Dubai KPMG subsidiary scandal a ‘wake-up call’ for global firms
One of the world’s largest accounting and professional services companies is experiencing a meltdown in their UAE offices, with senior partners calling for the complete suspension of the Lower Gulf branch’s executive management.
In an email sent to KPMG International, Nader Haffar, current CEO of KPMG’s branch in Dubai, is accused of cronyism, over-paying executives (including his own brother-in-law), creating a culture of fear at the company, and mismanagement so severe that profits have been nearly halved since he took over in 2018.
“The ‘massive crisis’ that has been revealed at KPMG’s subsidiary in the UAE should be a wake-up call for all international firms with branches in the Emirates,” warns Radha Stirling, CEO of Detained in Dubai, “We have seen similar instances of corruption and mismanagement of global company branches in the Emirates, such as Baker McKenzie and Dechert. Just because an international firm may have its own corporate culture and ethics, too often local subsidiaries adopt the approaches to business and management that prevail in the region, and this frequently manifests as nepotism, unbridled greed, corruption and lawlessness.”
Haffar has allegedly hired family members without disclosing their relation to him, giving them inflated salaries; paying for expensive PR campaigns to boost his own image; and intimidating staff who fear repercussions of expressing any disagreement with his decisions.
“Global firms need to recognise that this sort of behaviour is absolutely routine in the UAE,” Stirling explains, “It is modelled by the country’s rulers themselves – dissent is criminalised, megalomaniacal obsession with positive personal PR matters more than substantive reform or improvement, extreme wealth and privilege are regarded as familial entitlements, etc. Local branches of international companies need to be vigilant, because their offices and their executives can very quickly adopt tribalistic, cultural methods of operating without strict oversight. Baker McKenzie suffered major damage to their reputation because of the unethical conduct of their local representative, Habib Al Mulla; and the global law firm Dechert saw themselves embroiled in a horrendous scandal when their attorneys in Ras Al Khaimah participated in torture and human rights abuses on behalf of RAK’s ruler. When Gulf branches of an international company spiral out of control, it can get very bad, very quickly.”
Stirling suggests global firms should all conduct regular audits and site inspections of their Gulf subsidiaries to ensure compliance with professional ethics. “A considerable amount of our work deals with business disputes and arbitration,” She says, “When a company is mismanaged in the Gulf, it often results in the fabrication of criminal cases against those who either criticise executives, or who have been their victims, as they seek cover for their misconduct through a local-friendly judiciary. It is vital for firms to get ahead of these problems before they escalate into full-blown legal and reputational disasters.”