Barazi denies $4.8m DIFC embezzlement

Lawyers for Bisher Barazi, the former DIFC executive accused of improperly awarding himself and two other officials US$4.8 million of bonuses, denied allegations.

Lawyers for Bisher Barazi, the former Dubai International Financial Centre (DIFC) executive accused of improperly awarding himself and two other officials US$4.8 million (Dh17.6m) of bonuses, denied the allegations in a filing with the DIFC Courts made available yesterday. Mr Barazi engaged in no wrongdoing in awarding bonuses based on the 2007 financial performance of DIFC Investments (DIFCI), the financial arm he headed until his suspension last year pending an investigation into alleged irregularities, his lawyers argued in their first defence against the claims.

Responsibility for running DIFCI and distributing bonuses lay not with Mr Barazi but with the DIFC's former governor, Dr Omar bin Sulaiman, Mr Barazi's lawyers said in the response, filed on Sunday and released by the courts yesterday. Dr bin Sulaiman was arrested on suspicion of awarding improper bonuses and released from custody in May after repaying Dh51.5m. The bonus pool at DIFCI "was in the entire discretion of the governor of the DIFC, and the decision was ultimately his alone", the defence for Mr Barazi states. The defence also states Mr Barazi was not "party to any common design with Dr Omar and/or any other employee of DIFCI to act unlawfully".

The disputed bonuses were based on the company making $60m of "realised gains" in 2007, according to court documents. But the company actually had about $80m of losses that year, the DIFCI accounts show. Mr Barazi's lawyers at Bin Shabib and Associates in Dubai said unaudited results for 2007 initially showed about $200m of overall profits, and executives did not expect those figures to be "significantly different" after a full audit by PricewaterhouseCoopers (PwC). However, the executives still decided to pay out only 60 per cent of bonuses pending the audit, the pleading says.

By the time it completed its audit in April 2008, the document says, PwC had required DIFCI to remove from its profits millions of dollars of gains from its transfer of the ownership of the DIFX - the exchange now known as NASDAQ Dubai - to a new entity called Borse Dubai. PwC also directed DIFCI to factor about $200m of losses on a $1.8 billion investment in Deutsche Bank that year into its profits, turning a large gain into an $80m loss.

Despite the loss, the remaining 40 per cent of the bonus pool was paid out in June only after Mr Barazi brought PwC's changes to Dr bin Sulaiman's attention, his lawyers said in their defence, calling the fraud allegations "abusive and oppressive". DIFCI's lawyers did not respond to a request for comment. Dr bin Sulaiman was removed from his post in November last year and replaced with Ahmed Humaid al Tayer, under whose watch the financial free zone is undergoing a strategic realignment that has already seen several top executives leave.

The Dubai Government is meanwhile investigating financial irregularities at the centre through its Financial Audit Team, and DIFCI has hired accountants from KPMG to review its books for evidence of fraud. Mr Barazi's defence was filed in a case he originally brought against DIFCI claiming Dh1.78m of salary, benefits and damages from his former employer. DIFCI lodged a counterclaim last month that said Mr Barazi was not entitled to any extra pay because of the allegedly "unlawful" bonuses.

[e-mail] * with reporting by Bradley Hope