DUBAI // The three brothers at the head of the Damas jewellery business were yesterday fined more than Dh11 million, required to repay Dh365 million in cash and almost two tonnes of gold, and banned from running any company in Dubai for up to 10 years. The verdict follows a five-month investigation into Damas by the Dubai Financial Services Authority (DFSA) . Its report revealed that Tawhid Abdullah, the former Damas chief executive, "borrowed" almost two tonnes of gold from the company's vaults. The gold, which has not yet been returned, was used to make "certain personal investments", the DFSA said.
The regulator found that Tawfique, Tawhid and Tamjid Abdullah used Damas bank accounts as a cash reserve from which withdrawals were made for their personal use. About 2,200 debit transactions were recorded between July 2008 and October last year, covering items ranging from petrol for the brothers' cars to multimillion-dollar property investments. There was no limit to the amount that the brothers could withdraw from the Damas bank accounts.
The DFSA's action yesterday is unprecedented. Damas as a company was fined Dh2,569,000, of which Dh367,000 is due within a month and the rest suspended. The three brothers were fined Dh11,010,000 for violating DFSA regulations and are required to pay Dh1,101,000 within 180 days, with the rest suspended pending their co-operation with the authority's recommendations. The brothers had previously promised to pay back the money they owe the company, and they are now required to do so
The DFSA also banned each of the three brothers from holding an executive position at any company in the Dubai International Financial Centre for between five and 10 years, including the jewellery business their grandfather founded more than 100 years ago. The DFSA action comes five months after Tawhid Abdullah revealed to the board of directors that "unauthorised transactions" totalling Dh365 million (US$99.3m) had been made. The number was eventually increased to Dh606 million. After this disclosure Tawhid stepped down as managing director and chief executive.
The unauthorised transactions included at least 50 property deals, including investments in the Angsana Hotel and Suites, twin 49-storey towers on Sheikh Zayed Road in Dubai. One tower has since been sold. "We referred this case to both the police and the office of the prosecutor," said Paul Koster, the chief executive of the DFSA. "We have an obligation under the UAE penal code to refer conduct of a possible criminal nature to the relevant authorities."
The brothers yesterday declined to answer questions, but Damas said in a statement that they were working closely with the DFSA. Nasser Saidi, the chief economist of the DIFC, said the case illustrated the weaknesses in corporate governance that have become all too familiar during the global financial crisis. "The Damas case is a very important reminder to the boards of regional companies of the directors' duties and liabilities," he said. "This action will remind directors of public companies that they owe a duty to the company and to all their shareholders, which supersedes any duty they have to their own private interests."
Damas said yesterday it wanted to assure shareholders and employees that it "was focused on long-term stability and growth". Dubai Public Prosecution declined to comment, while Dubai Police could not be reached for comment. Damas began its goldsmith operations in Syria in 1907, when it was founded by the grandfather of the Abdullah brothers, and its first branch opened in Dubai in 1959. According to the company's website, it now has around 450 stores in 18 countries.