A memo from a top official at Dubai's financial free zone issued at the height of the global economic crisis warned that its investment unit needed US$1.2 billion (Dh4.4bn) in a matter of weeks to avoid operations coming to a halt. Bisher Barazi, the head of the investment arm of the Dubai International Financial Centre (DIFC) wrote to Omar bin Sulaiman, then the governor of the DIFC, on November 15, 2008, outlining the cash-flow requirements of the business, court documents show.
The memo, titled "Debt Situation", is the most detailed account of the cash shortage faced by DIFC Investments at the peak of the financial crisis. "The bottom line, we need $500 million by the end of November, $200m by the first week of December and $500m before the end of December so that ? we can sustain our basic business ? I am sorry to say that I have run out of options and or possible solutions to address this matter and I take full responsibility for that, however, if we do not get immediate support, the entire operations ? will come to a halt, not withstanding us defaulting on our commitments", Mr Barazi wrote, according to court documents filed in the DIFC Courts.
Mr Barazi and Mr bin Sulaiman declined to comment yesterday. The DIFC also declined to comment. The documents form part of a DIFC response to a claim filed by Mr Barazi for Dh1.78m in unpaid wages and benefits he says he is owed after being suspended from his position late last year. The DIFC has countersued Mr Barazi, asserting that he proposed bonuses worth $4.8m for himself, Mr bin Sulaiman and another official for the 2007 financial year. The bonuses have since been described as unlawful in court documents.
Mr Barazi denied the bonuses were improper, arguing that Mr bin Sulaiman was responsible. The DIFC's lawyers said in documents made available yesterday that Mr Barazi could not "absolve himself from the liabilities" by highlighting the fact that Mr bin Sulaiman authorised the bonuses. "The claimant was not a passive recipient of a bonus assessed, authorised and approved by his principal," the documents say. "On the contrary, the claimant recommended and prepared, revised, executed and proved the benchmarks for the investment bonuses."
The DIFC alleges that Mr Barazi still pushed through the bonuses at a point when he "knew or ought to have known" that the unaudited financials revealed a loss."During the times that he was seeking approval for the investment bonuses and when the instalments of the investment bonuses were being paid out, the claimant was of the view that the defendant was experiencing severe cash-flow problems which prevented the defendant from meeting its day-to-day obligations and debt obligations," the DIFC said in court documents.
A key issue in the case is the financial performance of DIFC Investments in 2007. The bonuses were based on expected annual profit of $200m at DIFC Investments. But the company recorded a loss of $80m after it shifted its stake in the Dubai Stock Exchange (DIFX) to Borse Dubai and wrote down the value of its investment in Deutsche Bank. DIFX is now known as NASDAQ Dubai. The DIFC points to this as an example of the alleged improper behaviour exhibited by Mr Barazi to obtain the bonuses. Mr Barazi, however, has denied his actions were improper. Mr bin Sulaiman was removed from his post at the DIFC in November. DIFC Investments posted a $561m loss for last year after writing down the value of many of its assets.
The Dubai Government is investigating financial irregularities at the DIFC through its Financial Audit Department, while DIFC Investments has hired the accountancy firm KPMG to conduct a forensic audit of its finances. @Email:firstname.lastname@example.org