Whistleblower sues EY over Dubai gold refinery scandal

Whistleblower Amjad Rihan is suing former employer EY over its handling of a scandal relating to gold refining company the Kaloti group, in which the firm was accused of bringing in gold from conflict zones and laundering money.

As a partner at EY Rihan worked to audit the Dubai-based Kaloti group and claimed to have uncovered a myriad of improper activities which he called “appalling, amoral and extremely unethical”.

The improprieties included the discovery that Kaloti had imported 5 tonnes of gold from Morocco which had been plated in silver to circumvent gold export restrictions, which Rihan claims Kaloti admitted to doing as standard procedure.

The company had also accepted around 57 tonnes of gold imported from Sudan without performing due diligence checks to verify it had not come from the conflict gold trade. Undocumented cash transactions totalling over $5bn were also uncovered, which made up almost 45% of Kaloti’s business in 2012.

EY’s audit clearance was required by the Kaloti group to confirm their gold was being responsibly sourced and that the standards of the Dubai Multi Commodities Centre (DMCC) were being met.

In court documents filed in London Rihan claims that when he raised a red flag at EY over these issues he was removed from the audit and senior EY staff were enlisted to rewrite the compliance report for the DMCC and suppress his team’s findings. The final report contained scant references to the discovered improprieties.

He further alleges that EY treated him as “a troublemaker” and insisted he return to Dubai despite there being evidence that Dubai authorities took “serious retaliatory action against individuals who criticised them or otherwise damaged their interests.” Upon his refusal to go to Dubai he was dismissed.

Linking the audit findings to the conflict gold trade in Africa and “atrocities committed down the supply chain”, Rihan described a sense of moral obligation which led to his whistleblowing.

Rihan’s lawyers further claim that EY’s failure to report Kaloti’s inappropriate activity was tantamount to bribery under the 2010 Bribery Act, as the information was suppressed to ensure “the maintenance of good relations with the Dubai authorities”. They further claim that EY’s failure to report on Kaloti’s suspected money laundering violated the Proceeds of Crime Act.

After learning of EY’s audit findings the DMCC changed its guidelines in a way that kept the final reports confidential. While Rihan cried foul the DMCC claimed the changes were simply made to align the rules with international standards.

Kaloti is the largest gold refinery in the Middle East, and the gold trade is one of the UAE’s most valuable industries, worth over $70bn annually.

Both EY and Kaloti deny any wrongdoing. An EY spokesperson said: “We are aware of the lawsuit and deny any liability on this matter. We plan to vigorously defend any allegations made against EY.”

Meanwhile Kaloti stated that while there were shortcomings in the initial stages of the audit process, these were remedied in 2013 and the final result was confirmed by the Big Four firm.