InfoAnda - Special Report: In Bahrain, a symbol at the heart of revolt |

Pakistanis angry over detentions in Times Sq. case
Monday, May 24, 2010
ISLAMABAD – Relatives of three men detained by Pakistan for alleged links to the suspect in the attempted Times Square bombing say the men are innocent.
They

Taiwan denies boycotting Australian film festival
Thursday, August 6, 2009

AFP - Thursday, August 6TAIPEI (AFP) - - Taiwan's Beijing-friendly government on Wednesday denied boycotting an Australian film festival amid a row over the e

Merkel's support dips, regional ally resigns International
Thursday, September 3, 2009

By Sarah Marsh and Noah Barkin

BERLIN (Reuters) - Chancellor Angela Merkel suffered a double blow on Thursday as a senior party ally in east German

Minister seeks closure of anti-Berlusconi websites
Wednesday, December 16, 2009
ROME (AFP) - – The Italian government moved Tuesday to close down Internet sites encouraging further violence against Prime Minister Silvio Berlusconi, who

Asian markets mixed after Wall Street rally
Wednesday, March 18, 2009

By ELAINE KURTENBACH,AP Business Writer AP - Wednesday, March 18SHANGHAI - Asia's stock market rally seemed to be running out of steam Wednesday, despite an

Obama in Afghanistan, says troops making progress | 4 December 2010
Greek financial sector is hit by new credit doubts | 18 December 2009
AP NewsAlert | 26 December 2008

Percy Sutton, attorney for Malcolm X, dies at 89 | 27 December 2009

Forum Views () Forum Replies ()

Read more with google mobile : Special Report: In Bahrain, a symbol at the heart of revolt |

Edition: U.S. Article Comments (0) Full Focus Editor's choice A selection of our top photos from the past 24 hours. Full Article Follow Reuters Facebook Twitter RSS YouTube Read CIA website goes down, hackers claim responsibility 5:35am EDT Analysis: Syria's Assad loses his grip to hardliners 8:55am EDT Two in court over alleged plot against Joss Stone | 11:06am EDT Wall Street rises from oversold levels 10:57am EDT U.S. agents slam gun sting effort on Mexico border 15 Jun 2011 Discussed 134 Alabama governor signs nation’s toughest immigration law 111 Obama weighs new steps to boost jobs 71 Republicans to debate, with Romney the frontrunner Watched Hefner, fiancee split; Schwarzenegger mistress talks Wed, Jun 15 2011 Airbus' view of flying in the future Mon, Jun 13 2011 Obama resigns from church Mon, Jun 2 2008 Special Report: In Bahrain, a symbol at the heart of revolt Tweet Share this Email Print Related News Blurred lines at Bahrain's GFH 11:25am EDT Analysis & Opinion 401(k) rip-offs: How to protect yourself Defending Arianna Huffington from the shareholder value police Related Topics World » Bahrain » Libya » Anti-government protesters form the words ''Game Over'' with bricks as they block the roads from riot police at the junction of Bahrain Financial Harbour in Manama March 14, 2011. Credit: Reuters/Hamad I Mohammed By Frederik Richter and Martin de Sa'Pinto MANAMA/ZURICH, Jun | Thu Jun 16, 2011 11:25am EDT MANAMA/ZURICH, Jun (Reuters)- Until a few months ago, the twin towers of the Bahrain Financial Harbour development -- clad in green glass and shaped like over-sized toy sea-horses -- were symbols of the island state's role as a regional financial hub. Today the towers have taken on a different significance: concrete expressions of the way business and politics so often merge in the Gulf and, as a result, targets in the unrest that has roiled Bahrain and the wider Middle East since the beginning of the year. Built by Gulf Finance House, a listed investment company run by Bahraini businessman Esam Janahi, the towers have also come to embody the ruling al-Khalifa family's fight to preserve its power and protect the vast wealth of the country's economic elite. Land in the Gulf Arab region is largely controlled by a small number of ruling families who use it as a kind of currency, doling out plots to favored families and developers to forge political relationships and make money. For it to work, the system depends on businessmen like Janahi, merchants who ostensibly operate independently from the state but whose success rests, at least in part, on political connections. Janahi, whose net worth local bankers estimate was several hundred million dollars before the global financial crisis, used his close ties to the al-Khalifas to build the centerpiece of the Bahrain Financial Harbour. He could then point to the development as a model to help secure further land deals from rulers and governments across the Middle East and as far away as India, convincing investors to put up billions of dollars for property projects, most of which have never been built. GFH was far from the only firm to turn sand into money. The basic game plan was played out dozens of times by various companies across the Gulf in the past decade or so. But Janahi and his firm were among the biggest. Janahi did not respond to a request for an interview for this story, but a GFH spokeswoman answered questions by email. Reuters also interviewed almost a dozen bankers who work or have worked in the Gulf region, most of whom have direct knowledge of GFH transactions. Our investigation shows the company charged investors huge markups on land deals and took out enormous up-front fees. Such fees are legal in the Gulf but western bankers say they would be highly unusual in Europe or the United States, where the industry collects big payouts only when a project is successfully built and sold. Documents obtained by Reuters show that GFH, which has teetered on the brink of collapse for several months, also sometimes shifted investor money from one project to plug holes in another. The documents also suggest that GFH's property projects were hurt by blurred lines between the personal interests of Janahi and GFH itself. Investments and payments seemed to move back and forth between the two with very little scrutiny. Investors in GFH have been left with huge losses -- $1.07 billion in 2009 and 2010 -- and plenty of questions about whether the company's myriad projects were ever going to be built in the first place. In Bahrain, where the ruling family has been involved in several property developments over the past decade, it's become a symbol to ordinary people -- especially the poor Shiite majority -- angry about a system that shuts them out and widens already gaping inequalities. When thousands of anti-government demonstrators failed to win tangible concessions from the government earlier this year, a small group singled out the BFH towers, blocking the main road outside the building (which also houses Reuters' Bahrain bureau) and waving one-dinar notes to highlight how cheaply they said the country's prime minister had acquired the building. "We're expanding our protests and we came here because this building symbolizes (the inequalities of) the whole economy," one protester told Reuters outside BFH in March, the pavement around him littered with stones and makeshift barricades after hours-long tear gas battles with security forces. THE BOOM Esam Janahi was relatively unknown before he founded GFH, way back in the pre-oil boom era of 1999. Armed with a degree in business administration from Hull University in the United Kingdom and an uncanny ability to navigate the Gulf's political and business elites, he quickly began pulling off deals, each one seemingly bigger than the last. Blessed with boyish looks and what many who have met him describe as real charm, Janahi won financial backing from around the region, including from a clutch of private investors in Kuwait, the Royal Guards of Oman pension fund and the Saudi-based Islamic Development Bank. The oil boom that began in late 2002 kicked off a six-year economic expansion that transformed the region. In Bahrain, which sits just off Saudi Arabia's east coast and is connected to its much bigger neighbor by a 25 km (16 mile) causeway, new skyscrapers shot up and several sq km of land were reclaimed and added to its northern shore. The new land was designed to host projects built by private firms such as GFH. It also turned into a source of revenue for the ruling al-Khalifa family. Like other Gulf rulers, the al-Khalifas control most of their country's land. Documents from Bahrain's business registry show that using a complicated series of companies, the royal family partnered with private-sector developers in several projects. The Bahrain Financial Harbour was one such project. A copy of a property deed -- obtained by Bahrain's main Shi'ite opposition group Wefaq and handed to reporters in March -- shows that the Ministry of Finance transferred the land on which GFH built its towers to the Bahrain Financial Harbour Company in 2003. Bankers with knowledge of the deal say Prime Minister Sheikh Khalifa bin Salman al-Khalifa, who has governed Bahrain since independence four decades ago, granted the land in return for a 50 percent stake in the project. The other 50 percent was owned by GFH. The prime minister's stake was held through an investment vehicle called Emar Bahrain, according to bankers with direct knowledge of the matter. There are no commercial registry entries for Emar Bahrain, but the business registry shows the chairman of Bahrain Financial Harbour Company is Sheikh Rashid Khalifa Hamad al-Khalifa, a high-ranking official in Bahrain's interior ministry, who is married to the prime minister's daughter. A second document obtained by the opposition and passed to reporters shows how Prime Minister al-Khalifa may have personally benefited from the deal. In 2005, according to the sales contract, Emar Bahrain transferred a parcel of land to the prime minister for one Bahraini dinar, or less than $3. The prime minister's office has told the Bahrain News Agency all transactions were legal and that the company received land elsewhere in return as compensation. Even before the Financial Harbour deal, Janahi had close connections to Bahrain's rulers. "He had a diplomatic passport," said someone who has done business with Janahi and has intimate knowledge of GFH. "He was a member of the shura council" -- Bahrain's upper house of parliament whose 40 members are appointed by the king. The development deal cemented those ties, and helped open more doors around the Middle East. In response to questions, GFH said it had 10 successful years before the financial crisis hit investment firms around the globe. It says it was the first firm to partner with governments in the region on real estate and infrastructure projects. "Indeed, Esam Janahi and other Executive Management members do hold valuable relationships with regional governments which were a direct result of spearheading GFH," the company said in an email. It went on to point out the "impressive track record that GFH showed in creating opportunities and unlocking value in emerging markets". THE MODEL During GFH's busiest years -- between 2006, when the Financial Harbour towers neared completion, and 2008, just before the Gulf's real estate crash -- the company used the towers as a signature project to negotiate more land deals with heads of state and governments elsewhere in the region. "It's not something that was openly advertised, but they would brag about how they were getting the land for next-to- nothing, and about how they were making huge sums of money," said a Gulf-based banker who had a business relationship with GFH and spoke on condition of anonymity. The model was simple. "You basically go and cut a deal with your buddies in Morocco, or Egypt, Tunisia, Syria," said a senior investment banker in Bahrain. Having paid very little for a parcel of land "they (GFH) would go over to investors and mark it up by something like 40 percent, in some cases even more, and sell it." Other bankers and two senior company insiders confirmed such a markup was typical at the company. GFH was not alone in this practice. Bahrain-based investment bankers say it was common practice for Bahraini investment firms to add huge mark-ups to the value of a plot of land or company they had bought cheaply before selling it on to investors. Companies in Dubai, Abu Dhabi, Qatar and elsewhere did the same thing. "The returns could reach up to 200 percent," said an investment banker who worked at a Bahraini investment firm affiliated with Esam Janahi, and who also asked to remain anonymous. The mark-ups meant investors initially owned something worth less than what they had paid for it, an anomaly that most hardly noticed as long as property values kept rising. It was also common practice for GFH to book massive up-front fees on the money they raised from investors. In some cases, real estate projects were split into several phases so that fees could be collected each time investor money was rolled over into the next phase, according to Bahraini bankers. Such an arrangement is highly unusual outside the Gulf, according to people who work in the industry in Europe and the United States. Management fees charged by private equity houses and asset managers in other parts of the world are typically modest. GFH does not dispute that it charged fees at the start of its projects. "GFH's business model did utilize upfront fees in addition to management and success fees, as did many institutions," it said in its statement to Reuters. PROBLEMS Local bankers estimate GFH raised a total of $5 billion between 2002 and today: much of that money is still locked up in unfinished projects. One such project, on about 1,750 acres of land outside Mumbai, India, was unveiled in late 2007. It is unclear what GFH paid for the land, but it seemed to have no problem selling the project -- a massive business and residential complex targeting international companies -- to private individuals around the Gulf. An internal GFH document seen by Reuters and verified by four former insiders shows that by September 2009, GFH and Abu Dhabi Investment House (ADIH), a company run by Janahi's brother Rashad, had jointly raised $1.1 billion for the project. After up-front fees and commissions had been taken out, only about 25 percent of that money reached the Mumbai project, according to the document. Additional documents seen by Reuters show other GFH projects had similar fees deducted. In July 2008, for example, GFH said that its second-quarter earnings had come mostly from fees on real estate projects, in particular a project in Libya. An investor in that project, known as Energy City Libya, told Reuters two months ago that he had completely written off his investment as no visible progress had been made and he no longer expected the project to be completed. Progress has been slow in Mumbai as well. GFH says it is committed to completing all of its projects and that it has signed an agreement with a new partner to complete the land acquisition in Mumbai and begin work. MONEY SHIFTERS The Mumbai project illustrates another aspect of the way GFH did business. The internal document shows that the $1.1 billion earmarked for India included money that was meant to come from a separate GFH project in Qatar. GFH claims that it offered investors in the Qatar Energy City project the option of rolling their funds into the Mumbai project. But a letter sent by GFH to one investor in January this year showed the company could not collect sufficient funds to complete the roll-over. GFH also wrote that the decision by FIFA to give Qatar the 2022 football World Cup raised other possibilities. Perhaps investors would prefer to shift their funds into a new project structure in Qatar instead? Shifting money between projects was pivotal to the way GFH operated. GFH "was a monoline business focused on originating new real estate projects, not completing old ones," said a former company insider who did not wish to be named. "They didn't have enough money to complete the old projects once they had sucked out all their commissions -- they sold them on to related parties, generating even more commissions -- so they had to keep coming up with new ones," he said. While it lasted, skyrocketing property prices hid the markups and the fees. But when the global financial crisis hit in late 2008, property prices in the region collapsed. AN ACCOUNT WITH GOD In a courtroom in Manama last September, Janahi waited as ordinary families trooped before a judge to settle their disputes. When his turn came, the tall, heavyset businessman stepped forward, arranged his meticulously starched white head-dress and took an oath on a golden-framed copy of the Holy Quran. The ceremony came when the court could not decide if his version of a $250 million business deal gone sour was real. After his many property projects had begun to run out of funds in early 2009, investors and business partners lined up to question the integrity of GFH's business model. One man in particular pointed a finger: Qatari businessman Khaled al-Suweidi, who accused Janahi of using him to gain access to land needed for a proposed "energy city" in Qatar and then reneging on a promise to share an expected $250 million in profit. Registry documents show that Janahi and Suweidi did jointly register a company in the Cayman Islands. But Suweidi lacked sufficient proof of a financial agreement -- hardly surprising in a region where multi-billion projects are often agreed with minimal documentation. By the time of Janahi's court appearance, Bahraini Prime Minister al-Khalifa had already made up his mind about his one-time business partner. In May 2010, he seized full ownership of Bahrain Financial Harbour and cut ties with Janahi. In return for a chunk of prime property that had been valued at $175 million during the boom years, GFH received $40 million in cash and a few plots of land. Unable to pay its debts, the company's balance sheet fell below the regulator's capital adequacy ratios at the end of last September. The firm has since raised just over a fifth of the $500 million it has targeted in fresh capital to cover losses. NO SCRUTINY One of the reasons the company is still creaking on, argue critics of Bahrain's government, is that Janahi's ties to the prime minister allowed him to escape the scrutiny of the country's regulator, the Central Bank of Bahrain (CBB). "Janahi did business with the prime minister who was just beyond the (influence of) the CBB," said the former business associate with intimate knowledge of GFH. The central bank did not force GFH to disclose the departure of its CEO Ted Pretty in February, a piece of news that would be seen as important and market-moving in other jurisdictions. And when last year GFH's auditors said the firm no longer complied with the regulator's minimum capital adequacy requirements, the CBB did nothing -- at least publicly. The CBB rejects that criticism. It said in a statement to Reuters that Bahraini law "gives the CBB legal, operational and financial independence so that it may undertake protecting the interests of depositors and customers of financial institutions without interference from any third parties." The central bank also said that booking up-front fees was legal under the international regulatory standards it applies as long as they are disclosed to investors, but that it had nevertheless discouraged the practice. Confidentiality provisions prevented it from commenting on GFH specifically, it added. Western bankers still think the CBB is one of the best in the Gulf, though central banks in the region generally lack independence from ruling families. Investors in GFH, though, are livid with the regulators. "The central bank and the ministries we have spoken to, they're not taking any decision they just said go to the courts," said Mohammed Boodai, a prominent Kuwaiti businessman who had several million dollars invested with GFH. "We want a real auditor coming from the outside to check the papers and documents they have got there." MARTIAL LAW GFH is as much symptom as cause of the region's malaise. Protestors in Bahrain -- most of them members of the country's poor Shi'ite majority -- have called for the ouster of the ruling family and an end to the system which allows companies like GFH to prosper. At the heart of the protestors' complaints: economic inequality and land ownership. The region's business and political elites cashed in during the economic boom, but few others benefited. "I still live with my entire family in a small flat. This palace is bigger than my entire village," a protester told Reuters on the same March day when more than 10,000 protesters trooped by several km of royal estate covered with palm tree gardens. Intended to be a fully fledged financial district, Bahrain's Financial Harbour is now little more than two partially occupied business blocks. Most of the few shops that opened in the shopping mall between the towers have closed in recent months. Janahi still lives in Bahrain. One former insider says he doesn't travel much anymore. When anti-government demonstrators blocked the road outside the buildings in March, the government declared martial law and the country's neighbors, including regional heavyweight Saudi Arabia, sent in troops to help put down the unrest. The armored personnel carriers and soldiers surrounded the Financial Harbour for the next two months. (Frederik Richter reported from Manama, Martin da Sa'Pinto from Zurich; Additional reporting by Sarah White in London; editing by Simon Robinson and Sara Ledwith) World Bahrain Libya Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (0) Be the first to comment on reuters.com. Add yours using the box above. Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

Other News on Thursday, 16 June 2011
NATO sliding towards Libyan ground war: Russian envoy |
ACORN argues Congress lacked authority to cut its federal funds
Bodies of 104 Air France crash victims to reach Paris |
33 OECD member nations see average unemployment rate drop to 8.1%
North, south Sudan clash before split: south army |
Adele reclaims #1, "The Book of Mormom" skyrockets on Billboard 200 albums chart
Kuwait ruler warns against unrest, security threats |
Congressional is the tough, shining star of the 2011 U.S. Open
Indonesia intensifies security before Abu Bakar Bashir’s trial
U.S. helicopters fire on attackers in Iraq oil hub: military |
Czech Republic declines participation in U.S. missile shield program
Gunmen kill Mexican governor's guards, leave threat |
Airline mechanic stows away on U.S. Airways flight
Portugal president names Coelho new premier
Rocco DiSpirito hosts celebrity-filled 'Dinner Party' for Bravo
United States Golf Association awards 2018 U.S. Open to Shinnecock Hills
ADP says investigating data breach |
Analysis: Computer security attracts venture capitalists |
Garmin sees Navigon buy boosting European auto ops |
Internet calls to generate $40 billion by 2015: report |
Oscar mystery added to best picture race |
Keith Urban ready to take fans on carnival ride |
Zawahri takes over as leader of al Qaeda |
Libyan rebels take new villages in Western Mountains |
Indonesian Islamist cleric jailed for 15 years |
Carmona helps Tribe regain first place
Violence in Vancouver as Canucks lose Stanley Cup |
Syrians flee northern town as tanks close in |
Greek PM to reshuffle government to push austerity plan |
Turkish sailing team with all-female crew makes waves in Bulgaria regatta
Refugees flee Myanmar towns as fighting rages |
New England, Toronto play to scoreless draw despite firing a combined 30 shots
Indians return to first place after coming from behind to edge Tigers
Cup O'Beans: Bruins capture title with whitewashing of Canucks
Mexican police capture suspected teenage assassins |
China sends out patrol ship amid territorial disputes |
Fielder could get bigger payday than Pujols in 2012
Serena’s loss dooms all-Williams finale at Eastbourne; Baghdatis advances in Holland
Cabrera's third hit of night gives Indians 5-4 lead over Tigers
Seattle University to join Western Athletic Conference (WAC)
Report: Mets new minority owner could eventually take control of team
Citi says 360,000 customers hacked in May cyber attack |
Alibaba to split, not IPO, e-commerce unit Taobao |
RIM faces tough sell on Q1 earnings and outlook |
HP's latest lawsuit heightens rivalry with Oracle |
Toshiba, HP to tie up on cloud services |
LightSquared gets more time to file GPS test results |
Bono's Spider-Man musical still weak, critics say |
Next Playboy has runaway bride sticker on cover |
Charlie Sheen loses early round in Men lawsuit |
Funk icon Sly Stone pleads not guilty to cocaine charge |
Fran Drescher's gay husband inspires sitcom return |
Brad Paisley is hero to sons for songs on Cars 2 |
Exiled Thaksin seeks December return to Thailand |
Yemen gunmen stage more attacks, Saudi oil arrives |
Iraq's Mehdi Army faces splits, wary of return to war |
Special Report: In Bahrain, a symbol at the heart of revolt |
Lady Gaga's meat dress heads to Rock and Roll Hall of Fame
CIA website goes down, hackers claim responsibility |
Tunisia risks controversy with travel ads
Crystal Harris covers July issue of Playboy as “Mrs. Crystal Hefner”
JK Rowling launches new Harry Potter website |
Nortel delays closely watched patent sale by a week |
Juror jailed for Facebook contempt |
China military paper urges steps against U.S. cyber war threat |
ROI youth magnets for global change
Jets players wrap up workouts in New Jersey, await end to lockout
Luke Donald gets hot start at U.S. Open as rain greets early starters
Formal announcement expected on Weiner status
Cottage cheese becomes call for rebellion in Israel
Infected tooth cancels George Michael appearance at AIDS charity event
At 100, IBM inventions part of daily routine
Charlie Sheen loses early round in Men lawsuit |
Two in court over alleged plot against Joss Stone |
JK Rowling launches new Harry Potter website |
Greece at new risk of being pushed off euro
Bodies of missing Tenn. mom, Jo Ann Bain, and daughter found
Female Breasts Are Bigger Than Ever
AMD Trinity Accelerated Processing Units Now in Volume Production
The Avengers (2012 film), made the second biggest opening- and single-day gross of all-time
AMD to Start Production of piledriver
Ivy Bridge Quad-Core, Four-Thread Desktop CPUs
Islamists Protest Lady Gaga's Concert in Indonesia
Japan Successfully Broadcasts an 8K Signal Over the Air
ECB boosts loans to 1 trillion Euro to stop credit crunch
Egypt : Mohammed Morsi won with 52 percent
What do you call 100,000 Frenchmen with their hands up
AMD Launches AMD Embedded R-Series APU Platform
Fed Should not Ignore Emerging Market Crisis
Fed casts shadow over India, emerging markets
Why are Chinese tourists so rude? A few insights

USD EUR - 1 year graph		BlogMeter 1.01