Grand Court stays multibillion dollar fraud trial

The Cayman Islands Grand Court has
put a fraud claim against Maan Al Sanea on hold until a special committee set
up in Saudi Arabia reaches its conclusions on the fraud allegations.

The claim was lodged with the Grand
Court in July 2009 by Saudi conglomerate Ahmad Hamad Al Gosaibi and Brothers
against Mr. Al Sanea and his Saad Group, on the basis that a number of Saad
companies were incorporated in the Cayman Islands.

The family-owned AHAB group accuses
Mr. Al Sanea, who is married to an Al Gosaibi, of having misappropriated and diverted
several billion dollars from AHAB companies to fund his own Saad Group when he
was in charge of the Money Exchange, an Al Gosaibi subsidiary.

The Cayman Islands Grand Court
subsequently froze US$9.2 billion of Saad Group assets. Mr. Al Sanea vigorously
denies any wrongdoing.

Chief Justice Anthony Smellie has
ordered a temporary stay of the proceedings in the Cayman Islands and in his
judgment also stated that Saudi Arabia may be the more appropriate forum to
hear the case.

“Saudi Arabia, if it offers an
available forum, may be the more appropriate forum for the trial of the underlying
allegations of fraud against Mr. Al Sanea,” the judge wrote. “The alleged
misconduct took place in Saudi Arabia and the preponderance of the witness
testimony and documentary evidence undeniably will have to be obtained there,”
the ruling said.

Chief Justice Smellie decided
proceedings in the Cayman Islands should be halted, pending the findings of the
12-man special committee that was appointed by the Saudi king to investigate
the dispute.

If the Saudi courts did not accept
jurisdiction, AHAB would be able to revert to the Cayman Islands for want of
“substantial justice” in Saudi Arabia, the judge said. In the meantime, the
freeze on Mr. Al Sanea’s assets, previously ordered by the Grand Court, remains
in effect.

Mr. Al Sanea has in the past
challenged the jurisdiction of the Cayman Court, saying the dispute is
essentially about Saudi Arabian matters and Saudi courts would therefore constitute
the appropriate forum.

The Cayman Islands Grand Court’s
decision was followed by a similar ruling in the New York Supreme Court, where
Justice Richard Lowe III said that three related law suits should be decided in
the United Arab Emirates or Saudi Arabia rather than the US. 

Both AHAB and Saad Group have since
2009 defaulted on a number of loan obligations amounting to an estimated US$10
billion to US$20 billion, and banks have sued the groups in the Cayman Islands,
New York, London, Bahrain, the United Arab Emirates and other countries to
enforce the loans.

In New York AHAB was sued by
Mashreqbank, which claims it is owed US$150 million from foreign exchange
deals. AHAB ascribes its financial situation to the alleged fraud by Mr. Al
Sanea, who the group claims used his control of the Money Exchange and other
financial subsidiaries to obtain massive unauthorised borrowing from over 100
banks. The group said that the fraud was only discovered by the AHAB partners
in May 2009, when the Money Exchange was no longer able to service its
unauthorised debt and defaulted on it. Mr. Al Sanea, who at one time was in
charge of AHAB’s financing subsidiary Money Exchange, resigned from this role
in 2005.

While AHAB claims that Mr. Al Sanea
continued to exercise control over AHAB subsidiaries even after his purported
resignation, Mr. Al Sanea denies the allegations and has stated that he has not
been involved in the running of AHAB companies for many years.

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