Saudi group sues Damas brothers in $22m claim

Trio faces more damaging accusations as a private equity company alleges that shares acquired before flotation were not paid for.

A Saudi private equity company is suing the three brothers who ran Damas for more than US$22 million (Dh80.8m) after accusing the jewellery giant of not paying for shares it acquired before the Dubai company went public two years ago. The Riyadh-based private equity house filed its claim against the three Abdullah brothers, Tawfique, Tawhid and Tamjid, at the Dubai International Financial Centre (DIFC), according to documents obtained by The National.

The legal action, which had not been previously disclosed, is a further blow to the brothers as they deal with the aftermath of a Dubai Financial Services Authority (DFSA) investigation into "unauthorised transactions" that followed the company's initial public offering in 2008. Amwal AlKhaleej alleges the Abdullah brothers agreed to buy 22,042,694 of its shares at $1 a share in an agreement dated June 16, 2008, just two weeks before Damas was scheduled to make a public offering of 25 per cent of its stock. But after the firm transferred the shares to the brothers, they did not pay the $22m owed, court documents allege.

On November 1 last year, the two sides came to an agreement where the Abdullah brothers would make a partial payment of $9.2m for 9,750 shares, the documents allege. Ammar al Khudairy, a board member of Damas and the chief executive of Amwal AlKhaleej, signed the agreement. But the brothers did not pay, the documents allege. Amwal AlKhaleej filed the claim against the brothers in December and the brothers appointed a lawyer to represent them in January. Amwal AlKhaleej is seeking the return of its more than 22 million shares or a payment of $22m with interest, the documents say. A hearing in DIFC Courts is scheduled for April 21.

Mr al Khudairy, who has agreed to resign as a board member of Damas, could not be reached for comment yesterday. Lawyers for the Abdullah brothers and Amwal AlKhaleej declined to comment. Amwal AlKhaleej, which was founded in 2005, was an early investor in Damas, buying an $82.5m stake in June that year. During the public offering, it sold a portion of these and now has a smaller stake in the company.

This month, Mr al Khudairy said: "You know, my number one criteria in choosing an investment is the partnership. We buy into companies - we do not buy out companies. Our typical acquisition model is to buy a significant minority, not a controlling majority, and therefore the trust and chemistry I have with the owners is crucial." The case is among the latest examples of companies increasingly using the DIFC Courts to handle financial disputes in the centre. The Courts saw 36 cases last year, compared with nine in 2008.

Some of the staff and facilities at the DIFC Courts will be used by the special Dubai World tribunal that can hear cases from creditors against the conglomerate. The DFSA this week ordered the Abdullah brothers to pay Dh1.101m in fines by the end of August. They have pledged to pay back Dh606m, which the DFSA said they had used for personal investments, in instalments before May 2012.