Ras Al Khaimah is ring-fencing troubled overseas investments worth hundreds of millions of dollars in a special company as it seeks the extradition of its former investment chief from Saudi Arabia.
The National has learnt that the northernmost emirate is transferring a slew of purchases that were overseen by Khater Massaad, RAK Investment Authority’s (Rakia) former chief executive, a 63 year-old dual national of Switzerland and Lebanon, as it claws back funds from a decade-long spending spree.
It intends to wind up the company as early as next year, by which time it hopes to have recouped as much as 50 cents on the dollar spent on the portfolio before litigation and settlement amounts.
Mr Massaad is being held by Saudi authorities. He was detained at Jeddah airport last month on an arrest warrant issued from the UAE that relates to his conviction, in his absence, last year in Ras Al Khaimah on fraud charges. This is part of a wider US$1.5 billion fraud and overpayments investigation.
He denies all charges against him by his former employer and challenges the judicial process that led to his conviction.
In an exclusive interview, a senior Ras Al Khaimah official has revealed for the first time the purpose of the company that few people outside the emirate’s leadership will have heard of.
RAK Development and its assets represent an eclectic mix of purchases made during the heady decade of lavish deal-making before the global financial crisis.
“The principal reason for the establishment of RAK Development was to ring-fence the troubled assets and bring focused management and expertise to address the complexities associated with distressed assets,” said Jamie Buchanan, a spokesman for the RAK Government. “This is in keeping with the totally transparent approach we have taken with ratings agencies and other interested parties. Our investigations identified serious malpractice, malfeasance and corruption. As a matter of policy rather than sitting on it, and if you sit on these things they will ultimately come out, we said here’s the problem and here’s what we’ve done about it.”
Some of the purchases being transferred to the troubled assets unit have triggered investigations into fraud and embezzlement that span continents and involve overseas government officials and business executives. Others relate to projects where suspected overpayments have been made but may or may not involve allegations of fraudulent activity.
Among the companies being transferred to the unit is the Sheraton Tbilisi hotel in Georgia and a massive infrastructure project in the Indian state of Andhra Pradesh.
Ras Al Khaimah aims to conclude the work of RAK Development by June next year by which time the assets it controls are expected to either be sold, written off or returned to health and transferred to other RAK-owned operating companies.
Some of the assets held in the company are also expected to be the focus of planned litigation overseas by the emirate.
It has already retained lawyers and forensic accountants, with legal fees running into many millions of dollars to date.
By consolidating all the troubled assets into one company it could make it easier for the emirate to tap international debt markets should it seek to sell bonds in the future.
It says ratings agencies are already aware of the work of RAK Development and have taken full account of its activities in their most recent ratings.
Standard & Poor’s in its latest update for the emirate affirmed its A/A-1 rating with no negative watch. The ratings agency was unavailable for comment when contacted by The National.
Mr Massaad was a key figure in building tile maker RAK Ceramics into a global brand, which helped to rapidly raise his profile in an emirate that lacked the hydrocarbon wealth of some of its neighbours. His success in turning what was a small provincial factory into the world’s biggest tile maker propelled him into his next role, leading Rakia, where he was appointed chief executive in 2007. Over the next five years he oversaw an unprecedented spending spree overseas until leaving the authority and the country in 2012. Forensic accountants hired by the authority are now trying to unpick some of those deals and following paper trails and cash transfers that one official described as “untangling spaghetti”.
Mr Buchanan says that, in addition to his Swiss and Lebanese citizenships, Mr Massaad holds passports from Georgia and Kyrgyzstan.
For the first time since his arrest on September 20, Mr Massaad last week issued a statement through a Saudi legal firm reiterating his innocence and highlighting his contribution to the economy of the emirate. “I have been told that the request by RAK for my extradition is based on two criminal judgments against me and others in the RAK courts dating from 2015. These allegations are made by the emirate itself acting as the owner of the businesses. However, I have never been served with a summons for either of the two cases made against me, which means I have never been able to defend myself in court. Indeed, I do not even know the particulars of the allegations,” said Mr Massaad in a statement from Jeddah, where he is being detained.
Ras Al Khaimah in a statement rejected the claims by Mr Massaad that he was unaware of the case against him.
“It is not true that he had no notice of the allegations put to him,” said Mr Buchanan in a telephone interview. “On numerous occasions representatives of the government of Ras Al Khaimah have met with him and his lawyers to discuss the allegations and set out the findings of a wide range of investigations into his conduct as a senior civil servant.”
He says claims by Mr Massaad that he was unaware of the allegations against him were “disingenuous and false”.
The court saga is being watched closely by the legal fraternity in the UAE and Saudi Arabia as lawyers from both sides dig in for what could be a protracted court battle.