False start for mammoth Saudi fraud trial
Cayman Islands courthouse, George Town
(CNS Business): The biggest ever trial to be held in the Cayman Islands got off to a false start yesterday, with proceedings adjourned at the start of the first day due to what the chief justice Smellie called “housekeeping issues”, but with the courts blocking off the next seven months to deal with the liquidation from the Al Gosaibi Saudi business empire and over six years of litigation already to get to this point, another 24 hours wasn’t going to make too much difference.
“I think everyone is keen to get started, so yes [today’s delay] was a little frustrating, but if there are housekeeping matters that need to be resolved, better to deal with them up front,” said Simon Charlton, chief restructuring officer and acting CEO of A H Algosaibi & Bros, the company at the centre of the $9.2 billion dispute with Saudi billionaire, Maan Al-Sanea, head of the Saad Group investment company, in what has been the Middle East’s longest running business litigation.
“One thing that everyone should understand is that this is a complex case, with several parties, a very large body of evidence and many issues, both procedural and on the merits, so people should be patient as this case progresses,” he added.
With billions of dollars at stake, allegations of fraud, forgery and conspiracy, all coming out of the financial crisis, borrowings from some 118 banks around the world are connected to this case, which has already seen various jurisdictional, and interim trials resolved all the way up to the UK Privy Council.
The main trial Ahmad Hamad Algosaibi & Brothers (AHAB) v Al-Sanea and Others started on Monday in Grand Court before Chief Justice Anthony Smellie, with AHAB having filed its initial complaint on 10 November 2009 and filed for restraining orders in July 2009, in connection with the collapse of the Al Gosaibi business empire, which it claimed was a result of fraud by Maan Al-Sanea.
Al-Sanea, who married a daughter of one of the founders of AHAB, was put in charge of the firm’s financial-services business after marrying into the family. It is alleged that over a twenty-year period, he negotiated huge amounts of loans, most unsecured, on the strength of the AHAB name. By 2009, banks hit by the credit crisis stopped lending and AHAB defaulted on payments to them.
As a result, the Algosaibi family claims it was the victim of a massive $9.2 billion fraud due to Al-Sanea’s manipulation of AHAB’S finances. They claim he forged documents and siphoned off proceeds to his Saudi and Bahrani companies and then to other companies established by him in the Cayman Islands. These allegations are denied by the liquidators of the Cayman companies, which are the active defendants to AHAB’S claims.
This long drawn out case has also seen a personal judgment in favour of AHAB in 2011 against Al-Sanea for US$2.5 billion, following a Grand Court hearing also in front of Chief Justice Smellie, which survived appeals all the way to the Judicial Committee of the Privy Council. While seeking to enforce that judgment against Al-Sanea in Saudi Arabia and elsewhere, AHAB is pressing on to now recover of another US$7.3 billion, which it claims to be able to trace to Al-Senea’s Cayman companies. The liquidators of one group of the Al-Sanea Cayman companies have also brought a counter claim against AHAB for some US$6 billion, which will also be resolved in the trial.
It has also resulted in plenty of work for the Cayman law firms involved on the case. Mourant Ozannes is acting for Ahmad Hamad Algosaibi & Brothers Company (AHAB) in the fraud claim against Maan Al Sanea and the Saad Group of companies. Harneys are acting for Saad Investments Finance Company (No. 5) (in Official Liquidation) aka SIFCO 5. Walkers are acting for nine of the 16 companies in liquidation, which are defendants to AHAB’S claims, in conjunction with accounting firm Grant Thornton, while HSM Chambers act for the 13th – 18th Defendants, each of which is a wholly-owned subsidiary of AWAL Bank, a Bahrain bank in administration by order of the Central Bank of Bahrain. AWAL Bank is not a party to the Cayman case.
Although no action took place in the courtroom on the opening day of the trial, which is expected to last for the next seven months, followed by two to three months of deliberations and writing, company officials for Al Gosaibi indicated that progress had been made on their dispute in Saudi with the banks that have claims against them. Charlton said that a settlement would be announced later this week, although that will not affect proceedings in Cayman.
Stating that AHAB was as much a victim of fraud as the financial institutions involved, Charlton said, “AHAB has always sought a settlement of both the claims brought against it by the banks and its claims against the defendants in these proceedings in order to bring forward distributions to financial institutions and others victimised by the fraud. Since May 2014 AHAB has been negotiating with a steering committee representing the affected financial institutions and is in the process of finalising terms and presenting these terms to the appropriate judicial authorities in Saudi Arabia for their consideration.
“AHAB alleges that funds were fraudulently obtained from financial institutions around the world and misappropriated through a complex fraud and ultimately ended up in a group of companies domiciled in the Cayman Islands. AHAB seeks the return of these funds so that they may be returned to the Claimant financial institutions as part of a comprehensive negotiated settlement between AHAB and those Claimant financial institutions,” Charlton said.
“With respect to the claims against the defendants who are domiciled in Cayman, Cayman is the most appropriate jurisdiction to bring these proceedings. AHAB is grateful to the Cayman Courts for accommodating the imminent and lengthy trial of these complex, high-value and important proceedings,” he added. “AHAB looks forward to the ultimate resolution of this dispute, by which it seeks to recover a significant sum for the benefit of its creditors.”
Category: Finance
