UK courts issue freeze order on businesses accused of embezzling Rakia

Khater Massaad (above), the former chief executive of Rakia, worked with Gela Mikadze, a lawyer, businessman and Georgian MP, who is accused of abusing his position as a key placeman in Georgia to divert money from Ras Al Khaimah companies into his personal bank accounts. Paulo Vecina / The NationalShow less

Judges on Wednesday imposed freezing orders on three UK-based businesses linked to a Georgian “puppet master” accused of embezzling tens of millions of dollars from the Ras Al Khaimah investment Authority (Rakia).

Gela Mikadze, a lawyer, businessman and local member of parliament, is accused of abusing his position as a key placeman in Georgia to divert money from Ras Al Khaimah companies into his personal bank accounts.

He worked closely with Khater Massaad, the former chief executive of Rakia, on ambitious investment programmes in Georgia including a US$155 million purchase of a sea port and a high-end shopping mall.

Mr Mikadze has been accused of directing lucrative contracts to companies he controlled and fraudulently receiving shares from Rakia investments after the fund changed direction and started selling off its foreign holdings in 2010.

Three London High Court judges on Wednesday imposed freezing orders for $42.5m on each of three companies with links to Mr Mikadze after evidence showed that potentially illicit funds had flowed through them. Rakia had sought freezing orders against 14 companies. An initial attempt to freeze the accounts through the UK legal system failed in 2015, only to be partially reversed yesterday on appeal.

Mr Mikadze - who was paid a salary of up to $26,000 a month for his work - has claimed that he is the innocent victim of a politically-motivated plot and an attempt to claw back money that he says he was legitimately paid.

Rakia claims that he and Dr Massaad were involved in a scam to secure $17.2m after Rakia decided in 2010 to sell Georgia's Poti port, according to court documents.

The fund claims that Mr Mikadze “engineered” a sham transaction as part of the process of disentangling Rakia from the port “for the sole purpose of prompting a very substantial payment”.

The businessman was arrested in Georgia in 2013 and held in solitary confinement. He claimed that he only pleaded guilty to misappropriating shares so that he would be freed to see his seriously-ill father. He handed back the shares and was immediately released from prison.

In a witness statement to London's High Court, he said he would fight to get the shares back and has lodged an application with the European Court of Human Rights.

He was not a personal target of the London legal claim. As a member of parliament in his native Georgia he has some immunity to prosecution, according to a source close to the case.

Khater Massaad - once the emirate’s most prominent economic representative - was convicted of fraud in his absence in 2015. He is currently being held in Saudi Arabia awaiting extradition to the UAE. He has repeatedly claimed his innocence and said that he was unaware of the cases that were being conducted against him.

The former tile tycoon was appointed Rakia chief executive in 2007 and over the next five years oversaw an unprecedented overseas spending spree. He left the UAE in 2012.

The cases are just part of a sprawling caseload of criminal and civil suits in Georgia, the UAE and the UK as part of attempts to claw back Rakia funds.

Rakia has also filed a lawsuit in London against US-Iranian businessman Farhad Azima based on claims that he secured kickbacks while being employed by Rakia to look after the recovery of overseas assets. Rakia is seeking $2.6m in damages from the businessman.

Rakia lawyers have secured global freezing orders amounting to tens of millions of dollars with forensic accountants continuing efforts to locate and retrieve funds alleged to have been stolen from the fund.