulator said in an emailed statement.
Criticising the brothers for their "failure to exercise appropriate corporate governance over the company", it said they owed "approximately AED365 million ($99.4m) plus the value of approximately 1,940,250 grammes of gold" to Damas. The firm was also fined a total of $700,000.
The DFSA added that the Abdullah brothers have agreed to repay the money owed to Damas. The brothers are reported to be considering selling personal assets to raise funds, including the sale of their yacht.
The discovery of the “unauthorised transactions” led to the departure of the firm's chief executive officer, Tawhid Abdullah, last year.  When Damas listed on the Dubai International Financial Exchange, now known as NASDAQ Dubai, in July 2008, he told Arabian Business that he was looking forward to increased opportunities as a result of the move.
"It's like gaining a PhD in something - you expect you will have more responsibilities but then you also have more opportunities," he said.
"Transparency is an element that we have lived and believed in, and it is positive. The world is becoming global and so I don't believe in the mentality of not being transparent - the more transparency, the easier it is to expand fast."
Tawfique Abdullah has served as chairman of the board of the company since 1980 and is responsible for monitoring group strategies and mentoring the executive committee.
He is also a qualified gemologist and goldsmith, and currently holds professional and active memberships with various organisations such as the Dubai Gold & Jewellery Group, the World Diamond Council and the World Federation of Jewellery.
Tawfique has also served as CEO of the Dubai Metals and Commodities Centre and has been bestowed with the title of ‘Knighthood of Belgium'.
Tawhid Abdullah served as CEO of Damas from 1990 until 2009. He also served as managing director of the company for over 10 years and was responsible for finance and corporate functions as well as marketing and the gold wholesale business.
Abdullah, who was instrumental in expanding the company's retail network and enhancing the Damas brand for over a quarter of a century, is also a qualified gemologist. He has held various senior positions at jewellery companies, including managing director of Dubai Gold & Jewellery Group.
Tamjid Abdullah has served as director of Damas International since 2005. He has also served as deputy managing director of the company for over 10 years and is responsible for the diamond division as well as the retail network.
He has been instrumental in establishing the quality control and customer service departments of Damas Jewellery, and has been recognised with numerous awards for jewellery design and craftsmanship including the De Beers Millennium Award for the Best Jewellery Piece in 2000 and in 2004.

Easy come, easy go: Abdullahs sell tower to pay back Damas debt

Source: The National 20 January 2010
Photo: Khan Tours website
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The Abdullah family has sold one of its twin high-rise towers on Sheikh Zayed Road in Dubai to raise money to pay back part of the US$165 million (Dh606m) it owes shareholders of the jewellery giant Damas International for "unauthorised" investments.
The sale of the tower, to a private investor, marks the first efforts by family members to meet their debt payment schedule, which requires them to pay Dh200m by April this year. The unauthorised investments were made with company money.
The two 49-storey buildings were known as Angsana Hotel and Suites until late last year, when Damas Hotels cancelled its contract with Banyan Tree Hotel and Resorts. Banyan Tree said in a statement at the time that the building would be "converted to residential use" and sold.
Yesterday, a temporary sign hung outside one of the buildings, proclaiming the new name "Emirates Grand Hotel".
Staff in the building said the tower had been sold to an Emirati investor for an undisclosed sum in October last year and would reopen next month with Iberotel, a German hotel company, as the operator.
The second tower is still for sale.
"We just signed a contract last week," said Alaa Hanna, a sales director at the Iberotel Miramar Al Aqah Beach Resort in Fujairah. "It previously belonged to Damas International but it was sold because of all these problems."
Construction on the two towers started in 2004. The tower that became the suites section of the hotel was opened last year, while the second building, with 364 hotel rooms, did not open despite being scheduled for completion late last year.  A spokesman declined to comment yesterday but a source close to the company said this week that the family had begun liquidating assets to meet its obligations. The brothers have recently been promoting the sale of their largest yacht to raise more cash.
Prices of residential property in Dubai have fallen by more than 50 per cent since their peak in 2008, which could be an obstacle to liquidating the investments the family made with the proceeds from the Damas International
public share offering in 2008. Almost 70 per cent of the transactions were investments in the property sector, with about 90 per cent of those in the UAE.
Blair Hagkull, the head of the regional office for the property consultancy Jones Lang LaSalle, said yesterday the sale was among the only major transactions in Dubai in recent months.
"We are seeing a situation where cash-rich organisations are finding attractive deals in this market," Mr Hagkull said. "The market has been quiet, but there are many purchasers and potential investors that are waiting in the wings for the prices to get to the right levels."
The Abdullahs face the risk of losing control of their 103-year-old family jewellery business. The brothers signed an agreement on November 4 to pay back the amount of the unauthorised transactions within 18 months.
They have also pledged to return 350 million of their 515 million shares if they fail to pay Dh200m within six months, Dh400m within 12 months and the full amount within 18 months.  If they were to default on these payments back to Damas International  and the shares were taken back by the company, their holding in the firm would fall to 16 per cent, from 51 per cent.

Damas: Abdulla brothers to repay $165m over 18 months

Source: ArabianBusiness.com 4 Nov 09
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Former Damas CEO Tawhid Abdulla.UAE jewellery retailer Damas International on Wednesday announced that the three Abdulla brothers have given a formal commitment to repay $165m they owe the company over the next 18 months.
The payment schedule is part of the formal settlement agreement between the Abdulla family and Damas, in respect of the repayment of unauthorised transactions that led to the resignation of Tawhid Abdulla as CEO last month.
The Abdulla brothers have undertaken to pay $55m within 6 months; an aggregate of $110m within 12 months; and the total within 18 months.
The company added that should auditors PricewaterhouseCoopers (PWC) discover further unauthorised payments as part of their investigations, repayments would need to be paid within two years.
The Abdullah brothers produced a list of assets that are potentially available for liquidation to be converted by them into cash to meet their obligations.
These included real estate investments in the Middle East and North Africa (including a number of residential and commercial buildings and units in the UAE) and an investment in a shopping mall in Turkey.
As part of the settlement agreement, the Abdulla brothers have also pledged 350 million of their shares in the company that would be transferred in whole or in part back to the company in the event of the terms of the settlement Agreement are breached.
Last month, PWC was appointed by the board of the company as an independent auditor to examine unauthorised transactions conducted by former CEO and MD Tawhid Abdulla.
The appointment of PWC follows the formation of a separate committee to examine the transactions in detail.

Damas CEO quits over $165m 'unauthorised payments'

Source: ArabianBusiness.com 12 October 2009
Photo: Damas website
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The managing director and CEO of UAE jewellery retailer Damas International on Monday left the company after admitting to being responsible for unauthorised payments worth up to $165m, the company said in a statement.
Following Sunday’s voluntary suspension of trading by Damas on Nasdaq Dubai, the company announced that it has accepted Tawhid Abdulla’s resignation.
The luxury retailer said in a statement that he had stepped down "due to his disclosure to the Board of what is understood to be unauthorised transactions conducted by him".
The statement added that the full extent of the transactions had not yet been calculated but the company’s initial estimate was that they could amount to about $165m.
The Abdulla brothers, who are founding members and current owners of more than 50 percent of the company's shares, "fully stand behind the company", the statement said.
"They have agreed to commit the necessary assets to secure and repay in full any unauthorised transactions," the statement added.
A special committee of the Board is to appoint an independent global accountancy firm to conduct an independent review and an international law firm to assist in analysis of the transactions.
The Board has appointed Hisham Ashour as CEO of the company effective from Sunday. Tawfique Abdulla will continue to serve as chairman of the Board and has also assumed day-to-day responsibilities as managing director.
The company also said it had adequate funds to meet its current financial obligations and was continuing to conduct business as usual.
"The Board remains fully committed to the highest standards of corporate governance, and has implemented procedures to ensure that the repayment is conducted in an appropriate and timely manner and that all transactions are fully scrutinized in the future to prevent a recurrence," the statement added.
Damas, a family-owned jewellery group with origins going back to 1907, raised $270m in an initial public offering on the Dubai International Financial Exchange, NasdaqDubai’s predecessor, in July 2008, in one of the largest privatisations of a family-owned business in the Gulf.
One of Dubai’s best-known brand names and a leading member of the city’s jewellery and precious metals industry, Damas has more than 500 stores across the world.