How Orion fell to earth

When Orion Holding Overseas was ordered into liquidation, accusations of $20m in losses from allegedly unauthorised deals emerged in the DIFC Courts.

The company's unfinished office space in building number one of Dubai Internet City will eventually be up for sale.

The remains of Mohammed Abu al Haj's dream lay scattered in a sunny office on the second floor of building number one in Dubai Internet City. A few dying plants, a calendar from last year, whiteboards scribbled with numbers and some long-unused furniture still litter the space where just seven years ago Mr al Haj, the scion of a wealthy Jordanian family, started what was to become Orion Holding Overseas.

The dream, he says, was to create an all-encompassing online trading platform to give investors access to every stock market in the Middle East while avoiding the need to navigate a tangle of regulatory regimes. Orion "was his baby", one former employee said. "We were the first to implement online trading," Mr al Haj says. "There was no one in the market doing this on the local exchanges. I started it in Dubai because I believed in Dubai, and the first free zone project established was Dubai Internet City, so I was in building number one."

The Dubai Internet City offices were the first of at least six that Orion would open in Dubai's economic free zones as it grew into a firm that employed more than 350 people and made annual profits greater than US$10 million (Dh36.7m). Thanks to a string of acquisitions and an aggressive expansion plan, Orion quickly became one of the shining stars in Dubai's financial firmament and the envy of bankers and brokers who had failed to offer trading on a regional scale. Between 30 per cent and 40 per cent of trades on the UAE's local exchanges were eventually routed through Orion's platform, Mr al Haj says, making it the country's largest single player in that market.

The company was valued at almost Dh1.4 billion when Shuaa Capital, Dubai's largest investment bank, bought a 20 per cent stake in February 2008. Shuaa sought Orion because it was looking to expand its brokerage operations, and buying part of Orion looked like an easy, immediate way in. Orion's fall - it was ordered into liquidation this month by a judge in the Dubai International Financial Centre (DIFC) courts - was as epic as it was mysterious.

The financial downturn toppled many firms, but analysts and people close to Orion say the economic climate does not fully account for how a company Shuaa valued at Dh1.39bn in its June 30 2008 financial statements was worth only Dh468m three months later, a decline of 66 per cent. "Everybody who left the company is so sorry it went down because it was the kind of company that was good and built to last," one former employee says. "It was very democratic and they spent so much time to collect resumes and get the right people."

Allegedly central to Orion's downfall were "unauthorised" trades on the Dubai Gold and Commodities Exchange (DGCX) that lost the company at least $20m. It is unclear precisely who made the trades, but sources familiar with them say they were investments made in the summer of 2008 against the price of commodities such as gold and oil, which were then on their way up. "The management was trading with the company's money," Mr al Haj says. "More than $20m was lost. They lost a lot on the DGCX and oil and all that, without proper risk management."

Sami Boujelben, the chief compliance officer of Orion, submitted a report to the company's board of directors in July 2008 describing the losses and saying that risk management protocols had not been followed, several sources at the company say. It is not known if the board was shown such a report. But the board opted not to take any action over Mr al Haj's objections, the sources say. People close to the company describe the losses as the tipping point that set off a feud among Orion's board of directors and the company's managers that ground the business to a halt.

Some took the side of Mr al Haj, who had offered to buy all of the company but was rebuffed, while others favoured a winding-up. Little is clear about what happened next at Orion, except that Mr al Haj resigned as chairman of the board in August 2008 in protest over what he claims was its failure to heed Mr Boujelben's report. Mr Boujelben left in August, was later reinstated, then left the company again. Mohammed Khalil, the chief executive, left and was replaced by the chief financial officer. Danny Dagher, a former Shuaa employee who had worked closely on his firm's purchase of its 20 per cent stake, was brought in to oversee the company for a short time.

As the company lurched towards insolvency in late 2008 and early last year, there was talk about a restructuring. An investment firm in Kuwait also made an offer in 2008, but ultimately did not step in. By the start of last year, former employees say some executives started requisitioning big-screen TVs and furniture at Orion's offices, locking them away in storerooms for later removal. At the same time many employees were allegedly terminated and claim they were not paid full benefits or salaries for their last few months of work.

They were dramatic times - so dramatic that one employee said he was considering writing a book about it. "I was terminated by BlackBerry," the former employee said. "There were many tries to shatter the company. They were trying to get rid of all the talented people. "When you see management getting rid of key people and keeping the teaboys, that's not restructuring. They were in there to destroy the company."

Orion last year commissioned a report from Ernst & Young to determine whether the company could be salvaged, statements made in the DIFC courts said. Despite the turmoil, the accountants determined that Orion could be saved if it cancelled the regulatory licence belonging to its subsidiary, Orion Capital. Such a move would then allow Orion to tap into part of a $2m deposit in a Swiss bank required to fulfil DIFC rules.

But in allegations made in recent DIFC court proceedings connected to Orion's liquidation, lawyers for the company claimed Orion was told by the Swiss bank that the cash had been used as collateral for a loan taken out in Mr al Haj's name. Mr al Haj, who admits having personal assets and bank accounts in Switzerland, denies the allegations made in court about the loans and says the Swiss bank's refusal to release the $2m came as the result of decisions by Orion's management.

The liquidators, meanwhile, have yet to offload any of Orion's assets, which include floors of offices the company bought in the Dubai Multi Commodities Centre in anticipation of further expansion. Also eventually up for sale will be the rights to unfinished office space in the DIFC that was to house Orion's new headquarters - a much more lavish spot than its original digs in building number one of Dubai Internet City.

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