Bad company - Sydney Morning Herald

No way out … Rodric David ended up in a Middle Eastern jail after going into business with the Kazal brothers.

The stench - a gagging foulness of human sweat and faeces from filthy squat toilets - overwhelms Rodric David as he's led, handcuffed, into a dank cell block crammed with 300 unwashed men. The Australian business tycoon - son of former grocery magnate John David, of IGA fame - tries his best to remain calm, but under his label shirt beads of sweat are trickling down his back. The shortish, stocky 40-year-old is the only Westerner in the cell at Abu Dhabi's Port Zayed police station. And certainly the only one wearing a Zegna suit.

Knowing that any sign of weakness could be perilous, David keeps his eyes fixed firmly on the concrete floor. He spots a spare little table, sits down, and pulls out a notebook and pen from his jacket. He starts writing - and writing. When he runs out of pages, he starts scribbling over the writing between the lines.

"The chairman will see you now," a fellow prisoner in a kendora, a traditional cream-coloured Arab gown, announces to him in English. David, at a loss as to what else to do, follows the man into a separate cell. Sitting on the bed is a fresh-shaven Arab, who looks David up and down and, in a plummy British accent, pronounces: "You are under my protection." He issues David with a series of instructions. Don't go to the showers. Don't go to the toilet. Don't leave your cell.

Wild ride … (from left to right) Andrew Kelly, Charif Kazal and Rodric David take a helicopter ride in the UAE.

The so-called "chairman" - he boasts that he once ran a business leasing private jets and was locked up for "accidentally" bouncing a cheque - seems to be sizing up David as a potential source of cash. This is May 2010, after all, and since the onset of the global financial crisis in 2008, newspapers in the Middle East and the West have been dotted with stories about business people thrown into prison in Dubai and Abu Dhabi over property deals turned sour. As the economic prospects of the United Arab Emirates (UAE) darkened, and many of its glittering glass towers lay vacant, so the authorities' attitude towards some of its foreign guests seemed to dim. The dream jobs of many Western expats, from the US, the UK and Australia, were turning into nightmares as they fronted allegations of embezzlement and fraud.

Rodric David, too, is a victim of the crash - losing nearly all his assets - but his story has an unusual twist. He's been thrown into prison because of a bitter falling out with an Australian man who once called him "brother" - Charif Kazal, a handsome, charismatic businessman whose Lebanese family owns a string of glamorous restaurants and bars in Sydney's The Rocks and Circular Quay, including a $13 million, three-storey nightclub called Bar 100, a popular look-at-me spot for many B-list celebrities.

Five months before, in early 2010, and fast going broke, David had finally stood up to Charif, 39, and his older brothers Karl, 49, and Tony, 48, calling in the millions they owed him over a failed housing project in Dubai. This squalid cell, David believes, is now payback from his former business partners. Charif Kazal had made a criminal complaint against David, and Tony Kazal, who has high-powered connections in the UAE, had lodged an absconding notice with immigration (far from absconding, David had been in almost daily contact with Charif but had not been responding to Tony's demands that he hand back the work visa the Kazals had sponsored).

Power trio … three of the Kazal brothers, (from left) Charif, Karl and France Dion. Photo: Tamara Voninski

Earlier that day, David had driven to the Port Zayed police station to respond to the Kazal allegations, accompanied by his lawyer, who resolutely reassured him that the authorities had no legal basis on which to detain him. Instead, the police gestured for David to stand up, put him in handcuffs, and told him he'd need to be detained for a few days at least.

But sitting in his cell, as frightened as he is of what lies ahead, all David can think about is his wife and two children, who are waiting for him to return home to their villa on the other side of Abu Dhabi. Before the lights are extinguished, "the chairman" offers David the use of his smuggled mobile phone. He calls his wife and pleads with her to "grab the kids and leave the country". Instead, she starts dialling numbers at the Australian embassy.

The next day David is transferred, in handcuffs and leg chains, from Abu Dhabi to Dubai's central prison, the notorious Al Awir, a sprawling compound in the desert with watch towers and high, white walls spiked with barbed wire. To his relief, as soon as he arrives, David is told he can go - as long as he attends future interviews with immigration officials.

The player … Charif Kazal and his wife Agnes (second from left) attend a Playboy function at Bar 100 in Sydney’s Rocks district in May 2012.

But if David is tempted to think that his ordeal is over, he is mistaken. At one of these interviews with the authorities three weeks later, he is handed a bundle of documents - Charif Kazal has alleged to a Cayman Islands judge that David has been jailed for financial crimes in Abu Dhabi and that their joint company has to be wound up immediately. A hearing is scheduled in four days' time in the Cayman Islands.

But it will be impossible for David to get there. His passport has just been confiscated by the UAE authorities. David's battle with the Kazals is just beginning.

It was never supposed to turn out like this. Growing up in the shadow of his father John David, whose grocery-distribution empire sold about 13 years ago for more than $400 million, Rodric David had been keen to carve out his own path in the business world. This was no simple challenge: John David had made the BRW Rich List in 2001, was a director of the company that managed the Sydney Entertainment Centre, and had a swag of property holdings that included the Tower Estate Winery in the Hunter Valley. Rodric tried his own hand at property development through the family company Parkview in the early 2000s, a time when property in Sydney and Melbourne was a sure thing, and in 2007 built an $8 million office complex in Bondi Junction.

Deal broker … Tony Kazal (circled) being escorted to a private jet in Christchurch last year.

It was David's own father who introduced him to the Kazal brothers, describing them as "good Lebanese boys". "They were very respectful of the way I viewed my father," he reflects now, leaning forward over his coffee in the lobby of the Westin Hotel in Martin Place. "They absolutely pressed that button every chance they could. 'You're like us,' they would say. 'You respect your father. You're honourable.' " Looking back, David now sees all this as part of a charm offensive by the Kazals, designed to build a bridge of trust between the two families. "It is well known that the biggest deal my father did was done on a handshake," says David. "I grew up that way." Karl and Charif began calling David their brother.

The Kazal family boasted of access to the highest levels of the UAE governments in both Abu Dhabi and Dubai, and displayed the kind of serious wealth commensurate with such a capital-intensive business. To Rodric, they seemed "well-connected and the real deal" - and like his own family, had worked hard to get where they were. (Rodric's own paternal grandfather had come to Australia as a poor migrant from Lebanon.)

In 2007, in the thick of the property boom gripping Dubai, the Kazals came to David with a plan that seemed bulletproof: a mammoth housing complex built in the desert at Al Salam to cheaply accommodate 30,000 of the labourers flocking to the UAE for work.

Walk this way … Tony Kazal's friend Saif al-Islam Gaddafi (circled) being escorted to a private jet in Christchurch last year.

Introductions matter in the Middle East and the Kazals promised Rodric access to UAE royalty. The second-eldest Kazal brother, Tony, had serious credentials: he'd worked for the founding ruler of the UAE, Sheikh Zayed bin Sultan Al Nahyan, and he had also won the trust of the sovereign of Dubai, Sheikh Mohammed bin Rashid Al Maktoum. He was also friends with the then heir to the Libyan regime, Saif al-Islam Gaddafi, son of Colonel Muammar Gaddafi.

In May, Rodric David and Charif Kazal flew to Abu Dhabi with a number of associates from both their companies, staying at the posh Emirates Palace Hotel. They planned to set up a web of companies in the tax haven of the Cayman Islands. International Property Services, itself owned by their umbrella company Emergent Capital, would be responsible for the massive housing project in the UAE. But it was this first visit that would persuade David to commit to the venture with the Kazals, after a week of glad-handing state officials and company executives.

In return for equal shareholding in this company, David and the Kazal brothers agreed to equally fund the costs of the housing venture, initially estimated to be 10 million UAE dirham ($2.6 million). In his naiveté or perhaps holding to his father's faith in closing a deal on a handshake, David overlooked the Kazal's failure to sign a shareholder's agreement.

David sold his house - a $12 million harbourside pile in Sydney's flashy Vaucluse - and moved his family to Abu Dhabi, channelling everything he had into the business. He outlaid hundreds of thousands of dollars on lawyers, accountants and advisors in the UAE, Australia and the Caymans, using his own gold Amex to fund day-to-day expenses such as flights and restaurant bills, including Charif Kazal's travel.

But fate was against him. The global financial crisis struck hard, and the property bubble driving the Persian Gulf burst. The value of villas in Dubai dropped by 19 per cent month-on-month in October 2008 after several banks suddenly tightened lending conditions, and in many corners of the UAE construction ground to a halt. The small city that David had expected his company would be servicing, and which was fast gobbling up his funds, was only two-thirds built, let alone filled with foreign workers.

By mid-2009, 18 months into the project, auditors told David that he had spent about $6.7 million on all of Emergent Capital's businesses. His funds were close to being exhausted and he was anxious to see his partners begin to fund their share. But the Kazals' enthusiasm for the project cooled more and more as the financial crisis deepened. Karl, Tony and Charif occasionally assured David the money was on its way, but nothing was ever put on the table.

Instead, in August, Karl Kazal agreed to help fund a separate Emergent Capital venture, throwing in $600,000 (half of which he delivered in bundles of $50 notes, packed in a David Jones plastic shopping bag). The funds were tied to the acquisition of a waste recycling plant in Sydney that had the potential to be worth a lot of money.

Finally, in December, David received a letter that floored him. Charif claimed his family had never agreed to invest funds in the Abu Dhabi business. Rather, their role was limited to making the necessary introductions.

David immediately sought legal counsel and started formulating an escape plan. He told the brothers to repay him millions of dollars or else he would take action to reduce his exposure. At a fiery meeting with Tony at the Dubai Marine Resort, David remembers him angrily declaring that, "We are honourable people. How dare you question our honour. Do you know who I know? Who my friends are?"

As 2009 drew to a close, David started taping his phone calls with the Kazals as he demanded repayment. Charif, in turn, began threatening him. First Charif demanded a $1.5 million cheque for Tony to make "all this go away", adding that otherwise, "I can't stop what will happen." On January 21, 2010, Charif warned him that "you'll have to deal with Tony". Two days later, Tony sent David a blank email with a link to a YouTube clip of a devil laughing.

David, now determined to rid himself of the Kazals, convened a board meeting on January 28, in which he restructured the company. Without the brothers in attendance, he executed a conversion of debt to equity, resulting in the dilution of the Kazals' shareholding from 50 per cent to 0.1 per cent. It was a declaration of war and, ultimately, a mistake.

The Kazals' first counterstrike was in March, when Tony lodged the absconding notice. Then, on May 6, Charif filed the criminal complaint in Abu Dhabi, alleging that David had embezzled $939,000 from their UAE-based company.

Then the following day, Charif applied in the Cayman Islands to wind up Emergent Capital, partly on the basis of the very same complaint. In a subsequent affidavit, Charif told the court that, "David has now been arrested and is currently in prison in the UAE". In fact, David was never arrested as a result of Charif's complaint, but had been detained because of the absconding notice - and he'd been freed from Al Awir five days prior.

What David repeatedly failed to see - or chose not to in his haste to reap huge profits from a questionable housing project - was that this venture was probably doomed from the start. If David had bothered to do even a modicum of research into the history of the Kazals, he would never have even contemplated closing a deal on a handshake with Charif, Tony or Karl.

It was an astonishing rags-to-riches ascent. The Kazal brothers - original name Hussein - were raised on the outskirts of the northern Lebanese port city of Tripoli. Their father, Mustapha, had a job driving people across the border into Syria and back - but it appears that he and his wife, Wadad, could not afford to keep their two daughters and eight sons in school. Their eldest daughter was married off to a man in Australia, and the older boys were sent out to find work.

Khaled, the eldest, joined his sister in Australia in 1984, and the rest of the family eventually followed, settling into neighbouring homes on the same street in Sydney's south. The family made a big effort to fit in and get ahead, starting with changing their names. The brothers adopted the name Kazal, and all but one took on new, anglicised first names. Third-born Hussein Hussein became Adam Kazal, Jihad Hussein became Jimmy Kazal, Ahmed became Oscar, and so on. Raised as Muslims, some of the brothers would later claim to be Christian after arriving in Australia, perhaps with a view to improving their social and business prospects.

The Kazals had their first business break in 1992, when Jimmy and Khaled (now Karl) took up the lease for a small eatery on Park Street, in Sydney's CBD. The Shawarma Grill House may have been a humble start but the family quickly set about amassing a hospitality empire that now includes some of Sydney's most meticulously-appointed restaurants in the finest locations, including Circular Quay and Darling Harbour. Along the way, the family took control of six NSW state government-owned properties in The Rocks - four of them without having to compete in a tender. They also undertook property developments from Canberra to the Gold Coast and tried their hand at trade deals with contacts from China to the Persian Gulf.

Before he moved to Sydney, the second-eldest brother, Tarek (Tony), spent several years in the UAE working for the royal family in one of its government departments. He took Australian citizenship but maintained a base in Abu Dhabi, where he earned direct access to several of the ruling Al Nahayan family. Tony and Karl leveraged their status overseas into Australian World Trading Pty Ltd. In a marketing blurb, Karl and Tony say the company advises "high net worth Arab colleagues on international investments", especially in Australia. For a fee, of course, they also offer introductions to the Gulf's ruling class.

Gerard Lanzarone, a former Austrade official based in the Middle East, says the Kazals were well-known in the Gulf among diplomats. When he first met them in Dubai some time before 1999, "they appeared to have a great deal of important contacts in the region. There are people you get no access to unless you are well introduced." Which means there are "opportunities for individuals and firms to play such a role for a profit. The Kazals, because of their contacts, were in a position to fulfil that role."

Their clout was evident from the mid-1990s. They helped set up the first UAE embassy in Canberra, sourced real estate for Arab tycoons and ran a series of gala camel-races at Sydney's Randwick Racecourse attended by a who's who of politics. When Sheikh Mohammed's airline, Emirates, was looking to establish a luxury resort in the Blue Mountains, west of Sydney, the brothers were on hand to offer their assistance, and Tony has for several years advised Sheikh Mohammed on how to best manage his vast stable of racing thoroughbreds.

In Sydney, meanwhile, the Kazals tried to replicate Tony's success with the decision-makers in the UAE by ingratiating themselves with those in power in NSW. They donated tens of thousands of dollars to state and federal MPs of all stripes, attended fundraisers and even planted placards in their front lawn, spruiking, for example, the former federal attorney-general, Robert McClelland, in whose electorate they lived. On more than one occasion this landed them in trouble. In September 1999, Karl Kazal was accused in federal parliament of stacking 450 people into an ALP branch to ensure the pre-selection of Tony Stewart, a colourful former Sydney state MP later called on for favours.

Stewart lobbied the Child Support Agency on Charif Kazal's behalf midway through last decade, after he was barred from leaving the country: he owed $40,000 in child support while spending $178,000 on overseas trips and gambling. The lobbying by Stewart and another Labor MP helped to have the travel ban overturned, which freed him up for a swag of expensive business trips over the next year or so - one of which was to Abu Dhabi with his new best friend, Rodric David.

Hansard also records Jimmy Kazal being accused of changing his name twice in 14 months during the late 1990s - including to "Anthony Contervento" - to help Karl and Tony launder $600,000 under the cover of a UAE-linked charity that was planning a mosque or school for western Sydney.

But if the Kazals had a trademark, it was courting politicians with a view to it opening doors for them in business. They took a personal hand in organising lavish trips to the UAE for a dozen politicians and cabinet ministers, and hosted others at their restaurants. In the past few years, their guests have included former NSW premier Nathan Rees, former prime minister Kevin Rudd, and even Julia Gillard.

But most alarming were the overseas activities of Tony Kazal. Not long after he and Charif incorporated their business with Rodric David, Tony flew from Dubai to Beirut to pursue a new venture. He didn't know it, but a Beirut court would later find that he was being set up, and the men involved stole €370,000 from him.

But what is revealing about the affair is the initial offer they had presented to Kazal. Posing as senior associates of the Lebanese-based group Hezbollah, they asked him to help execute a covert currency exchange worth $US1.2 million for a significant profit. Tony Kazal had said yes to what the United States considers a terrorist organisation.

Sometimes you can only see the real soul of a business operation when it breaks open before your eyes in the court room. In the two long years of court proceedings that followed Rodric David's arrest in the UAE - from Abu Dhabi to the Cayman Islands to a corruption probe in Sydney - the relationship between David and the Kazals became ever more poisonous, the revelations ever more dramatic. A judge in the Cayman Islands described it as "acrimonious", but this was an understatement.

In Abu Dhabi, David's passport was returned after the residency and foreign affairs office ordered that his visa be reinstated (Tony had claimed he had been required by law to lodge the notice because David had not handed him his passport). David returned to Australia and was then able to travel to subsequent court hearings in the Cayman Islands.

It was here, in November 2011, that David lost a crucial judgment. The court ruled he had breached his fiduciary duties as a director in the debt-for-equity conversion that had practically eliminated the Kazals' share of the company.

The judge raised questions about David's truthfulness and drew an "adverse inference" about his failure to properly notify the Kazals of what he intended to do at the critical shareholders' meeting. The judge ordered their shareholding be restored. For his part, Tony Kazal says his family's claims were "entirely validated by the court and our shareholding was restored ... we went to court and we were vindicated".

But the actions against David also resulted in significant collateral damage for the Kazals. The same Cayman Islands judge found that the Kazals had indeed reneged on their promise to jointly fund the business. ''Mr David thought that Charif Kazal was attempting to rewrite the history of their relationship," the judge found. "In my view the evidence overwhelmingly supports this conclusion.''

For a time, the local fraud squad in the Cayman Islands was investigating admissions Charif made in the witness box that he had forged official legal documents. The affair led to a falling out between the Kazals and their lawyers, Robinson Legal, the firm of choice for Paul Hogan and other heavy-hitters. In March 2012, the firm filed a lawsuit in the Caymans seeking more than $875,000 in unpaid legal fees, which was later settled.

And in Abu Dhabi, another court ruled that none of Charif Kazal's allegations of criminal conduct against David were true. Charif Kazal could not be accepted as a reliable or truthful witness, the judge declared, and acquitted David of all charges. And the court-appointed experts found "there is mismanagement by the company's manager, Mr Andrew Kelly", who throughout the dispute had been the Kazals' star witness.

Rodric David, in turn, became a witness against the Kazals when the NSW Independent Commission Against Corruption (ICAC) launched its own inquiry into the family over a different matter. The corruption watchdog found that Charif had struck a corrupt secret deal with Kelly, then the NSW government official responsible for the Kazal family's six leases in the heritage area of The Rocks in Sydney. Only months after Charif took Kelly on a lavish but secret trip to the United Arab Emirates, Kazal and Kelly signed the lease to 100 George Street, a multimillion-dollar historic building the family has since turned into Bar 100, a massive nightclub. NSW taxpayers would end up ploughing more than $6 million into the nightclub's development. Charif had promised Kelly a lucrative job as manager of the very business he was setting up with Rodric David. ICAC recommended prosecutors charge Charif with perjury for lying about the deal.

One afternoon during the public hearings, Charif waved one of David's friends, television personality Michael Hammond, into a private meeting room off to the side of the ICAC lobby. Hammond had felt "menaced" by Charif, the ICAC would later find, by what happened next. Charif prevented Hammond, who was there in support of David, from leaving, glaring at him and warning him that he knew of his involvement in the corruption investigation. "My informants tell me that you are part of this," he threatened, before reeling off two or three other names he believed were part of a conspiracy.

Rodric David no longer lives in Abu Dhabi or Sydney. Out of concern for the safety of his family, he doesn't want to say publicly where he is. He reveals only that he was spurred into moving by several scary incidents during the ICAC hearings.

David claims that he and some friends were followed by two Kazal brothers, France Dion and Abe Kazal, through the Sydney CBD one afternoon after they spotted him leaving a bar. A week later, David's wife told police she was being followed by a man, who was later identified as a private investigator. When David spotted the same man in his car outside his children's school, he tried to photograph him through the window with his mobile phone.

The man allegedly snatched the phone from David, after which they tussled and then the man accelerated away - with David sprawled on the bonnet of the car, sliding off on to the side of the road. A link between the Kazals and the private investigation firm - owned by a retired NSW police officer - was never proven by ICAC. But Karl and his brothers have maintained contact with several police officers over the years, including Ken Bowditch, another retired NSW detective who provided security to the Saif Al-Islam entourage during his visits to Australia, and Ken McKay, a current NSW Police assistant commissioner.

Certainly, such friendships appear to have endured the embarrassment of the public hearings. McKay came along to the grand opening of Bar 100 to congratulate Charif and his brothers on their success. So, too, did former NSW state Labor ministers Paul McLeay and Matt Brown.

The Kazals seem as keen as ever to maintain their connections with the political class. So keen, in fact, that Charif Kazal gate-crashed two state functions in 2011 attended by the NSW Premier, Barry O'Farrell, and the Deputy Premier, Andrew Stoner, held in honour of a visiting UAE minister,

Sultan Al Mansoori. This was despite Charif being "on the list of people not to be admitted", according to the CEO of the Australia Gulf Council, Michael Yabsley. Last month, however, Charif lost his appeal in the NSW Supreme Court to have his corruption finding dismissed.

Otherwise, it's pretty much business as usual. The Kazals recently opened their third Guylian chocolate cafe, in Sydney's Darling Harbour.

As for David, after three years and millions of dollars spent defending himself, he at least has the satisfaction of having the allegations of fraud and embezzlement levelled against him dismissed. "And that means more to me than the money," he insists.

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