x Abu Dhabi, UAETuesday 25 July 2017

London court is told Al Gosaibi is victim of 'master fraudster'

A Saudi business group that collapsed under a US$9 billion tide of debt fell victim to the "brazen" activities of Maan al Sanea, London's High Court heard yesterday.

The Royal Courts of Justice in London. AP Photo
The Royal Courts of Justice in London. AP Photo

A Saudi business group that collapsed under a US$9 billion (Dh33.05bn) tide of debt fell victim to the "brazen" activities of Maan al Sanea, London's High Court heard yesterday.

Mr Justice Flaux was also told Mr al Sanea covered up the group's "increasingly desperate" financial state while simultaneously "bleeding it dry".

Ahmad Hamad Al Gosaibi and Brothers are defending a $220 million lawsuit brought by five banks over claims that for decades it buried the "guilty secret" it was bust until it defaulted on its liabilities in 2009.

The banks' QC, Greg Mitchell, earlier told the court Al Gosaibi's investment division - The Money Exchange - may have been bust for the previous 20 years, but this was hidden - partly through a sense of "shame".

But the al Gosaibi family's QC, Ewan McQuater, yesterday hit back at claims his clients had had any inkling of the financial "catastrophe" building within the group, until it was too late to avert it.

He acknowledged that, as far back as the mid 1990s, senior figures at Al Gosaibi had "significant concerns" about the activities of Mr al Sanea, but there was nothing to indicate The Money Exchange might be on the brink of insolvency.

In fact, he told the court, Mr al Sanea - whom he branded a "master fraudster" - was simply "stringing them along".

Mr al Sanea - the one-time managing director of The Money Exchange - "arranged the forgery" of loan agreements and other documents "as part of a colossal fraud by which he borrowed billions of dollars in the name of [Al Gosaibi] and misappropriated the proceeds for his own benefit", Mr McQuater told Mr Justice Flaux in arguments yesterday.

Mr al Sanea went to "extraordinary lengths" to conceal his activities and the scale of The Money Exchange's debt from Al Gosaibi and from those beyond the "first floor" on The Money Exchange, Mr McQuater added.

He "obsessively concealed" the information flowing to and from the lending banks, the court heard, and acted as the main conduit of information between staff and the partners.

Any information leaks were rapidly plugged by him, said the al Gosaibis' QC, and few of The Money Exchange executives ever had a chance to speak to the partners.

Mr McQuater told the court Mr al Sanea was the "gatekeeper" of all sensitive information and ensured The Money Exchange was an entirely separate entity from the rest of the Al Gosaibi group, with many of its staff being expatriates.

The QC acknowledged it was a "striking feature" of the case that Mr al Sanea carried on his alleged fraud for so long undetected by Al Gosaibi.

"But it is just as striking that it was not detected by any of the 118 banks who between them were advancing billions of dollars of unsecured loans to The Money Exchange and TIBC [The International Banking Corporation] as well as billions more to the Saad Group, much of which has been dissipated or lost by Mr al Sanea and will never be recovered," Mr McQuater said.

But he told the court the "most outrageous" example of the scale and sophistication of his fraud was the use of the TIBC bank, which is based in Bahrain, a subsidiary of The Money Exchange set up by Mr al Sanea and an associate.

The bank operated largely as a charade in which "hundreds of entirely bogus customer files were faked", and there were no customer loans, the QC claimed.

The supposed customers were "either fictitious or knew nothing about the loans in their name", the court heard, and the QC added: "Not only do the machinations of Mr al Sanea go a long way to explaining how his fraud remained undiscovered by Al Gosaibi and the banks. But, in the context of the present cases, they also raise another question: why would the [Al Gosaibi] partners involve themselves in such a complex programme of flagrant dishonesty - including the operation of a fake bank and the concoction of financial statements - for no obvious benefit to themselves and, indeed, incurring considerable financial expense.

"On the evidence before the court there can be no real doubt that: Mr al Sanea borrowed billions from 118 banks in the name of Al Gosaibi; Mr al Sanea applied the [Al Gosaibi] partners' signature on the facility documents in order to obtain the borrowing; Mr al Sanea took the borrowed money for himself, leaving [Al Gosaibi] with the debt, and Mr al Sanea falsified The Money Exchange's financial statements and other records to conceal the extent of the borrowing and what had been done with it.

"The real factual question is whether that was a fraud on[Al Gosaibi], or whether the [Al Gosaibi] partners knew all about what Mr al Sanea was doing and actually authorised it," Mr McQuater told the court.

The hearing continues.

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