Unauthorised transactions valued at US$165 million (Dh606m) that led the chief executive of Damas International to resign this month included about 50 investments in a wide range of property projects, hospitals and regional companies. The Middle East's largest jewellery chain took stakes in the Bupa Cromwell Hospital in London, a shopping mall in Turkey and the Meydan City horse-racing-themed project on the outskirts of Dubai, according to a source familiar with the matter.
One of the largest deals involved the construction of twin 49-storey towers, called Angsana Hotel and Suites, on Sheikh Zayed Road. Most of the funds were spent on deals involving property transactions, but some cash was spent on other investments, including acquiring shares in Villa Moda, the Kuwaiti luxury retail chain. "There is nothing mysterious in the unauthorised withdrawals. It was an oversight in getting the approvals," said the source, who declined to be named because of an ongoing investigation into the transactions.
Tawhid Abdullah resigned as chief executive of Damas on October 12 after disclosing the company had made unauthorised transactions. He was replaced as chief executive by Hisham Ashour, and the company hired PriceWaterhouseCoopers (PWC) and the law firm Dewey and LeBoeuf to conduct a full investigative audit. Both the Dubai Financial Services Authority and NASDAQ Dubai have said they are in close contact with Damas.
Mr Abdullah and his two brothers, who together own more than half of Damas, have since signed a legal agreement "to repay in full and in cash the full value of the transactions under review". "We can't comment on the specific transactions as they are the subject of an independent review by PWC," the company said yesterday. "However, the full value of the transactions will be repaid in cash by the three Abdullah brothers under the terms of a formal settlement agreement with the company. In the meantime, the company's business fundamentals remain strong as will be apparent when we announce our results for the first half of 2009 in November."
But some of the investments could prove difficult to sell in the current economy, said Michael Atwell, the head of Middle East operations at Cushman and Wakefield, a commercial property broker. "The actual sellers at the moment are the ones that have to sell," he said. "If they can retain it, they are likely to. The buyers are looking for well-priced products and distressed sellers," he said. Neither Damas nor the Abdullah brothers have divulged whether the investments will be sold to pay back money to the company. However, Damas Hotels - a group owned by the Abdullah family - severed a contract with Banyan Tree Hotel and Resorts to manage the Angsana Hotel and Suites on October 1. Banyan Tree said the buildings would be converted into residential apartments immediately and sold.
"When a private company, especially a family company, becomes a public company, everything changes," said Gaetano Cavalieri, a Damas board member and the president of the World Jewellery Confederation. "The commitments are different. The board is committed to protect its shareholders first." Ernst and Young, Damas's auditor, said yesterday the transactions took place after the last period it audited, which ended on March 31.
"As a professional firm, we are bound to act with complete confidentiality and not to divulge any information obtained from, or relating to, our clients to third parties," the company said. "We can however confirm we are still the auditors of Damas International Limited and that we signed our report on the financial statements for the period ended 31 March 2009 on 27 July 2009. It is our understanding that the alleged events that have led to the appointment of an independent investigator took place after that date."
The full investigative audit is expected to be completed by the end of next month. @Email:aligaya@thenational.ae bhope@thenational.ae