Due Process, Dubai Style

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Others remain in prison as their cases inch along. Zack Shahin, a 45-year-old former PepsiCo (PEP) executive from Ohio who went to work for the property company Deyaar Development, has been incarcerated since March 2008, charged, along with others, with embezzling $27 million. In a statement earlier this year, Shahin's lawyers said that for days on end, their client had been denied food, held in solitary confinement and darkness, blindfolded, and threatened with torture. The attorneys said that Shahin is an innocent "target of a politically charged investigation." Dubai's attorney general, Essam Essa al-Humaidan, previously has rejected allegations that Shahin or anyone else has been abused by the emirate's prosecutors or legal system. The American government has repeatedly raised Shahin's situation with U.A.E. authorities, according to the U.S. State Dept.

Outside investors are looking carefully at how Dubai is applying its financial laws to foreign executives, says John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi. "It is good they are taking some individuals to court, pursuing them," Sfakianakis says, "but the way they are pursuing them could [negatively] impact Dubai."

Cornelius and his co-defendants are accused of diverting hundreds of millions of dollars from a trade-financing loan for projects such as the Plantation, a planned 20 million-square-foot development in the desert that was to include five polo pitches with stables for 800 horses, a luxury hotel, and houses. The prosecution charges that Cornelius and others forged documents and used the loans for "fake deals," according to a court document.

"I absolutely deny all the allegations against me," Cornelius says from behind bars. He said that the money in question was mostly used for property development in Bahrain and the relocation of an oil refinery from Canada to Pakistan, as well as for the Plantation project in Dubai. He and his associates reached a debt repayment agreement in 2007 with Dubai Islamic Bank, he added. The bank took control of the Plantation after Cornelius and his colleagues were arrested. If the bank had sold the property at that time, the proceeds would have more than covered all of the debt, Cornelius says.

He now lives in a dormitory with about 100 other men. The conditions are an improvement over those in Rashidiya prison, where he says that he and more than 250 prisoners shared six rooms meant for 48, and there were only two working toilets. Cornelius says he was held in solitary confinement for the first six weeks after his arrest in May 2008. The yacht and a beach hotel he owned in Kenya have been sold.

Cornelius says he has been in court about 30 times and has been denied bail a dozen times. The proceedings are in Arabic, and he finds them difficult to follow, even with an interpreter. Originally facing a maximum sentence of three years, Cornelius and his fellow defendants could get up to 20 years under a new anti-corruption law announced after his arrest. "This has been a devastating experience," he says.

Radha Stirling, a lawyer who started Detained in Dubai, says there has been a marked increase in detentions for financial crimes since last year. The majority of cases she is dealing with are related to bounced checks or other debts. "I think a lot of people relocated to Dubai as an extension of Europe, like France, Spain, or even the U.S.," Stirling says. "It was seen as very developed with a good legal system." Now, she predicts, "the average person who was once going there to seek employment or invest will shy away from Dubai."

The bottom line: Dubai's anti-fraud crackdown has resulted in the imprisonment of hundreds of foreign executives and financial workers.

Meyer is a reporter for Bloomberg News.

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