AW Galadari Dubai's First Bankrupt 1983
Dubai discovered oil in 1967. Dubai boomed! Rapidly increasing oil revenues soon attracted international business and trade to Dubai. This brought almost unlimited opportunities for local businesses and entrepreneurs to prosper. There only seemed to be an "upside". Many Emirati Businessmen started and grew their businesses to dominant market positions, often with Sheikh Rashid's help and support. It was inconceivable any high profile Emirati Businessman could get it wrong. But one did and his failure put Dubai's future at risk.
Smuggling versus Investing
Dubai had always traded in Gold. This was perfectly legal in Dubai. Outside Dubai's borders this "trading" was regarded as smuggling. Nevertheless many of Dubai's local Businessmen became major "Gold Traders", right more so than the three Galadari brothers - Abdul Rahim, Abdul Latif and Abdul Wahab Galadari. Abdul Wahab took responsibility for ensuring gold shipments from Dubai reached India or Pakistan safely, often sailing with "smuggling" dhow to do so. On one occasion he was caught by the Indian Customs but escaped and returned to Dubai. He became a "Wanted Person" in India.
Abdul Wahab Galadari (L) 1979
By the start of the 1970s Abdul Wahab Galadari's "gold trading" had made him a multi million dollar millionaire, as were his brothers. They were well placed to take advantage of Dubai's 1970s Oil Boom. Together they started a major conglomerate, building the Intercontinental Hotel, opening Dubai Bank, establishing a Mazda Vehicle Dealership, starting Dubai's first English Language Daily Newspaper - the Khaleej Times - and opening a string of construction, engineering and trading companies. UAE's Declaration on 2nd December 1971 helped the Galadaris since Foreign Governments forgave any outstanding criminal charges in these circumstances. Abdul Wahab was no longer a "Wanted Person" in either India or Pakistan. Galadaris became UAE Citizens although they originated from the town of Galadar in southern Iran.
Abdul Wahab Galadari had always been something of a "hot head", quick to act and willing to take risks. He soon became frustrated with the slow pace (as he saw it) of growth of the brothers' businesses. There were disagreements and increasing friction within the Galadari families eventually led to an acrimonious parting of the ways. Abdul Wahab left the Galadari Company in 1976 and established his own company - AW Galadari Holdings.
Chasing Gold and Silver Alone
Abdul Wahab Galadari didn't have new ideas for his business to follow. He created a "mirror image" of his brothers' company, competing directly with them on almost every level. He built the Hyatt Regency Hotel and Galleria, opened the Union Bank of the Middle East (under a special decree issued by Sheikh Rashid), started a Citroen Car Dealership, published a daily English Language Newspaper - the Gulf News - started a string of construction, engineering and trading companies. His Hyatt Regency Hotel became the centre piece for Dubai's 1981 Motor Racing Grand Prix. He provided Citroen CX cars to be driven by world famous drivers in a series of races . Abdul Wahab was later shocked to find all his cars had been badly damaged or completely wrecked in the races. Greater shocks were to follow.
Abdul Wahab Galadari Holdings (his company) also began investing heavily in Singapore in 1980. Within two years Abdul Wahab became Singapore's third largest Arab Investor focusing on hotels and property. At the beginning on 1983 he also established Galadari Commodity Trading with offices located in the Hyatt Regency Galleria. His new Company acted as Broker for Commodity Exchanges in New York and Chicago. They traded in all kinds of commodities but Abdul Wahib had a particular interest in Gold and Silver. His office was said to have been palatial with many fixtures and fittings made from solid silver, including his desk.
In February 1983, Abdul Wahab began trading in gold and silver futures, a notoriously risky business. Soon he was losing money. As the calls from the Commodity Exchanges arrived, he simply instructed his Bank to pay and continued trading. His losses continued to mount. By November 1983 he owed these Exchanges tens of millions of dollars while his overdraft at his Union Bank of the Middle East had reached two hundred million dollars. This huge debt came to the notice of UAE's Central Bank. Establishing a Bank in newly formed UAE required the Central Bank's approval. Abdul Wahab had never sought Central Bank's approval. He used his personal relationship with Sheikh Rashid, prevailing on him to issue a special decree establishing his Bank. Central Bank notified Dubai Government of the situation. Their investigation soon showed Abdul Wahab's debt to his own Bank exceeded the Bank's Capital by some 70 million dollars. Union Bank of the Middle East was close to collapse. Dubai Government demanded Abdul Wahab repay the debt. As soon as that news reached the foreign banks they stopped any funding they had been providing to Union Bank of the Middle East. Abdul Wahab was no longer in a position to meet his financial commitments.
Recovering Investors' Money - and losing all
Dubai Government issued a Decree on November 12th 1983 removing Adbul Wahab as Chairmanship of Union Bank of the Middle East and appointing a 3 man Team to manage the Bank's affairs. Their purpose was to avert "dire financial consequences to countless entities and many thousands of individuals in Dubai and in the region." Creditors came forward and soon Abdul Wahab's companies' debts totaled nearly $800,000,000. Union Bank's potential collapse would bring down other banks since they had made loans to the Union Bank. In 1984 Dubai Government issued another Decree formally announcing the winding up of all Abdul Wahab's non banking businesses. Dubai Government took possession of Abdul Wahab's Hyatt Regency Complex in lieu of partial debt repayment. Union Bank of the Middle East was eventually absorbed by the National Bank of Dubai. His Singapore investments were purchased by his brother's Dubai Bank although later Dubai Bank got into financial trouble due to bad loans and had to be "rescued" by Dubai Government. Dubai Bank was also merged into the Union Bank of the Middle East prior to that Bank being absorbed by NBD. Dubai Government's actions prevented a major bank collapse. Dubai recognised there had too many small privately owned banks, poorly funded and managed. Banking controls were tightened. Dubai had protected its reputation
Paying the Price
Abdul Wahab was imprisoned then eventually released, his UAE Passport confiscated and he was confined to living in Dubai. Dubai Government required Abdul Wahab to repay his outstanding debt from any income he subsequently earned although he was allowed a generous "subsidence allowance".
Abdul Wahab's wife was wealthy in her own right but since she was not directly involved in Abdul Wahab's businesses and losses, Dubai Government did not seek to obtain any restitution from her. Among her many assets was an apartment block. She had this converted into the St George's Hotel and appointed Abdul Wahab as its Hospitality Director. Thereafter he described himself as being in the hospitality business but he never again rose to the dizzy heights of the 1970s. Abdul Wahab Galadari died on 2005. Both his brothers predeceased him (Abdul Rahim 1994, Abdul Latif 2002). Abdul Wahab Galadari was buried in Al Qoz Cemetery with Galadari family and Government Officials attending.
There have been suggestions subsequently, that many others were in the same situation as A W Galadari. They too were heavily indebted to their own banks. However only A W Galadari was made bankrupt. Accusation is A W Galadari was treated differently because he did not have local heritage. Another is the Hyatt Regency Hotel became a "prize" that caused A W Galadari to be bankrupted while others were not.