Mashreqbank hits back in Al Gosaibi tit-for-tat

Mashreq filed a suit against the Al Gosaibi group in May, and the Saudi group reacted with a filing of its own.

A counter-claim filed against Mashreqbank in a New York court by Hamad Ahmad Al Gosaibi and Brothers, the struggling Saudi conglomerate, was an attempt to avoid responsibility for defaulting on financial obligations, the Dubai-based bank said Thursday. Mashreq filed a suit against the Al Gosaibi group in May, after the firm failed to keep up its end of two currency swap agreements in which Mashreq sent Al Gosaibi $225m (Dh826m).

The suits were filed in New York because Mashreq sent its $225m to New York-based accounts owned by Al Gosaibi and its banking arm, The International Banking Corporation. But Al Gosaibi this week lodged a counter-claim against Mashreq, alleging that the "facilities agreement" that Mashreq said was the basis for the swaps was, in fact, forged. In any case, the claim said, Mashreq was not allowed to make the transactions even under the forged agreement, which limited the size of such currency deals.

Mashreq was also accused by Al Gosaibi of aiding in a $9.2bn fraud allegedly committed by Maan al Sanea, a prominent Saudi businessman who for almost three decades headed Al Gosaibi's financial services arm, called the Money Exchange. Mashreq, Al Gosaibi said, had taken suspiciously high profits on more than 150 swap transactions with the Money Exchange over a period of four years. The bank should have known that these transactions were unusual and highly likely to be fraudulent, according to Al Gosaibi.

But Mashreq said Thursday that Al Gosaibi's latest court claims were an attempt to deflect responsibility for defaulting on the $225m in swap agreements. "Mashreq's claim is just a small piece of almost $10 billion [Al Gosaibi] and its partners owe many banks," Mashreq said in a statement. "[Al Gosaibi] is trying to avoid this liability by alleging implausibly that those banks, of which Mashreq is but one, were somehow involved in an unsubstantiated improper scheme. [Al Gosaibi] and its partners owe explanations to many banks and creditors, and thus far its explanations are not credible."

An Al Gosaibi spokesman declined to comment. Al Gosaibi has pinned most of its recent troubles on Mr al Sanea's alleged fraud, which it says caused it to default on loans this summer. The company is currently holding meetings with creditors to address its outstanding debts, though whether the firm will pay back loans based on documents allegedly forged by Mr al Sanea remains an issue. Al Gosaibi has said Mr al Sanea, the billionaire chairman and founder of the Saad Group, siphoned off money from Al Gosaibi into his own accounts and to the accounts of the Saad Group through the Money Exchange over a period of years. He was able to do so by keeping tight control of communications going into and out of the Money Exchange and borrowing money in Al Gosaibi's name based on documents and signatures he forged.