UK consultancy giant Ernst & Young has been accused of “unlawful, unprofessional and unethical” conduct over its relationship with a Dubai firm that was allegedly involved in money laundering and buying gold from conflict zones.
The claims are made in documents filed in the high court by lawyers acting for Amjad Rihan, a former partner at E&Y who exposed the alleged scandal three years ago. Rihan led a team given the job of auditing the Kaloti group, which at the time commanded half of Dubai’s gold refining market. His lawyers say that after blowing the whistle, Rihan was ordered by his employer to return to Dubai. He was dismissed when he refused.
Kaloti required the E&Y audit to prove it was responsibly sourcing its gold. An independent assurance was needed to meet the requirements of the Dubai Multi Commodities Centre (DMCC), a Dubai government entity, and the London Bullion Market Association, two bodies that were essential to the firm’s operation.
It is claimed in the court papers that Rihan’s team found Kaloti had imported 5 tons of gold bars from Morocco painted silver to avoid Moroccan restrictions on gold exports, while more than $5bn worth of cash transactions processed by the firm were not reported to the Dubai authorities. About 57 tons of Sudanese gold are said to have been received without conducting proper due diligence as to whether it had come from a conflict zone.
Kaloti is also alleged to have dealt with several organisations listed by the US authorities as fronts for terrorism and organised crime – including one linked to armed rebels in the Democratic Republic of Congo and another in Iran that at the time was subject to US and EU trade sanctions.
When Rihan’s claims first surfaced, they provoked a storm in Dubai, where gold is one of the country’s most important industries, worth more than $70bn a year. His decision to now sue his former employer has raised troubling questions about the role of E&Y and its treatment of whistleblowers.
The court documents claim that when Rihan alerted his bosses to the fact Kaloti had failed the audit, they “positively undermined his authority (including by removing him from the audit) and ostracised him within EY, treating him as a troublemaker”.
It is claimed E&Y placed “unreasonable pressure” on him to return to Dubai, despite there being “credible evidence the Dubai authorities and/or other authorities in the region took serious retaliatory action against individuals who criticised them or otherwise damaged their interests”.
Several E&Y senior staff were then drafted in to help Kaloti rewrite its compliance report for the DMCC “in such a way as to suppress, conceal or distort the audit findings”. References to gold bars coated with silver were removed and no mention was made of Sudan, the DRC or Iran; values put on cash transactions were removed.
Rihan’s lawyers say E&Y “failed to make a required disclosure based on their knowledge or suspicion that Kaloti and/or some of its suppliers were engaged in money laundering”, contravening the Proceeds of Crime Act. They claim E&Y is guilty under the Bribery Act because it sought to gain advantages, including retaining Kaloti as a client and maintaining good relations with the Dubai authorities, by “improperly performing its functions”.
An E&Y spokeswoman said: “We are aware of the lawsuit and deny any liability on this matter. We plan to vigorously defend any allegations made against EY.” Kaloti has always denied any impropriety.
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