EY forced to pay out big in international money-laundering saga

20 April 2020 Consultancy-me.com

EY in the UAE has been ordered to pay more than $10 million in damages to a former employee who blew the whistle on an international scheme involving gold importations disguised as silver.

The Dubai branch of global professional services firm Ernst & Young has been ordered to pay out more than $10 million in damages to a former partner following a long-running saga involving a gold-importing scam and claims of a cover-up. The ex-partner had alleged he was forced out of the job when he exposed misconduct in an audit of Dubai-based Kaloti Jewellery International, which had shipped gold coated in silver to avoid import restrictions.

Following lengthy legal proceedings dating back to 2014 when the claims were first made public, Justice Kerr, ruling in the high court in London, found that EY had failed to complete the Kaloti audit in an ethical and professional manner and was neglectful in its duty of care to protect its employee, awarding the claimant Amjad Rihan a total of $10,843,941 in damages along with £117,950 in sterling for past and future loss of earnings and employment benefits.

“I accept as a fact that the defendants were responsible for suggesting to Kaloti that it should draft its compliance report in a manner that masked the reality of the Morocco gold issue, removing the reference to Morocco and changing the coating of gold bars with silver to documentary irregularities. I regard this as professional misconduct.” Justice Kerr said in his ruling, noting gold as being among the ‘conflict minerals’ attractive to criminals and terrorists.

EY forced to pay out big in international money-laundering saga

“Almost seven years of agony for me and my family has come to an end with a total vindication by the court,” Rihan said following the ruling. “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… I hope that EY uses this judgment as an opportunity to improve and take the necessary measures to avoid anything like this ever happening again.”

Rihan had alleged that EY had failed to respond to his concerns and covered up irregularities in the financial reporting of Kaloti, which had reportedly paid billions of dollars in cash for gold sourced from Sudan, the Democratic Republic of the Congo and Iran and then imported from Morocco and disguised as silver in what was an elaborate international money-laundering scheme perpetrated across Europe – with at least 27 members of the gang since jailed in France.

According to Rihan, when he raised his concerns with EY he was told to return to Dubai but feared for his safety. He subsequently resigned, and went public with his claims in 2014. For EY’s part, the firm has disputed Rihan’s account of the events, while Kaloti has also denied any wrong-doing. “It was the work of an EY Dubai assurance team that uncovered serious irregularities and reported them to the proper authorities,” the Big Four firm previously stated.

In its latest statement following the verdict, EY again highlighted the firm’s position that its own assurance team uncovered and reported the serious irregularities – which resulted in sanctions against the refiner and contributed to regulatory changes in the UAE. “We are surprised and disappointed by the judge’s decision, its introduction of an unprecedented legal duty and its financial award to a former EY Dubai partner. We will appeal and, therefore, not comment in detail.”

Paul Dowling, a member of the legal team representing Rihan, however has some harsh words for the firm. “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. 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.”