Al Gosaibi corporate fraud is a war of attrition Frank Kane (The National, UAE)
The Middle East’s biggest corporate scandal has raged for more than a year now and still shows little sign of abating, nor of resolution.If anything, the confrontation between the al Gosaibi dynasty and their estranged family member Maan al Sanea is becoming more intractable, as positions on each side become more entrenched.What began as an explosive fight over US$10 billion (Dh36.72bn) of allegedly stolen money, which may be twice that amount at stake in the form of bank borrowings from about 100 creditors, has turned into a war of attrition largely fought in the courts in New York, London, the Cayman Islands and the Gulf.
In the confusion of flying legal actions and counter-claims, it is easy to lose track of the central thread, but there are some pretty important issues that must be resolved if global investors are to feel comfortable about doing business in Saudi Arabia. What’s at stake is the corporate integrity of the kingdom and its business culture.A brief resume. In May of last year, two Bahraini banks defaulted on repayments to creditors, sparking a cash crisis for their owner across the causeway in Saudi. When the al Gosaibi family looked at the books of one of those banks, The International Banking Corporation (TIBC), they uncovered huge losses; when they examined the records of the other, Awal Bank owned by Mr al Sanea, there were similar deficits.
The result was a $10bn hole in the finances of the Saudi parent, which the family alleged was the result of theft, forgery and deceit by Mr al Sanea. He has denied these allegations consistently since the beginning.The first legal actions began in New York, ironically by the UAE-based Mashreqbank, which claimed it was owed money by al Gosaibi entities in the US, but then snowballed into courtroom filings in London, Geneva, the Cayman Islands and other parts of the Gulf.
For its part the al Gosaibi side has accused Mr al Sanea of forgery, fraud, extravagant misuse of company money – for example, on a private zoo in Al Khobar in Saudi Arabia.These and other alleged corporate sins flowed from legal filings and courtroom exhibits. In particular, and central to the al Gosaibi case, were allegations, apparently backed up by expert witnesses, that Mr al Sanea had forged signatures on financial documents.
If this very public campaign was designed to spur the Saudi authorities into action, however, it failed. The financial and corporate establishment in the kingdom closed ranks against the allegations coming from abroad; a committee set up to examine the issues is still sitting, and presumably deliberating, but we have not heard a single word in public from it.Meanwhile, it looked to be going the al Gosaibis’ way. The evidence against Mr al Sanea began to mount. There was the supposed evidence of alleged forgery, backed by testimony from former employees in Bahrain that he allegedly ran the financial companies there as his personal banks.
Investigations by the Bahrain authorities, via the accounting firm Ernst & Young and a relatively unknown corporate investigator called Hibis, seemed to support the al Gosaibi version of events in Bahrain. Authorities in the Cayman Islands, where Mr al Sanea’s master company Saad Group was based, froze his assets and appointed liquidators to assess their value; in a major escalation, a US congressman demanded an investigation into alleged money laundering aspects of the affair, which the American authorities are considering. All this gave the impression of an unstoppable momentum on the part of the al Gosaibi cause.
Mr al Sanea, in contrast, has waged a low-intensity campaign in response to these allegations. In the courts, he has answered with evidence of his own and there have been some signs recently that this is paying off. His former lieutenant at TIBC, Glenn Stewart, fled Bahrain despite an order to remain there and from the safety of California filed a lengthy complaint to UN human rights officials that rebutted the central al Gosaibi claim that they were innocent and ignorant, victims of Mr al Sanea in Bahrain. Other executives also took legal action against the Bahrain authorities for what they claimed were prejudiced investigations against them, especially by Hibis. Hibis has stood by its work.
It then emerged that the Bahrain authorities were suddenly not so convinced about the al Gosaibis’ central claims about forgery, with the ruling of a tribunal that some, at least, of the documents presented in evidence were original.
http://suqalmal.blogspot.com/2010/02/awal-bank-hibis-europe-2009.html
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