Mystery continues over Kuwaiti fund’s half billion frozen in Dubai bank

Published in GSN, 15 November 2018

What has happened to the near half billion dollars which Kuwait-based The Port Fund lodged in a Dubai branch of Noor Bank? The money represents the return on Port Fund’s investment in a logistics development in the Philippines. The funds were due to be distributed to the fund’s shareholders last year and were passing through Noor Bank in Dubai when they were frozen on 14 November 2017, apparently at the request of authorities in Kuwait who claim some Port Fund executives were trying to embezzle funds.

The Kuwaiti authorities have recently changed their position and called for the frozen funds to be handed back to The Port Fund’s subsidiary Port Link GP, as long as the portions owed to the Kuwait Port Authority (KPA) and Public Institution for Social Security (PIFSS) – both of which are shareholders in the fund – are paid to them. The Port Fund has supported this arrangement but, despite this, the authorities in Dubai have yet to approve the release of the funds.

The dispute has been drawing in a growing list of high-profile names in the United States, including Neil Bush – a brother of former President George W. Bush – who wrote to Abu Dhabi Crown Prince and deputy supreme commander of the UAE Armed Forces Sheikh Mohammed Bin Zayed Al-Nahyan (MBZ) on 29 September to ask him to ensure the $496m was released.

In his letter, which has been seen by GSN, Bush warned MBZ about the damage being done to the UAE’s reputation by the case. “There is no need for a routine business transaction to cause an international outcry that shines an unflattering light on the two countries involved,” he wrote. The UAE’s high-profile ambassador to the US, Yousef Al-Otaiba, has also been involved in the case, relaying messages between the US and UAE parties. Another figure now involved in lobbying the UAE authorities is David Urban, a supporter of President Donald Trump who is credited with helping him win the crucial state of Pennsylvania in the 2016 election (and has in the past been tipped as a possible US ambassador to Riyadh).

Three days prior to Bush’s letter, Washington law firm Crowell & Moring, which represents The Port Fund, had written to Kuwaiti prime minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah, finance minister Sheikh Sabah Al-Khalid Al-Sabah and finance minister Nayef Al-Hajraf warning them that an alleged attempt to have the funds transferred directly from Noor Bank to Kuwait, bypassing The Port Fund, “would constitute an illegal expropriation of the funds and money laundering”.

Last month, Kuwait’s attorney general Dherar Ali Al-Asousi wrote to his counterpart in Dubai, Essam Issa Al-Humaidan, to ask that $125m of the funds be released to the KPA and a further $79.2m to the PIFSS. Assuming that was done, Al-Asousi indicated in his letter of 16 October that Kuwait had no objection to the rest of the money being handed to Port Link GP. In support of that plan, The Port Fund wrote to Noor Bank with wiring instructions to that effect. A representative from the fund also hand-delivered a letter to Ismail Ali Madani, the prosecutor in the Dubai attorney general’s office dealing with the case, which included a copy of the instructions sent to the bank. Crowell & Moring say Madani “refused to accept the letter”, without explaining why.

The Port Fund’s lawyers made another attempt to move things along by writing to Al-Humaidan on 5 November. However, the attorney general’s office has reportedly stopped accepting any hand-delivered or electronic submissions from The Port Fund’s lawyers. It is unclear why the attorney general’s office has taken that stance or why it has yet to allow the funds to be unfrozen. As a result, the funds were still frozen as GSN went press.

The delay in releasing the money threatens to further complicate the legal position of Port Fund executive Marsha Lazareva in Kuwait. The Russian national was jailed for ten years in May for embezzling money from the KPA; Crowell & Moring has launched an arbitration proceeding to have that conviction overturned (GSN 1,063/9). Lazareva and her colleague Saeed Dashti also face separate charges of embezzling money from The Port Fund, a case that would almost certainly collapse if the money in Dubai was unfrozen. A hearing on this second case was scheduled at the Court of First Instance in Kuwait on 5 November, but was postponed by the judge until 17 December after the authorities failed to bring Lazareva from prison to the court. Some observers have suggested to GSN the failure to deliver Lazareva to the court was a deliberate act by the prosecution in order to buy more time.

Privately-held Noor Bank is owned by the Dubai and UAE federal governments and the ruling families of Abu Dhabi and Dubai. The $496m represents a significant portion of its customer deposits, which totalled $8.4bn as of 30 June.