$490m fraud allegation at Dubai Islamic Bank
Posted on 06 April 2010 with 3 comments from readers
The former chief executive officer of the Dubai Islamic Bank was yesterday accused in a Dubai court of concealing a fraud leading to a loss to the bank of $490 million.
Local prosecutors have charged seven suspects, five businessmen and two former employees of the bank, of defrauding the bank of $490 million between 2004 and 2007, according to the report carried in Gulf News today.
Fraud allegation
The stunning revelation came as a part of a defence statement by the famous Dubai counsel Dr Habib Al Mulla, and the case is now adjourned until May 3rd. But whatever the outcome of this case the spotlight is surely now thrown on the scale of this alleged fraud.
Questions are bound to be asked about why it had not been revealed before. Why had the auditors not reported a problem? Why had central bank overseers not noticed the deficit?
Yesterday the assistant chief prosecutor Khalid Al Zarouni turned on the seven defendants who he dubbed ‘killers of the national economy’, and asked the court to apply the maximum penalties available for these crimes.
‘The suspects killed the whole nation by destroying one of its colossal economic pillars,’ he said. And Gulf News reported that Dubai Islamic Bank’s lawyers asked the court to return the file to prosecutors to add new charges of abuse of public service, bribing public servants and swindling public money.
How did it happen?
These are grave allegations indeed. But the shareholders and depositors of Dubai Islamic Bank will also want to know what went wrong, how it happened, and more particularly whether measures have now been taken to ensure that it will not happen again. And of course what has happened to the money from the alleged fraud.
Those with longer memories will recall a similar scandal at the Dubai Islamic Bank in the late 1990s. Then a complete management overhaul and recapitalization followed, and yet there still appears to have been a second serious breakdown in corporate governance.
It would be hard to imagine a chief executive officer from local UAE subsidiaries of HSBC or Standard Chartered Bank being able to conduct such a fraud without somebody noticing and reporting it. So today’s allegation raises as many questions as it answers.
3 Comments posted by readers:
Almost as hard to imagine as say a guy name Bernie or one named Chuck (pardon me, Sir Chuck) running a multibillion ponzi scheme under the watchful eye of the SEC.
Since that area isn’t exactly a poverty stricken region, and since this has happened before, I would hire an international auditing firm from outside the region to work along side the local bank auditors for the next 20 or so years, until (hopefully) a culture of honesty can be established at the bank. Two sets of auditors would be hard to fool or bribe, though not impossible, with the tremendous amount of oil money that will soon flow into the Middle East.
Maybe they could tour the jail before they start work. A contract with the auditor that they would share in any loss resulting from a defective audit might work.
the credentials and skills of international auditors are exposed in cases such as “enron”; “satyam computers”etc. the lesson i learnt is that no one should be undermined.