A Midas who lost his touch

A tycoon once worth $8bn finds himself at the centre of Saudi Arabia's biggest corporate scandal after getting crushed in the credit crunch.

Portrait of Maan al Sanea by Kagan McLeod for The National

A British friend of Maan al Sanea said: "Be nice to him. He's not a master criminal. He's just got himself into a fix and, like many in the current environment, he's finding it hard to get out of it." Any wrongdoing or otherwise may be decided by the Saudi authorities but it is hard to disagree with the rest of the suggestion. According to some who know him, the Kuwaiti-born entrepreneur is a likeable but determined man, who forged a business empire of apparently unstoppable momentum but who now finds himself at the centre of the biggest corporate scandal ever to hit Saudi Arabia. Like others caught in the blast from the most severe financial crisis in 70 years, his chances of emerging from it unscathed are remote.

Al Sanea is the alleged perpetrator of a US$10 billion (Dh36bn) fraud on the al Gosaibi family, one of the Kingdom's oldest and most venerable business dynasties. Once ranked among the world's billionaires with $8bn of assets, his bank accounts and those of his family have been frozen, and the courts have allowed him $10,000 per week to cover his personal expenses. Rumours of his imminent arrest surface every day, and his movements are severely restricted; an army of lawyers, investigators and forensic accountants is sifting through the ruins of Saad Group, the once high-flying conglomerate he founded.

All that, in the conservative and publicity-shy Saudi business establishment, amounts to a "fix" of huge proportions. "They intend to nail him," said a business partner of the al Gosaibis. If he does get "nailed", according to others who have done business with him, it will be just deserts for an overreaching and aggressive plutocrat who married into the Al Gosaibis and then exploited their good name in a series of reckless adventures in high-risk investment schemes across the globe. "He just got too cocky and greedy for his own good," said a banker.

Born in Kuwait in February 1955, Maan al Sanea came from a reputable family and received his higher education at military school and at the US air force base at Elgin, Florida. Subsequent biographies describe him as a "former fighter pilot in the Kuwaiti air force", but even his friends now concede there is an element of exaggeration in that. "He never really saw action," said one. But, likewise, there appears to be little truth in the revisionist suggestion that he worked as Kuwait Airways' cabin crew. "He's far too tall to do that job comfortably," added the friend.

The defining moment came when he married Sana Abdulaziz al Gosaibi and moved to Al Khobar in the Kingdom's Eastern Province, where the al Gosaibi family based their business. His dynamism and ambition impressed the family, a pillar of the Saudi establishment. The al Gosaibi dynasty originated in the desert village of Gassab north of Riyadh in the late 19th century. They escaped poverty through tax collection and camel farming, and a couple of decades later had moved eastwards, to the pearl diving centres of the northern Gulf. As financiers to the diving fleets and backers of the new regime of Ibn Saud, they flourished there. Even after the collapse of the pearling industry in 1930, they recovered to claim a major role in the oil-driven Saudi boom after the war. They are the epitome of Saudi "old money".

Construction, energy services and consumer products were the driving forces of the al Gosaibi business. They had enough wealth and influence to secure the lucrative franchise to distribute Pepsi in the Kingdom. According to Tony Pidgley, the British property tycoon who was a business partner with al Sanea for the past 24 years, there was obvious affection and trust between the late Abdulaziz al Gosaibi, the patriarch of the family, and his arriviste son-in-law. "We used to see them, with Sana, every year in London, and they were very close. Maan was like a son to him, and there was real respect." There are suggestions, however, that this close relationship bred a certain amount of rivalry, even jealousy, on the part of the younger al Gosaibi family members, which became more apparent after Abdulaziz died two years ago.

Al Sanea was not content to simply enjoy the lifestyle and wealth that went with his role within the family. He was determined to show that he could make it as a businessman on his own, and founded Saad, a contractor, in Al Khobar. Serving the booming oil industry and the expat workers at the nearby Saudi Aramco oil complex, the group quickly expanded into property development, travel and tourism. The pride of the business was the Oasis residential compounds, built to house foreign workers in security and comfort in the hostile Saudi environment.

The group was named after the al Saneas' son, who died later in a domestic accident. Paintings of the young boy hang in every Saad building, and his death gave impetus to the al Saneas' involvement in children's medical and educational charities, to which they have committed hundreds of millions of dollars. The Oasis development was the scene of another tragedy when, in 2004, terrorists stormed the compound and murdered 22 foreign workers. The massacre was a personal trauma for al Sanea, who tried unsuccessfully to negotiate with the killers. "It left a dark impression on him," said a friend. "He was always a moderniser in Saudi terms, but that made him think again about the Kingdom."

About the same time, al Sanea began a more aggressive push into financial services outside Saudi, opening Awal Bank in Bahrain. It sat alongside The International Banking Corporation (TIBC), which Al Gosaibi had opened in Bahrain a couple of years earlier, though operated at "arm's length" from Awal. These financial institutions were to spark the run on Al Gosaibi and Saad that prompted the current scandal, and last week were effectively taken over by the Bahraini authorities.

In those pre-credit crunch days, financial services were the "must-haves" of any ambitious conglomerate, and al Sanea saw them as essential to the future of both Saad and Al Gosaibi. Though, again, there was no formal connection between the two groups, they operated from the same premises in Al Khobar, and al Sanea did nothing to dispel the impression that he was acting with the blessing and backing of his wife's family, which gave him increased access to funding and credit on the world's financial markets.

"He leverages hard and borrows heavily," said one banker at the time. Another businessman told a slightly different version: "He upset many in the banking business by striking very tough deals. He made no friends then, and they will not help him out now." His profile was raised significantly in 2007, when he splashed out $3.3bn for a stake in the global banking giant HSBC. Like the Kingdom's other high-profile tycoon, Prince Al Waleed, al Sanea was painted as a new Arab investor with serious financial muscle and global ambitions. Now those HSBC shares are ignominiously up for sale to cover his liabilities, though they are locked in legal complications.

What has shocked many in the international financial community is how suddenly al Sanea's problems arose, and how quickly they spread to Al Gosaibi. Pidgley said: "I'm very sad and disappointed to see him where he is. If you'd asked me a few months back who was safe in the world at the moment, I'd have said it was Maan." Equally shocking, especially for the Saudis, was the way the affair so quickly went global. Doubts about the Bahraini bank's liquidity immediately reverberated on to Saad and Al Gosaibi. Almost overnight, a line of 100-plus international banks was knocking on the Saudis' doors, looking for loan repayments or guarantees. The creditors briefed lawyers, who lost no time issuing the actions and claims for multibillion dollar redress. Then the fraud allegations surfaced.

Even allowing for the lawyers' ambulance-chasing enthusiasm, the vitriol of the lawsuits filed in New York has shocked the Saudis. "Extortion", "thievery", and "looting" are not among the parlance in the Kingdom's financial circles. Worse is to come for al Sanea. It is said forensic accountants in Bahrain have turned up nearly 400 instances of forgery on letters used for obtaining credit by Saad entities. The signature of Sulaiman al Gosaibi, successor to Abdulaziz, was forged while he was on his deathbed earlier this year, it is alleged.

Meanwhile, further lawsuits are pending, from Geneva to the Cayman Islands, on behalf of creditors seeking access to al Sanea's remaining assets, supposed to be worth $9 bn. "Nobody is certain just how much is there, or where it is," said one banker. "It is just emerging how seriously leveraged he was, and it could all end up as a big pyramid of debt." The scandal has touched the highest circles in the Kingdom. Mohammed bin Fahd, governor of the Eastern Province, who is said to be furious that such calumny has been brought on the country, has personally lost money invested in Saad businesses, and is seeking punishment to match such disgrace.

One visitor to al Sanea's home outside Al Kohbar noted there was a stained glass window depicting him in warrior dress wielding a huge sword. He will need that to fight off the Saudi establishment, and the global legions of lawyers, in the days to come. * The National