A former Ernst & Young (EY) partner who blew the whistle on a massive money laundering scheme was awarded nearly $11 million by a U.K. judge Friday, settling a lawsuit in which he claimed EY buried an audit that uncovered wrongdoing by a client.
Amjad Rihan, who had worked in EY’s Dubai office, won the judgment from the U.K. High Court. Rihan claimed he could not find work as an auditor after he blew the whistle on EY’s participation in a cover-up of illegal activities by a client, Kaloti Jewellery International, a gold refiner based in Dubai.
During Rihan’s time with EY in Dubai, one of his tasks as an auditor was to evaluate Kaloti’s business practices, particularly its sourcing of gold.
Rihan alleged that in 2012, Kaloti imported gold from Morocco and covered it in silver to fool Moroccan authorities and avoid that country’s gold export restrictions. He also suspected that Kaloti did not adequately screen the source of $5.2 billion in gold, paid for in cash, that may have come from Sudan and Iran, countries that were under U.S. sanctions.
Rihan suspected Kaloti “may have been trading in conflict minerals and was being used as a vehicle for large scale money laundering,” according to a press release from the London law firm representing him, Leigh Day.
Rihan alleged that EY conspired with Kaloti and the Dubai Multi Commodities Centre to obscure the audit’s findings from public view. He eventually fled Dubai with his family out of fear for his life, refused to return, and later resigned from EY. He later took evidence of Kaloti’s money laundering activities to the press.
Rihan sued Ernst & Young Global and three subsidiaries for damaging his reputation and making it impossible to find comparable employment as an auditor.
In his decision, U.K. High Court Judge Timothy Kerr said that Rihan suffered a loss of earnings “by reason of the defendants’ failure to perform the Kaloti audit in an ethical and professional manner,” according to the decision. Judge Kerr also said that the audit’s findings, under standards of the International Standard on Assurance Engagements 3000, should have been considered breaches of compliance in the “zero tolerance” or “high-risk” categories. Such breaches should have been reported to authorities within 24 hours.
Judge Kerr ordered that EY pay Rihan $10.8 million in compensation for lost past and future wages, and approximately $114,000 in other damages. He dismissed a conspiracy charge.
Through his attorney, Rihan said he was pleased with the decision. “I hope that EY uses this judgment as an opportunity to improve and take the necessary measures to avoid anything like this ever happening again,” he said in a statement.
Through a spokesman, EY said it will appeal. “It was the work of an EY Dubai assurance team that uncovered serious irregularities and reported them to the proper authorities,” EY said. “Their work ultimately resulted in sanctions against the refiner and contributed to significant changes in the sourcing of precious metals and the regulation of refiners in Dubai.”
Kaloti Precious Metals, based in Dubai and parent company of Kaloti Jewellery International, said in a statement issued through a U.K. law firm that there were “numerous conclusions reached in the Judgment which appear to have been based upon findings of fact which are untrue.”
“It is categorically denied that our clients were involved in any money laundering activity in 2013 (or at any other time). No government authority or industry regulator has ever accused our clients of money laundering or any other serious wrongdoing, nor have they been investigated, questioned or had their assistance sought in regard to any such matters,” said the statement, made on behalf of Kaloti by the U.K. law firm Harrison Drury. “Documentary evidence was and remains available which would show this to be the case and allay any suspicion that may have existed.”
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