AlAhli Bank Kuwait v Maan AlSanea - Allegations and Analysis

This post reviews documents e-filed at the Supreme Court of New York website in connection with the case brought by Ahli Bank of Kuwait ("ABK") against Mr. Maan AlSanea and Saad Trading Contracting & Financial Services ("STCFS") (Case Index #602847/2009). As before I'd encourage you to take a look at the original documents yourself as this is the best way to form your own opinion. To that end you need to visit the Supreme Court of New York's website  and use the Case Index Number above to search for documents.

We'll use the plaintiff's allegations since the defendants' counsels' argument is more of a technical one - that New York is a forum non conveniens  and thus the suit should be dismissed to be tried in Saudi Arabia or Kuwait.  On that basis then they would not answer the charges but focus solely on dismissal.

You will find ABK's description of the transaction as well as their basic allegations in NYSC Document #1 pages 7-18.

ABK claims to have granted STCFS a US$60 million facility in September 2007 with US$50 million for letters of credit for building materials for Saad Construction business only and US$10 million for a working capital loan. In April 2008 the facilities were amended to increase them to US$100 million with US$80 million again for letters of credit for building materials for Saad Construction and US$20 million for a "clean" loan.

The court case is about four letters of credit ("LCs") that STCFS asked ABK to open in favor of three beneficiaries in the Kingdom of Saudi Arabia in an aggregate amount of US$24,999,545.00. The LC's were to be advised through The International Banking Corporation to the beneficiaries and called for the delivery of certain equipment. ABK is asserting the transactions were fraudulent. That the beneficiaries of the LCs were "front men" for Mr. AlSanea, that no shipment of goods took place and that the funds were not paid to the beneficiaries but were paid to STCFS.

In its allegations in the Complaint pages 7-18 in Document #1, ABK states that: 

1. Paragraph 8: Mr. Delijan "has since been discovered to be the General Manager of Saad Travel Tourism & Cargo Co, an affiliate of the Defendants, and not in the business of selling air conditioning and waterjet cutting machine systems". 
2. Paragraph 10: "The address for Safar stated by Defendants on the L/C application actually is the address for the Saad National School for Girls – another affiliate of the Defendants and not in the business of selling air conditioning equipment". 
3. Paragraph 11 D: During January 14-17, the beneficiaries submitted drafts. 
4. Paragraph 11 E: TIBC confirmed the signatures on 19 January. 
5. Paragraph F: Defendants presented ABK with commercial invoices supposedly signed by authorized signatories of beneficiaries along with signed delivery receipts including defendants' confirmation.   (AA:  Under UCP the beneficiary not the applicant submits documents to the bank.  And documents generally are submitted through the advising bank - though this is not a requirement).
6. Paragraph 11 G: ABK advised STCFS of discrepancies in the documents.  (AA:  Frankly, this boggles the mind.  As you'll see from below the documentary requirements were extremely simple - an invoice and a signed delivery note.  Hard to see why these wouldn't be in apple pie order).
7. Paragraph 11 H: ABK receives letters from STCFS approving discrepancies and requesting ABK to honor the LC and make payment to beneficiaries' accounts at TIBC. 
8. Paragraph 11 I: ABK makes payment of US$24,999,545 on 26 January.

Let's start with the four LC's. For that purpose we'll use the documents submitted by Mr. AlSanea's counsel Robert F. Serio, Esq., of Gibson, Dunn & Crutcher as part of his Affirmation dated 22 December 2009 (NYSC Document #17). That way we are using a source that is not hostile to Mr. AlSanea or STCFS. 

The LC applications are his Exhibit #9. As filed on the Supreme Court's website, Mr. Serio's Exhibit 9 only contains three of the LC's. For the fourth LC, we'll use Exhibit 1 to the 19 January 2010 Affidavit of Charles H. Camp, one of ABK's two counsel, (NYSC Document # 20-1). (The Exhibits in Documents 20-1, 20-2 and 20-3 appear not to be in the same order as in the Camp Affidavit. Unclear why this is.  Filing problems at the NYSC?)   Copies of the LCs applications are in his Exhibit #2 and the LCs actually issued are in Exhibit #7 (SWIFT format). 

Based on a review (and yes the LC applications match - at least three of them), here are some common details.

1. All four are dated 12 January 2009. 
2. All call for payment against commercial invoices and delivery notes. No shipping documents such as bills of lading are required as these are being shipped from the beneficiary's warehouse to the applicant Saad's. 
3. All are domestic LCs.  The LCs do not finance imports from outside the Kingdom.
4. All four LCs are to be advised through The International Banking Corporation with funds to be remitted to the beneficiaries' accounts at TIBC. 
5. All four LC's expire 12 March 2009 in Bahrain (at TIBC's counters).
   

First LC. 

1. Amount: US$7,825,815. 
2. Beneficiary: M/S Emad Youssef AlGamea Trading Establishment. AlKhobar. 
3. Goods: Air Horizontal Units, Chilled Water Fan Coil Units Thermostats and Accessories for Airconditioning Systems as per the Beneficiary's Proforma Invoice Dated December 14, 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200010.
   

Second LC. 

1. Amount: US$8,194,830. 
2. Beneficiary: M/S Walid Ahmed Safar Trading Services Est. AlKhobar. 
3. Goods: Supply of 30GTN Series – Dual Refrigerant, Multicompressor, A/C Equipments as per beneficiary's proforma invoice dated 11 December 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200033.
   

Third LC. 

1. Amount: US$3,003,700. 
2. Beneficiary: M/S Delian Fahed Al Delijan Est. –Trading AlKhobar. 
3. Goods: Supply of Waterjet Cutting Machine Systems as per beneficiary's Proforma Invoice dated 29 November 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200009.
   

Fourth LC. 

1. Amount: US$5,975,200. 
2. Beneficiary: M/S Delian Fahed Al Delijan Est. –Trading AlKhobar. 
3. Goods: Supply of Air Horizontal Units, Chilled Water Fan Coil Units Thermostats and Accessories for Airconditioning Systems as per the Beneficiary's Proforma Invoice Dated December 14, 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200009.
   

(I'll post something on ABK's "approval" of these transactions in due course.  This looks like a strong entry for the NBP "Credit War Chest" Award Contest).

Now let's turn to the flow of the payments. As part of the discovery process, ABK's counsel obtained information from Bank of America NY on the clearing account they hold for TIBC.   Exhibit 4 to the Camp Affidavit (in Document 20-1) consists of material provided by BoA.  In an accompanying certificate a BoA officer attests under oath to the accuracy of the documents.  The certificate is notarized. This information shows that TIBC's account at BoA received four credits from ABK on 26 January 2009.   Each credit is in the full amount of the four LCs above. 

Exhibit 1 (in Document 20-1) contains copies of additional information provided by BoA  – again sworn and notarized. This is even more interesting.  This submission contains the details of four payments made by TIBC from its account on  27 January 2009.  Each one is in the exact amount of one of the four letter of credit payments received the previous day from ABK.  Each of the  27 January debits from TIBC's account is directed to HSBC for credit to Saudi British Bank for credit to the account of Saad Trading and Contracting. 

But what I did not see mentioned in the Affidavit are two very curious things. 

1. The By Order Party and the Originator are identified as Saad Trading and Contracting.  That means that TIBC is saying that its customer Saad Trading is remitting the funds.  Under normal banking procedure this means the funds came from an account belonging to Saad Trading and Contracting. 
2. The Originator to Beneficiary Information says "Intercompany Funds Transfer"! Again this means that the owner of the funds is Saad.

Putting the best face on this on this information, it is a rather remarkable coincidence that STCFS just happens to have its own funds which exactly (to the penny) match the funds owed the beneficiaries on the four LC payments made by ABK the day before. And that it transfers them in the exact same four amounts the next day.  

As before a legal note.  At this point, as far as I am aware, no Court has issued a verdict in this or any other case against Mr. AlSanea or his companies.  Mr. AlSanea continues to maintain his innocence of any wrongdoing.