The al Gosaibi family of Saudi Arabia has filed a legal claim of at least US$9 billion (Dh33.05bn) against Glenn Stewart, the former chief executive of The International Banking Corporation (TIBC).
The lawsuit, lodged in a California court by Ahmad Hamad Al Gosaibi and Brothers, the family's partnership, alleges: aiding and abetting fraud, breach of fiduciary duty, fraud, conspiracy to commit fraud, and unjust enrichment. The allegations pertain to when Mr Stewart was the chief executive of the now bankrupt Bahraini bank.
Mr Stewart, who left Bahrain last year for his native California, said in an e-mail to The National he had not yet seen the complaint and would respond in detail once he had had time to study the claims. He denied all the allegations.
The action against Mr Stewart is only the second against an individual executive in the dispute between Al Gosaibi and Maan al Sanea, the head of the Saudi conglomerate the Saad Group. Claims have also been filed against Mr al Sanea.
The Bahraini authorities have held a criminal hearing involving 15 executives of TIBC and another Bahraini bank, Awal, including Mr Stewart and Mr al Sanea. A further hearing is scheduled for April 17.
The collapse of TIBC and Awal in May 2009 sparked a corporate battle between Al Gosaibi and Saad that has led to allegations of multibillion-dollar fraud and legal actions on three continents.
It is believed Bahraini regulatory officials have had discussions with their counterparts in Saudi Arabia regarding the criminal allegations.
Mr al Sanea has consistently denied the allegations.
Al Gosaibi and Saad owe $20bn to Saudi and international banks. Saad is believed to have settled in part with some Saudi creditors, although no details have been made public. A committee appointed by the government of Saudi Arabia has been considering the two companies' predicament for more than a year, but no solution has yet been found.
The California action alleges that TIBC "was a sham bank and had no real customers.
Mr Stewart knew that it had no real customers, having played a central role in fabricating and documenting a portfolio of dummy borrowers to make it appear TIBC had real banking business, in fraud of regulators, lenders and [Ahmad Hamad Al Gosaibi & Brothers].
"TIBC succeeded in borrowing well in excess of $10bn, using, inter alia, forged loan documents, forged board minutes and resolutions, and other concocted paperwork," says the Al Gosaibi claim.
The filing claims $9bn on three counts, $100 million on two others, and $1 billion in exemplary and punitive damages.
The Al Gosaibi claim "concerns one of the largest financial frauds in history", the court document alleges. "Beginning no later than 2000, Maan al Sanea and his accomplices carried out a multibillion-dollar fraud against [Al Gosaibi] through the adverse domination, control, and abuse of numerous corporate and other entities; through the fraudulent misuse of [Al Gosaibi's] name and credit to secure unauthorised borrowing from over a hundred financial institutions around the world; and through the misappropriation of billions of dollars of proceeds of that unauthorised borrowing.
"Mr Stewart was a chief architect of the scheme, being principally responsible for borrowing funds in [Al Gosaibi's] name or purportedly backed by the guarantee of [Al Gosaibi] or its partners, which he knew were being siphoned off by al Sanea and not used for any legitimate purpose.
"Mr Stewart also received millions of dollars of purported commissions and fees through various entities he controlled for processing and undertaking bogus transactions in order to facilitate Mr al Sanea's Ponzi scheme."
The events leading up to the collapse of TIBC and Awal have been scrutinised by Kroll, an international investigations company. The firm filed its report with Bahrain's public prosecutor in November.
American politicians have also shown an interest in the affair, which involved the transmission of multibillion-dollar sums of money from Saudi Arabia to the US via The Money Exchange, a remittance and foreign exchange company owned by the al Gosaibis. A congressional committee heard evidence relating to alleged money laundering - denied by all parties - last year.
