The Dubai Financial Services Authority said an investigation revealed that the company's board did not exercise appropriate governance after key executives drew down reserves without approval.
The regulator said that the 'Abdullah Brothers', who it named as Tawhid, Tawfique and Tamjid Abdullah, owed the company $99.4 million cash plus the value of 1,940 kilograms of gold, which would be worth around $71 million at market prices.
The regulator said sanctions included financial penalties of 2.6 million dirhams ($708,100) against Damas and 11 million UAE dirhams ($3 million) for the three brothers.
The brothers will also be banned from acting as directors of Damas or any company in the Dubai Financial Authority (DIFC) for a period of up to 10 years, the statement said.
Damas Chairman Tawfique Abdullah declined to comment when contacted by telephone. Interim CEO Sanjay Kalsi was not immediately reachable for comment.
'Maintaining international governance standards and internal systems and controls as well as ensuring investor confidence is fundamental to the integrity of the market in the DIFC,' said Paul Foster, chief executive of DFSA.
Damas replaced chief executive officer and managing director Tawhid Abdullah last year after alleging that he made unauthorised transactions worth about $165 million. He has denied any wrongdoing.
DFSA also said chairman of the board Tawfique Abdullah did not provide information to the board about the withdrawals in a timely and appropriate manner.
The regulator said a new board will be appointed to govern the company's operations and that Damas has also agreed to the appointment of new auditors for the fiscal year commencing from April 1, 2010.
The jeweller appointed a temporary chief executive and filled other positions in February. It named a PricewaterhouseCoopers executive as its restructuring advisor.
Damas is expected to be nearing a standstill agreement with its creditors of up to 4 billion dirhams ($1.09 billion) on the group's debt, a person close to the talks said in January.
The company is primarily involved in the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on a wholesale and retail basis.
Earlier in the day, Damas requested a suspension of trading in its shares pending a further announcement.
($1=3.672 Uae Dirham)
(Reporting by Dinesh Nair, Editing by Thomas Atkins) Keywords: DAMAS/BOARD (dinesh.nair@thomsonreuters.com; +971 4 391 8301; Reuters Messaging:dinesh.nair.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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