DIFC complaint alleges $4.8m in 'unlawful' bonuses

Free zone's assertions come in response to a court petition seeking back pay and benefits by former executive.

DUBAI - MAY 12,2010  - Dubai International Financial Centre in Dubai. ( Paulo Vecina/The National )
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The former investment chief of the Dubai International Financial Centre's investment arm awarded US$4.8 million (Dh17.63m) in "unlawful" bonuses to himself and officials including Dr Omar bin Sulaiman, the former governor of the financial free zone, a court complaint alleges.

Bisher Barazi, the former managing director of DIFC Investments, justified the bonuses by misrepresenting the financial statements to show an income of $60m in the 2007 financial year when the DIFC investment arm had in fact made a loss of $80m, according to a claim lodged at DIFC Courts by his former employer. Mr Barazi gave Dr bin Sulaiman $3.3m and took $1.2m for himself, while also awarding a third executive $300,000, the claim alleges.

Mr Barazi declined to comment yesterday "due to ongoing legal proceedings", while Dr bin Sulaiman did not respond to calls made to his mobile phone. The allegations come less than two months after Dr bin Sulaiman was released from police custody after repaying Dh51.5m of allegedly inappropriate bonuses he collected while serving as governor of the DIFC. A large-scale restructuring of the DIFC is also under way, with several major executives resigning in recent months, and with layoffs of staff and the development of new strategies to keep the financial centre competitive.

The allegations are detailed in a counterclaim filed by DIFC Investments against Mr Barazi, who is seeking Dh1.78m of unpaid salary, benefits and damages from his former employer. The National obtained the public documents from the DIFC. Mr Barazi says in his filing that he was asked to leave his position on November 22 last year because of an investigation under way into the DIFC by the Financial Control Department of the Dubai Ruler's Court. He then submitted his resignation on December 21 but claims not to have received his salary for the following three months or his end-of-service benefits.

He alleges in his court filing that when he complained to Ahmed Humaid al Tayer, the current governor of the DIFC, he was told "that he has no rights and if he wants to get anything he should go to court". But DIFC Investments said Mr Barazi was and remains on "investigation leave" with pay suspended. It filed a counterclaim against Mr Barazi for the $1.2m he is alleged to have awarded himself and reserved the right to file more claims once its own investigation into his time at the DIFC was complete.

DIFC Investments hired KPMG, the financial services firm, to conduct an independent investigation into the conduct of its employees, including Mr Barazi. The preliminary results of that investigation have shown that Mr Barazi "engaged in fraud, dishonesty, misrepresentation and/or breach of trust" as well as "breach of fiduciary duty", it alleged. These alleged acts include an unauthorised loan of Dh4.8m to Mr Barazi himself on March 24 last year, three weeks after the company voted that it would not give personal loans to employees except for one-month salary advances to staff who recently joined.

DIFC Investments also said Mr Barazi did not exercise due diligence on a Dh3 billion investment in the Dubai Pearl property development near the Palm Jumeirah. The deal to obtain 29 floors of the east tower of the project was announced in late 2008. Mr Barazi "failed to undertake any due diligence prior to entering into the Memorandum of Understanding and withdrawal of funds from the defendant's bank account", DIFC Investments says. Entering into such a deal without exercising due diligence "constitutes gross negligence, breach of contract, breach of fiduciary duty", it alleged.

Only Dh50m of the contracted amount was paid to the developer, Dubai Pearl, which is demanding the remaining amount. bhope@thenational.ae