Friday 17 April 2020 2:40 pm

Ex-EY partner wins $11m gold smuggling cover-up case against firm

An ex-EY partner today triumphed in an $11m (£8.8m) claim against the Big Four firm which he accused of conniving in the cover up of gold smuggling and money laundering.

Ex-EY partner Amjad Rihan sued EY after he said he was forced to flee Dubai after alleging the firm helped cover up the smuggling of gold for suspected money laundering.

Read more: EY whistleblower takes stand in gold bullion money laundering case

Today a High Court judge awarded Rihan $10.8m in damages and found that EY breached the principles of integrity, objectivity and professional behaviour

EY had carried out an audit of Dubai refinery Kaloti and discovered that in 2013 it had received large quantities of gold coated in silver from Morocco which had been declared as gold to Dubai authorities but may have been declared as silver to Morocco authorities to evade export restrictions.

The audit also found that 40 per cent, amounting to $5.2bn, of Kaloti’s business was conducted in cash.

Rihan said his bosses at EY tried to water down the report into Kaloti and did not want the results to become public.

Read more: EY accused of failing to report drug gang’s gold bar money laundering

In 2013 Rihan fled Dubai and subsequently resigned from the firm. He published the findings of the audit in 2014, despite legal threats from EY’s lawyers.

The judge, Justice Kerr, heavily criticised EY’s conduct and accused the firm and its staff of “failing to act with integrity”.

The Defendants “were not acting with integrity because it was obvious that the proposed audit report would mislead by omitting or playing down the damning findings about how Kaloti was running its business in March 2012.

“They were not acting with objectivity because they proposed to bow to pressure from the DMCC [Dubai Multi Commodities Centre], which was obviously not impartial and unbiased, to conceal or minimise Kaloti’s wrongdoing.

“The defendants thereby sought to involve the claimant in
unethical conduct, putting them in breach of the audit duty of care,” the judgment said.

The judgment also found there was no evidence EY had a policy to protect whistleblowers.

“The EY organisation was supposed to have a written whistleblowing policy, though I have no evidence that it had one,” the judge wrote.

Justice Kerr also criticised the evidence of three witnesses called by EY who were all senior member of the firm’s management team at the time.

Mark Otty – formerly Europe managing partner and now global emerging markets deputy chair, Herve Labaude – formery global deputy general counsel and now retired, and Bernard Heller – professional practice director for Europe Middle East,
India and Africa.

“I did not find Mr Labaude to be a reliable or candid witness on undocumented matters,” the judgment read.

The judge said Otty was “calculating and given in search of legal advantage, without regard for objective truth or accurate recollection”.

The judgment described Heller as “not a satisfactory witness” and said: “His answers to questions attempted to minimise his
involvement in a drafting exercise in which… he was centrally
involved.”

In a statement, Rihan said: “Almost seven years of agony for me and my family has come to an end with a total vindication by the court.

“My life was turned upside down as I was cruelly and harshly punished for insisting on doing my job ethically, professionally and lawfully in relation to the gold audits in Dubai.”

His solicitor, Paul Dowling of Leigh Day, said: “For years EY has refused to admit any wrongdoing in relation to the Kaloti audit. Instead it accused Mr Rihan of being a liar and a fantasist.

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“Our client’s character and actions have now been completely vindicated by the court. By contrast it is EY which has been found to have committed serious professional misconduct at the highest echelons of the organisation.”

EY Global today said it was “surprised and disappointed” at the court’s decision and said it would appeal.

EY Global said in a statement: “It was the work of an EY Dubai assurance team that uncovered serious irregularities and reported them to the proper authorities. Their work ultimately resulted in sanctions against the refiner and contributed to significant changes in the sourcing of precious metals and the regulation of refiners in Dubai.

“The judge’s decision calls into question the objectivity and integrity of the Dubai regulator and suggests that it was not sufficient to conduct the assurance engagement in accordance with the regulatory standards of Dubai.”

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