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Saudi firm aided fraud against 100 banks, court rules

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A court in the Cayman Islands has ruled that Saudi conglomerate Ahmad Hamad Algosaibi & Brothers (AHAB) can’t collect damages from a former manager for a multi-billion-dollar fraud because it was complicit in the scheme, according to reports.

The court issued a 1,348-page ruling on Thursday in response to claims by AHAB that Maan al-Sanea, who married into the family business and managed its financial assets, engaged in unauthorised borrowing “on an industrial scale”, Bloomberg reported.

Al-Sanea argued the business was aware of his actions and authorised them prior to its default on $9bn of debt in 2009.

AHAB’s default was among the largest of the global credit crisis and forms part of what is often described as Saudi Arabia’s longest-running debt dispute.

There have been signs of the progress this year with banks in the UAE and Saudi Arabia moving towards settlement plans relating to both AHAB and al-Sanea himself, who was detained by authorities in October in relation to the $7bn of debt owed by his Saad Group, which also defaulted.

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Combined the two companies are estimated to owe $22bn to more than 100 international banks, contractors and thousands of staff.

An auction of vehicles owned by the former billionaire began in March with the proceeds going towards repaying about SAR18bn ($4.8bn) owed to creditors.

Cayman Islands chief justice Anthony Smellie described the AHAB case as “one of the largest ponzi schemes in history” involving nearly $330bn that flowed through the firm since 1981.


He found that the scheme was so complex it could not be unwound and ruled out AHAB’s $4bn claim and a $5.9bn counterclaim by an al-Sanea company.

“The dishonesty perpetrated by AHAB is impossible to unwind and no attempt is being made to do so,” he said, according to Bloomberg.

“AHAB was an active participant in the fraud from inception to its unraveling in 2009.”

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He went on to describe how the scheme had a “much greater turnover than the scheme operated by Bernie Madoff”, the disgraced US financier who committed the largest fraud in history worth an estimated $65bn.

AHAB took out more than 12,500 loans between 2000 and 2009, by which time they were maturing at a rate of 20 a day, according to Smellie.

“The losses involved are many billions of dollars. Revealing the truth has required a huge investigative, forensic and legal effort,” Steve Akers, a partner at Grant Thornton UK who represented liquidators for an affiliate of al-Sanea’s company, said after the ruling.


AHAB’s chief restructuring officer said the company was considering its next steps, Bloomberg reported.

The firm said it had reached a deal to make significant payments to creditors from its financial and real estate assets under plans supported by 71 per cent of creditors.



Source Credit: Gulf Business


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