Al Mojil board resigns after jail sentences, fines

The entire board of Saudi contractor Mohammad Al Mojil Group (MMG) resigned Monday after the company was fined SAR 1.6 billion by the stock market regulator and three top executives were sentenced to prison.

The Capital Market Authority's Committee for the Resolution of Securities Disputes determined that three people, including the founder Mohammad Al Mojil and his son Adel Al-Mojil, the chairman, guilty of manipulation and fraud relating to the family-controlled company's initial public offer (IPO) in 2008.

They were sentenced to between three and five years in prison.

MMG said in a statement that the committee's decision was based on "fundamentally flawed" evidence and had severely hurt the board's ability to run the company, according to Reuters.

The decision to resign is, in part, due to their serious concerns about the unlimited director and executive liabilities in the Kingdom of Saudi Arabia," MMG said. "It is now up to the other shareholders of the company and the Capital Market Authority to decide upon the next steps for the company.”

The family company has up to SAR 100 million of projects underway, and a huge fleet of equipment, but has no plan to form a new board, according to a statement sent to Reuters.

The CMA charged that "illegal profits" were made during the IPO through the discrepancy between the shares' value in the offer and their real value.

Shares of the company have been suspended from trading since July 2012 over losses.

Several construction companies in Saudi Arabia have been going through a rough time, as they over-extended themselves during a construction boom in the past decade. As oil prices dropped, the government canceled or scaled down projects and postponed payments.

The kingdom’s biggest construction firm, Saudi Oger and Saudi Binladin Group, have stopped paying their staff and dismissed thousands of workers.

"Recent events highlight the dire need for a systematic and far-reaching overhaul of the construction sector in the Kingdom of Saudi Arabia as well as the regulations which govern these firms," MMG said in its statement

The company added that the recovery and restructuring plan had been going well, with the firm reporting its first profit since 2012. Under the restructuring plan, the firm could have offered creditors preferred shares in MMG to settle debt, benefiting from a law introduced this year in the kingdom, it said.