Al Gosaibi moves to block Mashreq asset seizure

Ahmad Hamad Al Gosaibi and Brothers has filed papers against a move to seize personal assets of its leaders in a New York court case.

The Kingdom Tower in Riyadh - a project by the troubled Al Gosaibi group.

Ahmad Hamad Al Gosaibi and Brothers, the struggling Saudi family-run conglomerate, has filed papers against a move to seize personal assets of its leaders in a New York court case. The firm lodged legal papers in New York State Supreme Court to protect Al Gosaibi's partners' financial holdings from a claim by Mashreqbank, based in Dubai. That claim is one of three cases in which Mashreq alleges the Al Gosaibi group and The International Banking Corporation (TIBC), its Bahraini banking arm, defaulted on foreign currency swap transactions worth US$75 million (Dh275.4m) and $150m in May.
Mashreq says it transferred a total of $225m to Al Gosaibi and TIBC, but failed to receive the equivalent in Saudi riyals on appointed dates, as outlined in agreements. The Mashreq cases are only some of the legal actions taken after defaults by the Al Gosaibi group, which sent tremors through the Gulf's business community. In addition to Mashreq's suits, Deutsche Bank has sued the firm in New York over a similar transaction. The German lender Commerzbank has also sued the firm in London.
While one of Mashreq's suits names the Al Gosaibi group and another names TIBC, the third names 20 members of the Al Gosaibi family individually and asserts that the partners "were in fact the guarantors of the debts and obligations" of the company, and thus should be held liable for the defaults. But the group's lawyers countered in court yesterday that Mashreq was not entitled to bring the case as it could not "show a probability that it will succeed on the merits".
The firm argued that the currency swaps were part of an alleged $9.2bn fraud perpetrated against Al Gosaibi by Maan al Sanea, a Saudi billionaire who had headed Al Gosaibi's financial services arm and is chairman and founder of the Saad Group, another large conglomerate. Mr al Sanea's assets were frozen by Saudi authorities in late May, and this month a Cayman Islands judge put a freeze on $9.2bn of his worldwide assets.
Al Gosaibi and Saad have said they are restructuring their debts and have held meetings with creditors. Many banks in the region have made provisions for large loans to the two large conglomerates in the past year. Al Gosaibi further alleges in the court documents that Mashreq aided Mr al Sanea's fraud through "wilful blindness" to clear irregularities in the swaps that gave Mashreq suspiciously high profits for transactions of that type.
The filing says the kind of currency swap agreement that Mashreq entered into with Al Gosaibi's financial services arm, Money Exchange, was unusual because the swaps did not take place simultaneously, as is usually the case. Instead, Mashreq would give the Money Exchange a certain amount of dollars and a week later, the Money Exchange would give Mashreq the equivalent in riyals, giving the Dubai bank a profit through a favourable exchange rate.
In essence, Mashreq was making a "short-term loan" disguised as a routine currency swap, according to the filing. Al Gosaibi claimed that kept money flowing through Money Exchange, which Mr al Sanea headed, helping him continue to siphon off money from the business. Al Gosaibi has asked the judge to block Mashreq's attempts to attach the assets of Al Gosaibi's leaders to the case. A Mashreq spokesman on Monday called Al Gosaibi's latest claims "outrageous in the extreme". A hearing for two of Mashreq's cases was scheduled Tuesday in New York.
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