Home / ANALYSIS / Mohammad Al-Mojil Group (MMG): The story so far

Mohammad Al-Mojil Group (MMG): The story so far

by James Morgan on Jun 26, 2016

A question of value: The legal battle over the misrepresentation of MMG’s value has resulted in significant losses and a string of accusations.
A question of value: The legal battle over the misrepresentation of MMG’s value has resulted in significant losses and a string of accusations.

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During the past fortnight, a series of rulings have emerged in Saudi Arabia that pertain to the legal case surrounding Dammam-headquartered oil, gas, and petrochemical contractor, Mohammad Al-Mojil Group (MMG).

On 16 June, 2016, the Committee for the Resolution of Securities Disputes (CRSD) – part of Saudi Arabia’s Capital Market Authority (CMA) – imposed prison sentences on three MMG executives. The committee also penalised the local arm of US-headquartered Deloitte Touche Tohmatsu for its involvement in the case.

In simple terms, this month’s CRSD rulings link back to a long-running legal battle concerning the value of MMG. However, as with most cases of this nature, simplifications belie the dispute’s convoluted backstory, not to mention the number of stakeholders that have been dragged into the fray.

In 2008, MMG became a publicly traded company. Founder Mohammad Al-Mojil took the decision to sell a 30% stake in the contractor by way of an initial public offering (IPO). Approximately four years later, on 22 July, 2012, the firm incurred significant losses, and the CMA suspended trading of MMG shares on the Saudi Stock Exchange, Tadawul.

Later that year, in conjunction with financial consultancy Protiviti Member Firm (Middle East) Ltd, the Saudi regulator began to investigate MMG’s operations and financial reporting for the period 2005 to 2012. Once the investigation was complete, the CMA instructed Protiviti to document its findings in a report, which was delivered on 30 June, 2013.

On 18 November, 2014, the CMA issued a charge sheet containing allegations against Mohammad Al-Mojil, his son Adel Al-Mojil, and others, in relation to MMG’s IPO, according to a statement issued on behalf of the Al-Mojil family.

Fast-forward to the present day and we arrive at the aforementioned custodial terms. Mohammad and Adel Al-Mojil were each sentenced to five years’ imprisonment for misrepresenting MMG’s value. A third unnamed executive from the contractor received a three-year prison sentence, according to news agency, Reuters.

Deloitte & Touche Bakr Abulkhair & Co, the local arm of New York-headquartered financial outfit Deloitte Touche Tohmatsu Ltd, also came under fire, owing to its historic work with MMG.

Initial reports suggested that the CRSD had banned Deloitte from providing accountancy services in the kingdom for a period of two years. However, while the firm has been penalised by the committee for breaching the rules of accumulated losses, the sanction is not unqualified.