Locals caught in Dubai property deal gone bad (Complete article below)

Royce Millar and Rick Feneley
July 27, 2009 .
FOR more than 150 years, Geelong Grammar has provided its privileged graduates with the keys to success in an Anglo-dominated Australian society.

But for Old Grammarian classmates and property industry figures Angus Reed and Matt Joyce, some training in doing business in more exotic locations like the United Arab Emirates might have been more useful.

The Age can reveal that the two long-time mates are among four Australians facing a string of charges, including fraud, over a property deal gone bad in Dubai.

Mr Joyce and fellow Australian executive Marcus Lee have been languishing in prison for six months. Mr Reed and an Australian lawyer, Anthony Brearley, are believed to have left Dubai before the police investigation, thereby avoiding jail.

Well-placed sources last night confirmed that Mr Reed and Mr Brearley had been declared "fugitives" in Dubai and would be tried in their absence.

The Age also believes that the James Packer-backed developer Sunland Corporation has both Mr Reed and Mr Joyce in its sights as it prepares civil action to recoup millions it says it lost on the deal.

Important to charges against Mr Joyce and Mr Reed are payments allegedly made by Mr Reed's company, Prudentia, to a bank account in Jersey held by Mr Joyce. Both men are expected to insist that any such payments were unconnected with the Dubai property deal in question.

A source close to Mr Reed says he is deeply upset by his mate's predicament but has not returned to Dubai for fear of being arrested.

One source close to one of the families say the saga has led to tension between the two old mates, a suggestion rejected by a spokesman for Mr Joyce.

Like thousands of their colleagues, Mr Reed and Mr Joyce ventured to Dubai a few years ago in search of riches. The dream turned sour last year for Mr Joyce in particular, when that country's "miracle" property boom proved to be a very burstable bubble.

Until his arrest in January, Mr Joyce had been managing director and Mr Lee a senior executive of Dubai Waterfront, a subsidiary of the state-owned Nakheel Corporation. It is the world's biggest waterfront development.

At the core of the row is the sale in 2007 of a parcel of development land by Dubai Waterfront to Sunland. Mr Reed's Prudentia Investments is believed to have partnered Sunland in the purchase of the waterfront site. But Prudentia sold its share of the project as the boom continued through 2007. Now Sunland has put development of the site on hold.

Sunland has made a formal complaint to Queensland Police and the Australian Competition and Consumer Commission. The Age believes the company names Reed, Joyce and Lee.

Mr Joyce and Mr Lee insist they are innocent. Australian business sources have complained that the two became scapegoats amid the property collapse in Dubai, where "commissions" or kickbacks have been commonplace.

The Dubai prosecutors and Sunland, which has billions at stake in Dubai, see things differently. Sunland has stated publicly that it will seek "civil remedies in respect of the alleged fraud".

It has repeatedly stated it is co-operating fully with the Dubai authorities in its investigation of Mr Joyce and Mr Lee but has denied being behind the police action against them.

Any civil action will be taken in Australia, not Dubai. But in what is shaping up as a bitter stoush, with big-name lawyers such as Robert Richter likely to be throwing the punches, the case is set to throw open a rare window into the opaque world of business and government in a country dominated by its ruler, Sheik Mohammed bin Rashid al-Maktoum.

Mr Reed is well-known in property circles, including as adviser to the Nauru government in the 1990s when it lost a fortune on the Melbourne property market.

Those who know the two men say Mr Joyce is quiet and cautious while Mr Reed is more entrepreneurial and daring. It is counter-intuitive, they say, that Mr Reed is now a free man at home in Toorak while Mr Joyce sweats it out in a Dubai jail.

After a thorough vetting by Mr Reed's lawyers, Prudentia issued a brief written statement to The Age. The lawyers would not allow Mr Reed to be quoted. Instead, a company "spokesman" said: "Some years ago, the Prudentia group, through its Singapore-based subsidiary, was involved in a transaction which we understand is the subject of the investigation by the Dubai authorities.

"The Prudentia group has at all times acted properly and with integrity and is concerned and surprised that there would be any allegations of wrongdoing against representatives of any of the parties involved in the transaction."

Mr Joyce's Melbourne-based lawyer, Martin Amad, restated his client's innocence and questioned Sunland's motives. He said the land sale was a "legitimate business transaction that occurred prior to the global economic downturn. Sunland has subsequently incurred a huge loss on the project and has written down the value of the land substantially".

"Shareholders of Sunland would hope that Sunland exercised due diligence prior to purchasing the land," Mr Amad said.

"After all, they would have their shareholders believe they are an experienced and sophisticated property developer."

He said that, contrary to previous reports, there had never been an allegation of Sunland paying consultancy fees to Dubai Waterfront.

Mr Joyce's wife and three children and Mr Lee's wife are still in Dubai, awaiting the outcome of the fraud trial.

Sunland did not wish to add to the written statement it made to the Stock Exchange last week.