x Abu Dhabi, UAESaturday 22 July 2017

The eventful life of Khalid bin Mahfouz

Few Saudis outside the ruling family have merited an obituary in The New York Times.

Khalid bin Mahfouz.
Khalid bin Mahfouz.

Few Saudis outside the ruling family have merited an obituary in The New York Times, but Khalid bin Mahfouz lived a controversial life and was a participant in extraordinary events in the Arab world. Khalid, who died on August 16 in Jeddah after a long illness, was born into wealth and power as the heir to Saudi Arabia's biggest financial institution, the National Commercial Bank (NCB). For 30 years he oversaw NCB's development as a modern, global finance house. But ultimately he surrendered his family's control of NCB. Khalid lived through, and was directly touched by, events of huge international significance: the oil shock of 1973 and subsequent sharp rise in crude prices; Saddam Hussein's invasion of Kuwait in 1990; the scandal-ridden collapse of the Bank of Credit and Commerce International (BCCI) in 1991; and al Qa'eda's attacks on America in 2001. For the last five years of his life he conducted a determined campaign against the international media to clear his name of any involvement in the financing of the September 11 attacks. He will be remembered fondly by litigators everywhere but especially in London, where he helped make "libel tourism" a growth industry. A key figure in the growth of the Saudi banking industry, Khalid facilitated the kingdom's export of petrodollars around the world after the Yom Kippur War and oil shock of 1973. For a while in the 1980s, he was a leading member of "Riyadh West" in Houston, America's oil capital. As a friend of the then state governor John Connally he enjoyed privileged access to the Texas business scene, which included the Bush family, the soon-to-be secretary of state James Baker, and other wealthy entrepreneurs. Leaving Texas, Khalid turned his attention back to Arabia and hit major controversy. He was a shareholder and director of the BCCI, which went spectacularly bust in 1991 and damaged the image of Middle East banking for years. His involvement ended with the payment in 1993 of US$225 million (Dh826.4m) to settle fraud charges brought in New York, though Khalid's lawyers insisted this was not admission of wrongdoing. His settlement was "purely a business decision". The legacy of BCCI, from which Khalid withdrew "sizeable investments" shortly before its collapse, soured relations in Arab financial circles for years; not least in Abu Dhabi where investors had picked up his stake in the dying bank. The Abu Dhabi investors had viewed Khalid as a safe pair of hands for BCCI, but his exit left them isolated and exposed to the global fallout from the scandal. It was a traumatic period for Saudi Arabia and for Khalid. Saddam Hussein had invaded Kuwait in August 1990 and an Iraqi invasion of Saudi was feared. Khalid obtained Irish citizenship for himself and his immediate family in a multi-million dollar arrangement later investigated by the Irish authorities. After BCCI, travel to the US became less attractive, and London became his second home outside the kingdom. These subsequent troubles should not cloud the bin Mahfouz achievement in Saudi business. Khalid's father Salem had arrived in Saudi Arabia from the Hadramout region of Yemen in 1912 as a poverty-stricken six year old, yet within a couple of decades had become the money changer to the agents of the Al Saud family, rulers of the new kingdom. It was a rags-to-riches story equalled only by that of Mohammed bin Laden, a similarly impoverished emigre who moved from the same region of Yemen at about the same time to seek his fortune in Saudi. There is no evidence the two families knew each other before they left Yemen, but their presence in the same exalted business circles led to friendship and business partnerships that were to endure to the next generation. In particular, Khalid became lasting friends with Salem bin Laden, who took over the family business on the death of his father. Khalid began at the bottom of the ladder, as a cashier, but soon became a senior executive and began to move towards new directions in corporate and investment banking as well as foreign exchange. He also deepened the relationship with the bin Laden family. Steve Coll, the author of The bin Ladens, paints this picture of Khalid and Salem bin Laden in the early 1980s in America: "When they flew together on their private jets, Salem might joke and sip champagne and play guitar, but Khalid would sit quietly drinking tea or smoking an Arabian water pipe." But it was clear "that on money matters, Khalid was clearly the senior partner". His personal cheque was good for up to $50m and he spent money freely on property and jewellery. His house in Houston "looked something like Versailles," says Mr Coll. In 1988 came the transaction that was later to haunt him and which sparked the litigation-fest. Salem approached Khalid and asked him for a contribution towards the "Afghan resistance", then on the verge of defeating the Soviet army. Khalid agreed and handed over about $270,000 - loose change for such a wealthy man. His lawyers later said the gift was to "assist the US-sponsored resistance to the Soviet occupation" but what was regarded as "humanitarian support" in 1988 looked very different after September 11, 2001. Prosecutors, lawyers, forensic accountants and investigative journalists descended on the bin Mahfouz business empire, and in particular Khalid's role within it, searching for the evidence of "financial jihad" that would prove his links with Osama bin Laden and al Qa'eda. Wilder allegations had it that Khalid was Osama's brother-in-law; that he was a member of the "Golden Chain" of donors to al Qa'eda; and that his Islamic charities were front organisations for terrorist funding. His pursuers were resoundingly unsuccessful. Newspapers in Europe and America ran corrections and retractions, authors were forced to apologise and withdraw allegations, and one, Rachel Ehrenfeld, author of Funding Evil, was ordered to pay $230,000 in costs and damages. All the legal actions were settled in Khalid's favour. Sometime in the mid-1990s, maybe on the death of his father in 1994, he appears to have undergone a personal epiphany, confidants say, giving up the Houston and London lifestyle, becoming noticeably more religious and making big donations to Islamic charities. His health deteriorated to the extent that he gave up the chief executive job at NCB and later sold his family's controlling interest in the bank to the Saudi government. The last tranche of shares was sold in 2003 for $2.7 billion. The sons of his only marriage, Abdulrahman and Sultan, will inherit the bulk of his estate estimated at some $10bn, and the remaining bin Mahfouz business. They wait to hear whether they will also inherit continuing civil actions by US lawyers to make them pay for their father's "humanitarian support". fkane@thenational.ae