Crucial pieces in a $20bn puzzle

The trial that began in London's High Court yesterday is the latest epsiode in the battle between the al Gosaibi family and Maan al Sanea.

The Royal Courts of Justice in London. AP Photo

The trial that began in London's High Court yesterday is the latest episode in the two-year battle between the al Gosaibi family of Saudi Arabia and Maan al Sanea over US$20 billion (Dh72.46bn) of debts and allegations of fraud, theft and forgery.

But, even though Mr al Sanea is not a party to the London action, both sides agree the ruling there could be crucial.

Six banks want repayment of some $250 million in loans and interest they claim the al Gosaibis borrowed before 2009. The family alleges the loans are the responsibility of Mr al Sanea, who they say fraudulently abused their good name to take out the loans. He denies that claim.

In essence, the judge is being asked to decide whether the al Gosaibis were the victim of fraud by Mr al Sanea, or whether they acted in full knowledge of his activities and authorised them. If he decides for the Saudi family, it will strengthen their hand in talks with more than 100 other banks, to which they owe a total of $9.2bn. If the judge decides for the banks, it will open the floodgates for legal actions by the other banks against Ahmad Hamad Al Gosaibi and Brothers, their Saudi business empire.

From documents filed in court and seen by The National, it is possible to piece together the arguments each side are likely to use in the trial.

The case against the al Gosaibis

HSBC, one of the banks involved in the action, is seeking repayment of $86m plus interest. The bank, in which Mr al Sanea had a 3 per cent stake, has been closely involved in the Saudi affair from the outset. In its "skeleton" outline of evidence to be presented to the London court, HSBC says "for many years, Al Gosaibi was an apparently reputable Saudi company … which borrowed and repaid money under loan facilities with numerous banks including HSBC". HSBC developed top-level relationships with Al Gosaibi executives, including Mr al Sanea, who ran the al Gosaibis' financial business. However, HSBC claims: "It now appears Al Gosaibi's borrowing was more extensive than it had revealed to its lenders. It depended to a large degree on continual fresh borrowing to cover its own loans and outgoings … Following the credit crunch, the edifice began to crumble.

"It is suggested Al Gosaibi can essentially shift its own losses on to the shoulders of its lenders because the money advanced was received by the financial business as part of the supposed fraud, and abstracted by the fraudsters without Al Gosaibi ever having the benefit of it."

HSBC claims that argument "could most charitably be described as opportunistic … but is in fact spurious. The only fraud which it is clear was perpetrated is a fraud on the lending banks themselves."

The bank also alleges: "It is now clear beyond doubt that the Al Gosaibi partners were well aware from an early stage that Mr al Sanea was running a substantial financial business in their name. It is also clear they acquiesced in this."

HSBC says there were occasional debates with the family about the financial business, but that Mr al Sanea "emerged victorious from these with virtual carte blanche to continue operating the business".

The bank dismisses claims of forgery and says family members routinely allowed their signatures to be used on documents via mechanical and laser devices. Al Gosaibi "cannot avoid its obligations to the banks", HSBC concludes.

The case for the al Gosaibis

In their written opening statement, lodged with the court, the al Gosaibis go straight to the issue at the heart of the action: the "facilities documents" that agreed the original loans with the claimant banks. The family partnership and individual members of it "did not authorise the facilities and were not aware of them", they claim. "The documents bear the signatures of the late Abdulaziz al Gosaibi and the late Suleiman al Gosaibi, both formerly chairmen of the family partnership; however, those signatures were forgeries and were therefore not effective to bind Al Gosaibi to the facilities."

They also allege: "The person responsible for the forgeries was Mr al Sanea, formerly the managing director of an Al Gosaibi division called The Money Exchange (TME) and who is also the husband of one of the female partners, Sana al Gosaibi."

Al Gosaibi claims: "He arranged the forgery of the facility documents, together with a large number of other similar 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. "Until recently he was regarded as one of the richest men in the world. Al Gosaibi says that much of his wealth was misappropriated from the partnership."

The allegation continues: "The scale of Mr al Sanea's fraud is remarkable … As at May 2009, when the fraud was discovered, the total accumulated balance sheet debt of Al Gosaibi companies was about $9.2bn, provided by 118 banks around the world. Almost all of it was unsecured." Total exposure of Al Gosaibi companies combined with Mr al Sanea's own liabilities and those of his company Saad Group is estimated to be more than $20bn.

The alleged fraud was uncovered by the investigating accountants Deloittes, which found $330bn of cash had gone through TME in a nine-year period, and $5.5bn of that was paid to Mr al Sanea or his companies. In the same period, the al Gosaibis were paid just $146m from TME as dividends.

"If Al Gosaibi is found generally liable for the borrowing arranged by Mr al Sanea, then it is likely that they will be bankrupted," the family's court statement says.