Due Process, Dubai Style

Hundreds who rode the boom have been detained

By Henry Meyer

Not long ago, British businessman Ryan Cornelius was living the high life, doing real estate deals out of Bahrain. He took his family on safari in Kenya and on big-game fishing trips on his yacht. Today, Cornelius resides in a prison cell in Dubai, accused of loan fraud. He's been locked up for more than two years without a court reaching a verdict.

Cornelius and other executives have been targeted by Dubai's government in an anti-corruption sweep provoked by the emirate's financial and real estate collapse in 2008. The emirate's image as the Singapore of the Middle East, a cosmopolitan hub for finance and tourism, is being tested as it tries to clamp down on the excesses that government officials say accompanied an explosion of foreign investment and immigration. Many of those accused of wrongdoing protest that they are innocent victims of abusive prosecutions. They claim they are being detained without the sort of due process provided by Western courts.

"The whole legal system seems to hold you in a state of constant suspension," Cornelius, 56, says from a pay telephone at Dubai's Central Prison. "We just don't seem to move forward."

He and six co-defendants have been charged with defrauding Dubai Islamic Bank by improperly diverting the proceeds of a $501 million loan. The case is one of the biggest frauds ever alleged by authorities in Dubai, the second-largest of the seven emirates that make up the United Arab Emirates. Cornelius denies any wrongdoing.

In all, Dubai authorities may have jailed several hundred executives, according to a London-based advocacy group called Detained in Dubai. The crackdown has focused on alleged fraud involving state-run real estate concerns and other companies. Dubai's judicial system, which is based on Islamic law, or sharia, has highly punitive aspects that private lawyers in the emirate say are weighted against defendants. The U.S. State Dept. issued a report in March that said the U.A.E. lacks an independent judiciary, suggesting that its courts are subject to political influence.

About 40 percent of the 1,200 people in Dubai Central Prison have been convicted of defaulting on bank loans, Human Rights Watch said in a report in January. The emirate's financial laws impose punishment of as much as four years behind bars for a single bounced check. Even after completing their sentences, some inmates remain incarcerated until their debts are paid off, something unheard of in modern times in the U.S. or the U.K., New York-based Human Rights Watch says. "Our current criminal laws are not fit to deal with sophisticated financial crimes," says Habib Al Mulla, the former chairman of the Dubai Financial Services Authority, an industry regulator. Al Mulla, an attorney, represents one of Cornelius' co-defendants. New laws are needed "to protect bona fide businessmen from the abuse that some do face under the current legal system," he adds. "This abuse has a damaging effect on the economy and the country."

After it launched its crackdown two years ago, the government said it had uncovered kickbacks and other corruption at a variety of state-controlled companies. During its boom years, the emirate and its companies amassed debts of more than $100 billion for projects such as the world's tallest tower and a group of artificial, palm-tree-shaped islands built by property developer Nakheel. The Dubai government and prosecutor's office didn't respond to repeated requests for comment.

Some U.A.E. citizens arrested in the anti-fraud offensive have been freed after repaying what the government said they owed. The former governor of the Dubai International Financial Center, Omar bin Sulaiman, was released from prison in May, following two months of detention after he returned to the Treasury of Dubai about $14 million in bonuses he allegedly awarded himself. Hashim Al Dabal, the ex-chairman of state-owned Dubai Properties, got out in June after eight months in detention by repaying $35 million he allegedly embezzled from the real estate company.

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