Gulf developers face accusations of embezzlement and corruption

Dubai: Developers in the Gulf have walked into a minefield of controversy and speculation as corruption claims, investigations and embezzlement threaten to damage the real estate market.

Nakheel has found itself in the middle of a storm over rumours that its "second in command" - a UAE national - has been arrested for pocketing money, according to a Gulf News source.

When asked directly by Gulf News whether someone had been arrested, the Nakheel spokesperson neither confirmed nor denied the allegation.

"Nakheel conducts regular audits to ensure transparency and regulation of procedure. This process is ongoing and it would be inappropriate to comment further at this stage," the spokesperson said.

However, in relation to the question of embezzlement, "the company can confirm that no irregularities have been found within Nakheel," it said in a statement.

This latest turn of events comes as Nakheel is in the midst of holding internal investigations involving some employees over alleged corruption claims.

Sultan Ahmad Bin Sul-ayem, chairman of Dubai World and Nakheel, said Nakheel was "preparing a statement".

Even with Nakheel's confirmation of no irregularities, for such a heavyweight developer to be even associated with cloudy issues is not good for the valuable image of Dubai's real estate market.

Tamweel investigation

At the same time, former chief executive officer of Islamic mortgage lender Tamweel, Adel Al Shirawi, is being questioned by Dubai police as part of an alleged "embezzlement and mistrust" investigation.

The news involving these two incidents comes about six months after the detention of Jack Shahin, former chief executive of Deyaar Development, for alleged fraud.

These allegations come at a time of uncertainty in Dubai as house prices are predicted to drop 10 per cent by 2010, due to a period of oversupply, according to the latest Morgan Stanley report.

Such allegations challenge the government's plans to improve transparency in the real estate market in particular.

A recent Jones Lang LaSalle report said Dubai was the most improved city in the Middle East and North Africa in terms of real estate transparency.

Marios Maratheftis, regional head of research for Middle East, North Africa and Pakistan at Standard Chartered, said the Dubai government was making "genuine efforts" to improve transparency.

"But the very fact that these investigations are being carried out is a sign of transparency in itself," Maratheftis said.