Thursday, June 17, 2010

The International Banking Corporation - Trowers and Hamlins Sues AlGosaibi

Not a good week for the AlGosaibis.

Trowers and Hamlins, the Central Bank of Bahrain Administrator for TIBC, announced through its public relations firm, Hill and Knowlton, that on 16 June, it had "filed a US$720 million foreign exchange claim against Ahmad Hamad Algosaibi & Brothers (AHAB) at the Saudi Arabian Monetary Agency (SAMA) Committee in the Kingdom of Saudi Arabia, following referral of the claim by the Council of Ministers."

There are a couple of telling points in the press release.  The first is the comment that the claim was filed "following referral of the claim by the Council of Ministers".

The second is a quote from Abdullah Mutawi, the T&H Partner handling this case:
“The claim we have launched with the SAMA’s Committee follows unsatisfactory responses from AHAB and their representatives to questions relating to the assets of TIBC that we have repeatedly asked them."  
You'll recall (and if you don't here's the link) that earlier there were complaints from some of the Kuwaiti banks that AHAB (as well as Saad) were not responding to requests for information or to hold meetings.   T&H notes in the press release that it has has "filed an application in the Courts of New York under Chapter 15 of the US Bankruptcy Code for an Order pursuant to Bankruptcy Rule 2004 authorising discovery.  The application seeks to obtain an Order from the Court compelling the disclosure of key financial information which the Administrator has been requesting from AHAB since August 2009 and which has not been forthcoming."  

The third is that AHAB is the "single biggest debtor owing US$3.2 billion."

In its press release T&H notes 
In addition the Administrator recently filed cases with the Negotiable Instruments Committee (NIC) in Saudi Arabia against Saad Trading (US$ 117 million), which is part of the Saad Group, as well as Abdulaziz Al Sanea (US$54 million) for defaults on loans advanced by TIBC.   Hearing dates have been set for early 2011 in relation to those cases and the administrators are currently working to expedite these hearings.
And that it will be pursuing other cases in an attempt to recover monies owed TIBC.

Finally, there is a quote from an unnamed representative of the Central Bank of Bahrain
“We are pleased that litigation has been launched less than 12 months after the CBB placed TIBC into Administration. This is a positive step forward in what is clearly a very complex case and reflects the CBB’s commitment to maintaining a well regulated and stable investment environment in Bahrain.”
Frank Kane over at The National has some additional information.

Two quotes. 

The first.
“Trowers and Hamlins’ rhetoric simply ignores [the Al Gosaibi group’s] multiple offers to enter into a co-operative information sharing agreement …”said Jim Courtovich, the spokesman for Al Gosaibi, said in a statement to The National.
The second.
In a letter to Mr Mutawi dated May 26 obtained by The National, a lawyer for Al Gosaibi said the group was advised not to hand over documents to Trowers and Hamlins because the firm was planning to use them as evidence in cases against Al Gosaibi.
“We could not responsibly advise our clients to proceed in this manner,” the letter, from Eric Lewis at the firm of Baach Robinson and Lewis, said.

In the letter, Mr Lewis also advised Trowers to join Al Gosaibi in the fight against Mr al Sanea, asserting that filing lawsuits against the group would be unproductive for creditors to TIBC.
As always, it's a good way to end a post on this topic to note that Mr. AlSanea vigorously denies the AlGosaibi allegations against him.


Anonymous said...

If TandH have determined that AHAB owes TIBC 3.2 billion dollare why would it be unproductive to the creditors of TIBC to try to obtain repayment of that amount from AHAB?Apparently, TandH did not determine that Mr. AlSanea owed the amount to TIBC or they would be pursuing him for repayment. Is the integrity of TandH or their competency being cvhallenged? They have an excellent reputation and were appointed by the CBB>

Abu 'Arqala said...


Thanks again.

While I'm not a US politician and therefore don't hear God talking to me, I can try to channel AHAB and T&H.

AHAB's contention (vigorously disputed by Mr. AlSanea) is that they are the victims of a massive fraud. So presumably their argument is that to sue them diverts resources from pursuing the real culprit and is therefore counter productive. Whether one buys this argument depends on whether one buys the central thesis of their allegation.

As to T&H as the Administrator, they are not charged with (and would not legally take the risk of) determining the guilt or innocence of parties. Their job is to recover funds owed TIBC. That means going after every listed creditor of TIBC. And leaving it to the Courts to determine whether or not that person has a defense to payment. It's simply a matter of running down the list of creditors in TIBC's books, making demands for payment. Where payment is not received the next step is to file a lawsuit.

Anonymous said...

You don,t know the facts of the case, believe me.

Abu 'Arqala said...


Thanks again.

But it will take more than mere assertions to convince me.

Anonymous said...

You have no evidence to accept the claims of AHAB. Yet you seem to do so. You yourself wrote that it would be impossable for the ALGosaibis to not know that TIBC was a subsidiary of AHAB. It is so stated in their consolidated financial statements. This would be required.They were in regular contact with bankers. These guys had their offices in the Money Exchange and they were unaware of ten years of activities in their own subsidiary in Bahrain?They did not know that they were listed on the Board of Directors? They couldn't just ride over the causeway and walk in the door anytime they wanted to?Of course they could.AWAL Bank is not under discussion here as I know nothing about that. TIBC was owned by AHAB and opened at their request in order to raise funds for AHAB. AHAB is the parent company that disavowed any responsability to its own employees after years of service and dedication. Everyone was always told to refer to Abdul
Aziz as "Uncle Aziz" in person or in memo. The younger generation appears to have taken a different attitude to its employees.
Whatever issues AHAB has with AlSanea it is dishonorable to drag ones employees (in my opinion) from top to bottom down to save yourself.This is a new form of Corporate structure. Set up a business and when things go bad say you knew nothing about what was going on in your own business and blame ALL THE PEOPLE WHO WORKED FOR YOU AND YOUR FAMILY. Ithink this could work out very well for lots of business owners,don't you? I won't bother you anymore after this, thank you for your attention to another of the story.

Abu 'Arqala said...


Thanks again for your comments. And I really mean that. You are most welcome here and I'd like to assure you that you are not bothering me.

When I started SAM, I wrote that it was meant to be a market place of ideas. All ideas are welcome and vigorous debate is encouraged.

I don't particularly believe AHAB's contention that they were unaware of TIBC. But that to my mind is really a secondary point.

It seems from a variety of factors that the failure of TIBC and Awal cannot be explained simply by poor management or by resort to blaming the "global" economic crisis. (As is our custom here, I'd note for the benefit of Kuwaiti readers that that is "global" with a small "g").

There just seems to be too much evidence to the contrary. The Hibis Report, the E&Y Report, the LC applications at Ahli Bank Kuwait which included the rather interesting transfers of the payment of funds to the purported beneficiaries of the LC to the Company itself as an intercompany transfer, what might be described as unorthodox FX transactions with Mashreqbank, the correspondence between the then CEO of TIBC and Mr. AlSanea regarding the arrangement of affairs at the Money Exchange - which could be read as an attempt to disguise its true identity and business to circumvent anti money laundering laws in the USA, and so on and so on. Though I would hasten to note that perhaps there are other explanations for that correspondence - though I haven't been able to think of any.

As to your point about making scapegoats of members of the staff in an intra-family dispute, I agree wholeheartedly with one exclusion. If the affairs of the bank were not being conducted in a kosher fashion (to use another local technical banking term), then all those involved - whether active engineers and participants in such conduct, facilitators,, or those who saw it going on and did nothing - need to answer for that. The answer is first in terms of personal morality. Second as a claim to any professional status as a "banker". And finally, if laws were violated, to the legal system.

So, please let us continue this discussion and debate. To encourage that I shall give you a nom de net - Ibn "M" in true GCC patronymic style. That I hope will make it more personal - than merely Anonymous.

Anonymous said...

Nothing in TIBC was done without prior authorization in writing by the Chairman of the Board Sulaiman AlGosaibi. Since he did not speak English and manage ment did not speak Arabic this was essential. All minutes of all meetings were sent to them and returned signed and put on file or sent wherever they were supposed to be sent.Anyone who did anything but implement the decisions of the family as communicated by the Board or its agent which was always also in writing and signed by Sulaiman would be fired. Down to selling an old chair and putting the revenue in the company if the sale had not been authorized.Family members did not return calls and messages and employees risked termination if they attempted to speak to a family member about business.Employees never spoke directly to an AlGosaibi,long befor AbdulAziz died even though AbdulAziz did show up in person at events and greet his employees nicely. This was not a trick against the AlGosaibis.I've seen the younger generation publicly thanking creditors of TIBC for their support of the Bank and refusing to acknowledge the presence of TIBC management standing right there. It was weird.It was reported that certain younger members of the family referred to management as "the dogs" on a regular basis in the past.
Hibis did not investigate TIBC. ONly EandY for some reason issued a report full of statements of suspicion but without evidence and without the exculpatory evidence with which they had been supplied. Even that which you are referring to. Why remains a puzzle.
Noone in management was on the Board of Directors.I think it would be very difficult to discipline an AlGosaibi by telling them they would be removed from the Board if they didn't start attending the meetings in person.Noone would have minded if they did attend. Noone was trying to trick anyone. The Bank was audited at least 24 times and no-one remarked upon this method of communication even the CBB itself. fact of the matter is that htis campany and all the decision made was run by the AlGosaibi family under AbdulAziz and then Sulaiman. The younger generation didn't really participate but what was done in the family was not considered open to management.TIBC never even had access to funds. All moneys borrowed went directly to the parent company and were on a name basis only. One key was with TIBC and one with AHAB. This was acceptable to theCBB as it prevented non-family members from access to funds. The CEO virtually had to request lunch money to take business guests to lunch or risk not being reimbursed. He had no access to any cash. He offered advice that had it been taken would have resulted in avoiding a default byAHAB-remember it was AHAB that defaulted on TIBC. He set up restructuring avenues that could have resulted in survival of TIBC. They were ignored. It all seems very irrational which is why you are confused. Other motives are involved and foolish actions were taken by many people which have resulted in a lot of unnecessary destruction. By the way, those reports were supposed to be confidential. Someone released them. Why? Also, I can,t type.One more thing. Do not underestimate the effect of the credit crunch which essentially resulted in a run on the bank from other larger banks. This was survivable but the Sulaiman dies as the market crashed and the ship was afloat without real captain and when AHAB defaulted without expectation on the part of TIBC the ship crashed.

AA fan said...

Thanks AA for your posts. The bigger the fish, the harder to this process when and how much will be recovered for the TIBC and AWAL creditors is a question.....