x Abu Dhabi, UAEWednesday 26 July 2017

US$9 billion US fraud charge dropped in Saudi’s long-running feud between Al Gosaibi and Al Sanea

Amid an ongoing international legal dispute, Saudi Arabia’s Al Gosaibi family have dropped a US$9 billion legal claim against the alleged right-hand man of former advisor and fellow Saudi businessman Maan Al Sanea.

The Bahrain world trade center complex, right, where The International Banking Corporation has its office. Phil Weymouth for The National
The Bahrain world trade center complex, right, where The International Banking Corporation has its office. Phil Weymouth for The National

The international cold war between Saudi Arabia’s Al Gosaibi family and fellow Saudi businessman Maan Al Sanea took an unexpected turn on Monday after the Gosaibis dropped their US$9 billion claim against Glenn Stewart, often described as Mr Al Sanea’s right-hand man.

Ahmed Hamad Al Gosaibi & Brothers (Ahab), the family’s partnership, filed the action against Mr Stewart in California in March 2011, which alleged aiding and abetting fraud, breach of fiduciary duty, fraud and fraud conspiracy, and unjust enrichment while he was chief executive of The International Banking Corporation (TIBC), a Bahraini bank.

However, in a dramatic turn of events a settlement was agreed by both parties on Monday, after Ahab’s legal team approached Mr Stewart’s defence lawyers during the summer about drawing the case to a close.

The settlement agreement is expected to be filed with the court in California within days.

Under the terms of the settlement, both parties will agree to bear their own legal costs, with no monies changing hands between the two sides, according to a copy of the agreement seen by The National.

“We feel vindicated by this settlement,” said Haig Kalbian, a partner with the Washington and Abu Dhabi-based law firm Kalbian Hagerty, which represented Mr Stewart. “We always said that this case should never have been brought against Glenn Stewart. The fact that the other side has walked away from the case speaks volumes.”

Ahab’s lawyers Lewis Baach approached Mr Stewart’s defence team about a settlement this summer, after the judge granted a motion by the defence that Ahab should put up a cash bond of just over US$500,000, employing a little used California law statute applicable to lawsuits filed against Californian residents by parties from outside the state.

“This was the first time that the judge had to look at the merits of the case, and he was satisfied that Glenn Stewart had a reasonable chance of success,” said Mr Kalbian. The judge’s favouring of Mr Stewart on this matter may have persuaded Ahab that it was unlikely to receive a judgement in its favour if the case went to full trial, he said.

Ahab’s decision to settle was part of a refocus of its litigation efforts under a new executive management, said Eric Lewis, the family’s global legal coordinator.

“We have confidence that we would have proven our allegations at trial, but were looking at two years to trial, likely appeals, and then a further international asset-tracing exercise through an array of offshore jurisdictions that could have been both time-consuming and expensive,” he said.

As part of the settlement agreement, Mr Stewart has agreed to be interviewed by Ahab’s representatives on a range of subjects including Mr Al Sanea, Ahab, TIBC and other related companies.

Any information provided during the interviews, to be held in three six-hour sessions that have yet to be scheduled, will not be used as the basis of further legal action against Mr Stewart, according to the agreement.

His agreement to provide information that can be used in Ahab’s litigation against other participants “at the end of the day is far more valuable than any monetary recovery against him as an individual,” said Mr Lewis. “The goal here is to gain further evidence of Al Sanea’s [alleged] vast Ponzi scheme and to learn why more than 100 banks would have made unsecured loans based on forged documents without the slightest concern about what the money was being used for.”

Ahab announced yesterday that it had initiated new legal proceedings against Mr Al Sanea in Saudi Arabia, declining to give further details. The proceedings are understood to have been launched within the past three months.

The case against Mr Stewart is part of the wider dispute between Ahab and Mr Al Sanea’s Saad Group, which has spawned legal battles in London, New York, the Cayman Islands, Saudi Arabia and Bahrain, stemming from about $15 billion of liabilities owed by the two conglomerates.

The dispute between the two was prompted by the collapse in July 2009 of TIBC and Awal, another Bahraini bank. Ahab claims that the collapse of the two banks, which triggered a massive debt default of about $15bn involving 90-odd banks, was because of a massive fraud by Mr Al Sanea.

Ahab’s lawsuit alleged that Mr Stewart was one of the principal architects of Mr Al Sanea’s international fraud and money laundering scheme. The family alleged that Mr Stewart and Mr Al Sanea had launched TIBC as a shell bank as a means of leveraging unauthorised borrowing that could be siphoned off to Mr Al Sanea.

Mr Stewart and Mr Al Sanea have consistently denied any allegation of wrongdoing.

jeverington@thenational.ae