Dubai: The Dubai Financial Services Authority (DFSA) on Sunday banned the Abdullah brothers from the board of Damas International Ltd. for 10 years and imposed a penalty of Dh2.57 million on the company for its failure to exercise corporate governance.
"The sanctions include financial penalties against Damas, Tawhid, Tawfique and Tamjid Abdullah, and voluntary bans, for periods up to 10 years, on the Abdullah brothers from acting as directors of Damas or any company in the Dubai International Financial Centre," the regulator said in a statement on Sunday.
When contacted by Zawya Dow Jones on Sunday, Tawhid Abdullah said he wasn’t aware of the DFSA action.
DFSA announced sanctions against Damas International Limited and its Board of Directors for their failure to exercise appropriate corporate governance over the company and its subsidiaries.
The announcement follows an investigation by the DFSA into "unauthorised transactions" that were announced to the market by Damas on 15 October 2009.
Announcing the actions against Damas and its directors, the Chief Executive of the DFSA, Paul Koster said: "Maintaining international governance standards and internal systems and controls as well as ensuring investor confidence is fundamental to the integrity of the market in the DIFC."
The investigation found that the amount owing by Tawhid, Tawfiq and Tamjid Abdullah (Abdullah Brothers) to Damas International Limited comprised of approximately Dh365 million plus the value of approximately 1,940.25 kilo grams of gold, the price of which is to be fixed on a date agreed by Damas and the Abdullah Brothers.
Damas, a Nasdaq Dubai-listed jewellery group, operates more than 450 jewellery stores, mostly in the Middle East. It is primarily involved in the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on a wholesale and retail basis.
Fact file
The DFSA fined the Dubai-based jeweller and its founders and majority shareholders, after it found they had withdrawn Damas funds worth as much as $165 million for their own personal use without disclosing it to the board.
Trading in Damas shares on the Nasdaq Dubai was suspended on Sunday morning pending an announcement. They last traded down 8.1 per cent at $0.17 Thursday.
In October last year, Damas replaced its CEO Tawhid Abdullah with Hisham Ashour, who was initially hired as the deputy CEO.
It also hired PricewaterhouseCoopers to investigate the alleged transactions of Tawhid Abdullah and his brothers.
Damas formed a board committee to investigate the details of the transactions, and to appoint an international law firm charged with advising the board in matters of corporate governance.
At that time Tawhid Abdullah denied any wrongdoing.
Timeline
March 21, 2010: The Dubai Financial Services Authority (DFSA) bans the Abdullah brothers from the board of Damas International Ltd. for 10 years and imposed a penalty of Dh2.57 million on the company for its failure to exercise corporate governance.
January 17: Damas International says it is nearing a standstill agreement with its creditors of up to Dh4 billion ($1.09 billion) on the group’s debt. Damas in December posted a near $200 million first-half loss. Damas is dealing with nearly 20 banks, including international players such as France’s BNP Paribas and Britain's Barclays, as well as local lenders, according to a financial statement released in December. The unnamed source says Damas has nearly completed working on the official standstill agreement, under which it would defer principal loan repayments until May 31 but still accrue interest.
October 26, 2009: The two top executives and the former CEO of Damas collectively pledge to repay nearly $165 million in “unauthorised transactions” that led to Tawhid’s departure, according to the company. “The three Abdullah brothers have signed a formal settlement agreement with the company in which they have committed to repay in full and in cash the full value of the transactions under review,” said a statement posted on the Dubai-based jeweller’s website.
October 15: Damas says it is bringing in PricewaterhouseCoopers to investigate the transactions of Abdullah brothers. It also forms a board committee to investigate the details of the transactions, and to appoint an international law firm charged with advising the board in matters of corporate governance.
October 13: Damas International said in a filing to the Nasdaq Dubai that it is shutting its money-losing Italian subsidiary, acquired in 2004, to prevent further losses. The unit sold jewellery under the Stefan Hafner, IoSi, Porrati and Nouvelle Bague brands. Damas says its sales accounted for less than 2 per cent of the family-run company’s revenues in the previous fiscal year.
October 11: Damas replaces its chief executive Tawhid Abdullah after he told the company he made “unauthorised transactions” worth as much as $165 million. The board appoints Hisham Ashour as the new CEO. Ashour joined as Deputy CEO and brings many years’ experience in regional and international financial management.
