A senior sales manager at Dubai-based property developer Nakheel is being investigated for financial irregularities after a criminal case was brought against him in early August. Nakheel is also conducting an internal audit into its own procedures.

Dubai’s public prosecutors say a criminal case was registered at Bur Dubai police station against Walid al-Jaziri, Nakheel’s general manager for sales, on 3 August.

It is unclear how much money is involved in the alleged fraud, but it is understood that it could be as much as AED3bn ($817m).

The first court session on the case was held on 7 August. Further sessions are scheduled for 19 and 28 August. Al-Jaziri has been charged as a government employee for allegedly asking for a bribe for himself or another person, as well as other financial irregularities.

MEED was unable to reach Al-Jaziri for comment.

The details of the alleged financial irregularities are unclear. However, one source familiar with the allegations says they involve Nakheel employees advising the company to launch properties on the market at below the market price, before selling those properties to themselves or associated companies and individuals who then sold on the units at the market rate for a profit.

Nakheel has had a strong sales performance in recent years and for the first four months of this year alone it reported land and property sales worth in the region of AED23bn.

Much of its success has come from developments that have been launched over the past six years. Properties frequently sell out within days of being put on the market, and in some cases within hours.

Some 2,000 villas were sold on the Palm Jumeirah in record time in 2002, and since then the developer has enjoyed continuous success at its sales launches. Nakheel sold 716 units within the Veneto development at Dubai Waterfront in five days in May, and last year the first 500 properties at the Al-Furjan development were sold in
just one day.

The company has also been raising money for further developments. In mid-August, Nakheel listed a two-year dirham-denominated sukuk on the Dubai International Finance Exchange valued at AED3.6bn to help finance future growth and projects.

A Nakheel spokesperson declined to comment on the case involving Al-Jaziri and would not confirm or deny that an internal investigation had also been launched into the alleged fraud.

In a follow-up statement, the firm says: “Nakheel conducts regular audits to ensure transparency and regulation of procedure. This process is ongoing and it would be inappropriate to comment further at this stage.”

Nakheel recently introduced new rules to prevent properties being sold on quickly by their original owners. Prospective investors in the Trump International Hotel & Tower on Palm Jumeirah have had to sign an agreement that bans them from selling on any property for one year after they take ownership of it.

Public sales of apartments at Trump International Hotel & Tower began on 23 June. It is home to some of the most expensive properties in Dubai. In June, bids for the penthouse broke the emirate’s record for such properties.

It is understood that Nakheel is considering plans to implement either the same or similar regulations on other properties when they are launched.

Nakheel is one of the largest developers in the world and is building some of Dubai’s largest real estate projects, such as the three Palm islands, The World and Dubai Waterfront. The scale of its activities are such that, so far this year, it has awarded building contracts worth more than AED25bn ($6.8bn) in total.

The contracts include a series of deals for villas and bridges at Dubai Waterfront. Villa contracts have also been awarded at Jumeirah Park and Al-Furjan, along with a dredging contract for Port Rashid.

Earlier this year, Nakheel formed a joint venture with Dubai Islamic Bank to develop further properties.

Tashyed, the property development joint venture, broke ground on its first scheme at Jumeirah Heights on 15 July. Nakheel provided the land for the development, which is located close to Sheikh Zayed road and Jumeirah Lake Towers.

The scheme will consist of up to 300 apartments, townhouses and villas in a lake-front setting. The project will have a built-up area of approximately 625,000 square feet.

Commencement of the project is expected in the first quarter of 2009 and the selection of consultants is already under way.

It is the first of several real
estate projects planned by Tashyed in the UAE. It is also planning another residential project within phase two of International City, also on land purchased from Nakheel.

The joint venture partners plan to commit an initial AED2bn to the company. Nakheel will provide development management skills, as well as sales and marketing services, while Dubai Islamic Bank will supply banking, mortgage and financial services expertise.