At Large

Dubai’s Tarnished Glitter

As its finances became shakier, so does the rule of law. Take the case of Zack Shahin.

By 6.10.10

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DUBAI -- Ultra-modern skyscrapers in fanciful shapes, luxurious hotels and condominiums, artificial islands and boating lagoons. It was the liberal Muslim city-state of the future, the world's new frontier of opportunity for enterprising investors and business executives.

That sunny perception of a member of the United Arab Emirates began to give way to a darker reality by 2009. Dubai World, a government-owned conglomerate, turned out to be greatly over-extended and nearly collapsed (Abu Dhabi came to the rescue with a large loan).

Even earlier, a Human Rights Watch report described abuse and poor housing conditions of "guest" workers, mostly from Asia, who make up close to 90 percent of Dubai's population. (In its 2008 summary, Human Rights Watch said, "Authorities censor and harass human rights activists, impeding independent reporting that could help curb abuses.")

As criticism grew and Dubai's financial situation worsened, there came a series of accusations and arrests of businessmen of non-Dubai nationality, accusing them of fraud, embezzlement, and other crimes. As word of their treatment trickled out, it became clear that modern Dubai's criminal justice system was anything but just. 

In September 2009, the Dubai Islamic Bank (DIB) seized the assets of a real estate developer Plantation Holdings. Charles Ridley, a Briton, and three partners (two British, one Turkish) were accused of wrongfully obtaining a $501 million loan from the bank. Ridley was arrested. The four now have sued in Bahrain for funds held in its central bank belonging to the DIB. Their complaint contends that Dubai authorities were protecting senior local officials.

Herve Joubert, a retired French intelligence officer, moved to Dubai to build leisure submarines for wealthy customers. His new workshop was financed by Dubai World. He'd heard rumors about the abuse of foreign workers, but dismissed them. "I saw glamour, marble columns, mirrors and money," he said.

His good fortune changed abruptly. In June 2009, he fled Dubai in a rubber dinghy, just before a court convicted him in absentia of embezzling $3.8 million from Dubai World. He'd heard that people were often jailed for long periods without charges being filed. He said the accusations against him were all bogus, that it was a case of "a palace struggle over money."

Then there is the case of American Zack Shahin. He had gone to Dubai from Ohio as a young man after hearing about the opportunities there. He became a Pepsi-Cola executive, then a banker. In 2002, he co-founded Deyaar Development, which ultimately became Dubai's second-largest developer. Shahin was its CEO. 

His career ran into a brick wall one day in March 2008. Police forcibly removed him from his home, with his wife and two children watching. They had no arrest warrant or search warrant to ransack his records. They held him incommunicado for two weeks. There was no contact allowed with his family or attorney, though Dubai law calls for this. He says he was tortured, interrogated for hours at a time, and forced to sign documents without being given an opportunity to read them. He was told that if he did not, his wife would be arrested.

Under Dubai law, prosecutors can hold a prisoner for 21 days without filing charges. The courts may then grant an indefinite number of 30-day extensions without requiring prosecutors to file charges. The usual reason is that an investigation is ongoing. The prisoner is entitled to an attorney only after the police say they have completed their investigation.

Thirteen months later, Zack Shahin was charged with having embezzled $100,000 from Deyaar, although its chairman and board of directors had approved the transaction as an incentive bonus. In addition, the firm's Certified Public Accountants, Ernst & Young, also reported it as a bonus. The auditor said that the irregularities alleged by the prosecutor did not have sufficient relevant documentation. What they did have was the statements extracted from Shahin which had been manipulated and supplemented with fabricated ones. 

In all, four investigations of Shahin were launched. One was dropped, one is pending; two have resulted in charges conjured up by authorities. In April 2009 the U.S. State Department declared, "What should appall all Americans and any person concerned with human rights…is Dubai's decision to extend Shahin's detention despite a plea from the U.S. Government urging Dubai to complete their investigation of Shahin in an 'expeditious and transparent manner.'"

Shahin's immediate goal is to be granted bail, pending trial. After more than two years in jail under very bad conditions, that is not unreasonable; however, two official U.S. Government diplomatic notes and letters from his Senators and Representative have been ignored.

Dubai bills itself as an international finance center; however, its own finances are very shaky and the seizure of expatriate businessmen on flimsy charges suggests an effort to blame others for its own malfeasance. When foreign businessmen -- including Americans -- have been accused or seized, Dubai's criminal "justice" system took over -- with an obvious thumb on the scales.

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About the Author
Peter Hannaford was closely associated with the late President Reagan for a number of years. He is a member of the board of the Committee on the Present Danger. His latest book is “Presidential Retreats.”