The Origins of the Maan Al Sanea Case
The Maan Al Sanea Case, also known more officially across multiple legal battles that have been fought out since 2009 as the Ahma Hamad Algosaibi and Brothers vs Saad Investment Company Limited and Al-Sanea and Others, has a very long history, which is fundamental to CBIA’s present investigation of the case and also provides a very readable introduction to how such complex cases have historically and continue to be covered in the mass media.
When two Bahraini banks failed in 2009, one owned by the Al Gosaibi family (AHAB) and the other by Al Sanea, were left owing over 100 banks, including Deutsche Bank, HSBC, and Societe Generale, an estimated $22 billion.
AHAB claim that Al Sanea stole the funds after marrying into the Al Gosaibi family in the 1980 and once being made a partner in their business named the Money Exchange in 1981, he took control of its financial operations.
The Al Gosaibi Money Exchange
The Al Gosaibi family epitomizes how business and familial relationships are intertwined in the Gulf. The wealth began as the result of conglomerate of export and import and trading businesses, as well as land investment. Later building construction firms they also won a concession to run the Pepsi-Cola bottling plant in east of the country
In the 1950s they started offering financial services through a new company called the Money Exchange which served expatriate workers in the emerging oil industry growing around the Aramco oil company.
Between 1981, when Al Sanea took over, and 2009, when it collapsed, the Money Exchange’s financial statements ‘deliberately and grossly understated’ the extent of its borrowings and the extent of Ahab's indebtedness to its banks.[2]
Before its collapse, the Money Exchange had raised an estimated $126bn by way of fraudulent borrowing from at least 118 banks around the world.
A crunching end
It was the 2008-2009 credit crunch that caused Al Sanea’s empire to unravel after the Al Gosaibi’s Bahraini bank, The International Banking Corporation (TIBC), TIBC raised its funds against its loan book with the major part of its money coming through interest-rate swaps as well as foreign exchange and Islamic finance deals.
Similar to what had been happening at Lehman Brothers, this became a very risky way to operate, meaning TIBC needed to constantly roll over short-term maturities, so when banks stopped lending to them; it was in May 2009, when TIBC defaulted on a foreign exchange deal with Deutsche Bank, that the game was up.
TIBC went into administration, as did Awal bank, owned by Al Sanea, and it was then that the scale of the losses became known. The Al Gosaibi family claimed they had no knowledge of the foreign exchange transactions, and didn't even know that TIBC existed. Al Sanea, they alleged, had stolen billions of dollars and put it into his own Saad Investment Co Ltd (SICL).
Global consequences
Since the collapse there have been a series of lawsuits around the world, including the major ones still ongoing in London and the Cayman Islands, legal proceedings took place in New York, Los Angeles, Saudi Arabia, the United Arab Emirates, Bahrain and Geneva.
In the US, the Al Gosaibi family is represented by Eric Lewis, a powerful international attorney who was legal counsel to the liquidators of the collapsed Bank of Credit and Commerce and advised liquidators running down the companies of fraudster Bernard Madoff.
The fraud that Al Sanea is alleged to have committed appeared to involve the transfer of funds ‘on a dizzying scale … yet there appear to have been no questions asked’, Lewis claimed in his testimony to the 2010 Congressional US Committee on Financial Services that collated evidence on trends in terrorism financing.
Central to CBIA’s work, Lewis’s approach, particularly in relation to the Al Sanea case, underlines how it is now of utmost importance to address what he calls ‘fundamental concerns about the safeguards that have been put in place to prevent our banking institutions from becoming instruments of terrorist financing or fraud or other financial crimes’.[3]
Sources
[1] Reuters, Special Report: In $22 billion Saudi family feud, who knew what?, reuters.com, 10 June 2011.
[2] The National, Cayman Islands court dismisses claims in $126bn Algosaibi family feud, thenationalnews.com, 01 July 2018
[3] BBC News, US banks and regulators 'fail' to cut money laundering, bbc.com, 28 September 2010
