Il Accuse! -- Former TIBC CEO Flees Bahrain

 Copyright Allied Artists

As reported in the Torygraph, Glenn Stewart has managed to escape from the apparently intolerable conditions he was being held under in Bahrain.  And has filed a formal charge with the International Court of Human Rights for false imprisonment designed to "deliberately inflict mental cruelty and torture". 

You'll recall (if you force yourself to think some rather unpleasant thoughts) that instead of being incarcerated in one of Bahrain's jails (by all means the sort of thing one should definitely avoid),  he was forbidden to leave the island while investigations into the collapse of TIBC were ongoing.  A sort of a modified house arrest with Bahrain as the house.  I guess the nearest comparative would be the French penal colony known as "Devil's Island" for more than one reason.

As he aptly put it, having escaped from these conditions of inhumane treatment, he is akin to a runaway slave.

If that weren't disturbing enough, from the article it's hard to avoid drawing the conclusion that the parties the Bahraini authorities have detained in connection with the collapses of TIBC and Awal believe they are victims of an unjustified conspiracy against them involving the Bahraini authorities, Ernst and Young, and Hibis and perhaps others.   The Bahraini Authorities would seem to include at a minimum, the Central Bank of Bahrain, the Attorney General of Bahrain and various investigative organs of the CID - though it is unclear whether other entities and individuals might be involved.  Nor how high up this goes!  I'd also hasten to add that it's unclear whether all these parties are alleged to have been active co-conspirators.  Or whether some of them may have been unwitting dupes.

According to direct quotes from Mr. Stewart it also seems this conspiracy has sinister undertones of persecution of "Westerners".

It's reports like this that make Abu Arqala wonder when justice will be done, if ever.

 

And finally a hat tip to Rupert Bumfrey, I would have missed this disturbing story if he had not reported it on his blog.  It doesn't seem to have been reported elsewhere yet. And that could, perhaps, be a chilling indication of the extent of this plot.  Or then again perhaps not.

Former Tamweel CEO Sentenced to Jail

Maktoob Business reports that a local court sentenced Adel Shirawi, former CEO, and three other officials to jail terms ranging from three to one years for financial crimes during their tenors at Tamweel.  Mr. Shirawi's sentence also includes a fine and the repayment of funds.

As noted, lawyers for three of the convicted parties (Messrs. Shirawi, Abdul Razak, and Khalthoum) said they would appeal the sentence.  There was no statement regarding the fourth party (Abdullah Nasser, former Deputy CEO), but presumably, he is appealing as well. 

Dr. Omar Bin Sulaiman Freed After Repaying Dh51.5 Million in "Bonuses"

The National reports that Dr. Bin Sulaiman has been released after repaying Dh51.5 million in funds he was alleged to have misappropriated as bonuses during his tenure as head of the DIFC.  

As the article notes, the Dubai anti-corruption law provides an "out" if the funds are returned.  It's unclear if the return of funds constitutes an admission of guilt or is equivalent to a "nolo contendere" plea.

For more on this topic, you can check out Ken's post earlier this week at WallStWTF.    

AlGosaibi v Maan AlSanea - AlGosaibi Attempts to Enlist Kuwaiti Banks Against Saad

AlQabas reports that AlGosaibi and its counsel (Saudi and American lawyers) met with Kuwaiti banks exposed to both AlGosaibi and the Saad Group to request that they unite their legal actions against Saad by forming an alliance whose goal would be the combining of their individual legal documents and other evidence, including any forged documents or documents suspected of being forged to strengthen the legal position of all creditors in recovering their money through the legal process.

At the beginning of the meeting the Kuwait banks reportedly indicated their intention not to co-operate with one party of the debtors.  

The representatives of AlGosaibi responded by:

1. Assuring of the start of a "new page" of co-operation between AlG and its creditors.  You'll recall earlier that AlQabas had carried a report that Kuwaiti creditors were frustrated with AlG's responses to their attempts at contact and negotiation.
2. That the Kuwaiti banks should have a permanent representative in the creditors committee in Riyadh and Dubai so that they would learn "in near proximity" (first hand) what was happening.
3. That 70% of the AlGosaibi Group's wealth had been designated to pay its debts.

The banks responded to the last point by noting they were not going to entertain any discounts on the debt from any party (either AlG or Saad).  And that they were on the verge of taking legal steps against Saad.  This is described in the last paragraph of the article as the filing of cases in Saudi by some and by others in the USA.

The article then notes that the Central Bank of Kuwait has instructed Kuwaiti financial institutions to provision 100% for AlG and Saad exposure by 31 December 2010.  Three banks have almost already achieved that level.  It being understood that some banks had relatively small exposures.  As for those with larger exposures it's expected that they will require until the end of the year.

Assuming the article is correct, what's interesting about this is the apparent attempt by AlGosaibi to enlist creditors in its campaign against Maan AlSanea and the Saad Group.  As you'll recall, AlG has accused Mr. AlSanea of forging certain documents to obtain loans in AlG's name but then using the funds for his own purposes.  And, as you'll recall, Mr. AlSanea vigorously denies these accusations.

AlG appears to be trying to bolster its accusations of wrongdoing by Mr. AlSanea  by enlisting third parties to join in its campaign.  By portraying itself as the innocent victim of wrongdoing,  AlG may hope to  deflect creditor anger and pressure (from itself) to Mr. AlSanea.  A tactic, that if successful, might also set the stage for a later justification for a discount on the debt.

AlGosaibi v Maan AlSanea - Allegations of Forgery - Evidence Inconclusive?

Here's an article from the Gulf Daily News in which a forsenic expert is quoted as saying that it is not possible to determine if Sulayman AlGosaibi's signatures were forged or not.

There are a couple of interesting things about this report.

In  the NY Supreme Court Case (601650/2009), as part of a forum non conveniens argument, the attorney for Maan AlSanea submitted a  sworn statement by one of AlGosaibi's lawyers, Andrew John Ford, given in connection with the suit of British Arab Commercial Bank and others against AlGosaibi.  This is Document 107-2 (Exhibit 25), which you can access by going to the Supreme Court of New York's website, and undertaking an Index Search using the above case number (601650/2009)

Here's paragraph #13 of the Ford statement.

"AHAB says that this borrowing was obtained by the forgery of the signatures of the chairman of AHAB by or at the direction of Mr AI Sanea on hundreds of banking documents. It has submitted many of the  banking documents to forensic examination by Dr Audrey Giles, head of the Giles Document Laboratory  and formerly head of the Questioned Documents Section of the Metropolitan Police Forensic Science Laboratory. Dr Giles' work has been hampered by the lack of original documents (many of which were  removed from the Money Exchange by Mr AI Sanea and which he has refused to return). Nevertheless she  has so far concluded that there is evidence that the signatures on at least 286 banking documents are not  genuine. On some documents, signatures have been applied by colour photocopying or by an inkjet printer and then traced over with a porous-tip pen; on others, the signatures are identical matches of those on  other documents and therefore highly unlikely to be genuine. In some cases the signatures were applied to  documents at a time when it would have been physically impossible for the purported author to have  signed because of incapacitating illness."

It's unclear if

1. Based on additional work, Dr.  Giles has changed her earlier findings.  
2. Or this refers solely to this particular batch of documents cited in the Gulf Daily News article.

Presumably, more information will be forthcoming.

Damas - Update on Enforceable Undertaking

From Nasdaq Dubai.

Damas International Limited (The Company) announced today that it is taking all reasonable steps to secure and recover the drawings amount owed to the Company by the Abdullah brothers.

The Company is working with the Abdulla brothers within the overall timeline, to recover the drawings amounts, as agreed in the Settlement Agreement and the Share Pledge Agreement (the "Agreements"). Given the complexity involved in transferring / selling the assets declared to the Company, it is taking more time to affect the recoveries as per the timeline mentioned in the previous announcement by the Company on 4 November  2009. The delay in payments does not constitute an event of default under the Agreements.   However, the amount of US$55 million to be paid by the Abdullah brothers to The Company on or before 30th April 2010 will be carried forward and settled in accordance with the terms and conditions of the Agreements. Active efforts are underway by the Company and the Abdulla brothers to repay the amounts either in cash or by transfer of assets.

The Company is constantly engaged with the Abdulla brothers to ensure expeditious realization from the sale of assets to settle their drawings. These efforts are on going and the Company will report to its shareholders and the market on a regular basis as to its efforts, and the effectiveness of its efforts in recovering all amounts due to the Company by the Abdullah brothers.

The Company, having clarified this matter and informed the market of the developments requests an immediate reinstatement of the trading on its shares.

 Some reactions.

1. Sounds like the recovery isn't going particularly well.  Old hands in the banking business will tell you it's not a good sign when the obligor can't make the first scheduled payment on a deal he's recently negotiated with you.  I have good reason to believe that this rule applies pretty much around the world - even in Dubai. 
2. The Brothers took cash and a "bit" of gold from Damas.  The company is unable to pay its lenders. 
3. When I read comments about transfers of assets (even with a new presumably alert and scrupulous board), I worry about the transfer of illiquid and potentially duff assets.  If the Brothers can't liquidate the assets, why should Damas presume that it can?  And if the debt is extinguished at transfer and not upon realization, why should Damas bear the liquidity risk (that the price they actually get will be much less than the transfer value) and the costs of carrying the asset until realization.
4. As noted above, the Brothers took cash and a "bit" of gold.  Their obligation is to return the company to the position before the "withdrawal".   The goal should be to avoid a BPPN "settlement" that lets the obligors skate away scot-free.

Bin Sulaiman NOT Released on Bail

17 April 2010 Update:  The Attorney General of Dubai has issued a statement that Dr. Bin Sulaiman has not been released.

Below is the original post which is erroneous.

According to the Gulf News, Dr. Omar Bin Sulaiman, Former Governor of the DIFC, has been released on AED 50 million bail.  This amount is equivalent to the amount he is being investigated over.

As you'll recall earlier Dubai had passed an anti corruption law, which among other things provided  for immediate release in the case of full restitution. 

Of course, according to the press article, the amount involved here is "bail" and not a return of the disputed funds.

The Benefits of Blogging: Recognition

When one is associated with a prestigious blog like this, it's only natural that there is an effect on one personally.  Recognition, fame and accolade follow in rapid succession.   

Yes, there are the awards - the tangible evidence of one's accomplishments.  As gratifying as these are, even more touching are the requests to provide guidance or help.

It's not been that long since Suq Al Mal was launched and already the process has begun.

Today I received an email advising me that

You were recently chosen as a potential candidate to represent your professional community in the 2010/2011 Edition of Distinguished Professionals Online.

We are please to inform you that your candidacy was formally approved March 15th, 2010. Congratulations.

The Publishing Committee selected you as a potential candidate based not only upon your current standing, but focusing as well on criteria from executive and professional directories, associations, and trade journals. Given your background, the Director believes your profile makes a fitting addition to our publication and our online network. 

As you'll note I've made it to the highly prestigious status of a "potential" candidate to represent my very own "professional" community as a "Distinguished" Professional.  And you'll note that I was not only selected by the Publishing Committee based on my current standing, but that the "Director" himself thinks my profile makes a fitting addition.

And to think I was flattered by two comments nominating me to the Chairman of the Federal Reserve Board or Emcredit.  I'll bet Mr. Greenspan isn't in the Distinguished Professional Directory.  I seriously doubt if he was even a potential candidate.

As gratifying as that was, you can imagine how I felt when I found a personal email to me from  HE AlHaji Lamido Sanusi, Newly Executive Governor of the Central Bank of Nigeria Head Office kindly inquiring about my health and apologizing for the delay in sending me the US$40 million that the CBN owes me.  All I need to do is send him my personal bank account details and the money will be on its way.  Of course he might ask for some money to cover expenses in Nigeria, but then one has to spend a buck to make a buck.

But that was not all, I also had an email from a nice young lady in Sierra Leone, the adopted daughter of a deceased head of state of another African country who needs my personal help in assisting her to secure an inheritance.  Once I send her my account details, I shall get the funds and will be allowed to keep 10% of the principal for myself plus 30% of the profit on the entire amount.  I'd reveal more but I am sworn to secrecy for security reasons and her future.

I really do need to look in my spam inbox more often.

AlGosaibi v Maan AlSanea - Allegations of Forgery Confirmed?

If you've been following this legal battle, you'll know that the the key defense of the AlGosaibis is that there was widespread forgery of signatures of key members of the family on documents used to obtain loans from international and regional banks.  And that they never received the proceeds of the loans.   They have accused Mr. AlSanea of being the mastermind of this alleged plot.  Mr. AlSanea for his part has vigorously denied any wrongdoing.

On 5 April, the Kuwaiti newspaper Al-Seyassah published a lengthy account  (some five pages when printed out) of an alleged evidence file/document "T-1437" which was supposedly prepared by Bahraini criminal justice experts about the allegations of forgery of Sulayman AlGosaibi and Ahmed Al Gosaibi's signatures on a variety of documents.   As per Al-Seyassah's account the report supports the AlGosaibi's contention that there was forgery, though the report does not identify the forger or forgers.

Al-Seyassah states that it received the document from an anonymous source - apparently via an email.

The article also discusses the latest New York Court hearings related to Mashrekbank v AlGosaibi (to which AlGosaibi has added Mr. AlSanea as a third party defendant).

I've given the document a quick read and if I have time I may post a bit more on it later.  In  the interim, you can use the link above to read the document.  The print version of Al-Seyassah has some charts/illustrations. 

It's important to note that there is no way of knowing whether the document is authentic. And as Al-Seyassah notes in its article there is a "propaganda" campaign going on by partisans of either side.

It's also important to note that Mr. AlSanea vigorously denies any wrongdoing.  And that no Court has found anyone guilty or exonerated anyone in this case.

Awal Bank - Purported Central Bank of Bahrain Letter

A few days ago I was given what is purported to be a copy of a letter from the Governor of the Central Bank of Bahrain to the Attorney General of the Kingdom of Bahrain.

First of all, it's very important to state up front that I have no way of verifying the authenticity of this document.  

Second, the copy I have does not bear any written legend restricting its audience such as "Strictly Private" or "Secret" etc.  And it appears that this letter or one close to it served as the basis for the Al-Seyassah (Kuwait) article I posted on earlier.  So it seems in one form or another to be "out" for public comment.

2009/204/MM

30 July 2009

His Excellency the Distinguished AlSayyid Abdul Rahman AlSayyid

First Public Lawyer (Attorney General)

Public Prosecution

As-Salam Alaykum wa Rahmat Allah wa Barakatuhu

I want to inform Your Excellency that Awal Bank, a bank licensed by the Central Bank of Bahrain, has encountered difficulties in settling its obligations toward creditors (or lenders) - local and international banks and financial institutions - beginning in May 2009.

Immediately upon learning of this [AA: Awal's inability to pay creditors], the Central Bank engaged a specialist company - Hibis Company - as an investigator to determine the circumstances that caused this inability/difficulty.  It has become clear from the preliminary results of the investigation that there were numerous violations of Central Bank regulations, excesses (going beyond proper bounds) in the management of the bank  which constitute a form of deceptions, breach of trust, embezzlement, and money laundering.

In this regard during previous years the management of the bank embarked on providing the Central Bank misleading reports/statements on the operations of the bank.  Among the most prominent of violations that the management engaged in was the presentation (appearance) of profits though fraud and forgery.  In addition to the lack of implementation of regulations specifically on the combating of money laundering which has led to suspicions of the involvement of the bank in this activity.

Based on these dangerous excesses/violations which have led to the insolvency of the bank towards its creditors, the Central Bank has decided to place the bank under Administration according to Article 136 of the Central Bank of Bahrain and Financial Institutions Law #64 of 2007.  Your Excellency knows quite well also that the conduct/actions which the management of the bank engaged in which led to its insolvency have negative reflections on the reputation of the banking sector in the Kingdom of Bahrain, especially given the result of its large dealings which were concluded with regional and international financial institutions.

On that basis, the Central Bank of Bahrain decided to refer this case to the Public Prosecutor to take the legal actions you deem appropriate in this matter.

We would like to draw your kind (noble) attention to the following individuals whose names are in the "sphere" of suspicion according to the Hibis Report which is in the final stages of preparation and which we will provide you shortly.  For this reason, we trust that you will prevent them from leaving the Kingdom to protect the conduct of the investigation in this case.

There then follows a list of 11 names.  

[I have deliberately not mentioned the names of the 11 individuals listed in this letter as there is an ongoing investigation.  And perhaps more important this document is unverified.  Is it actually the CBB's letter?]

Then a final salutation and a signature.

At this point it is appropriate to note that as far as I know all the individuals who have been named in this list deny any wrongdoing.  Equally that none has been convicted by a competent Court of any wrongdoing.  And if the press reports I have read are complete, none have been charged with any crimes.  As I noted in an earlier post, often material witnesses are restrained from traveling so that they will be available to investigators during the investigation.

And finally yet again.  This is a purported copy of a letter issued by the Central Bank of Bahrain in this matter.  I cannot vouch for its authenticity.  

AlGosaibi v Maan AlSanea - Forum Non Conveniens?

Conveniens or Non?

Supreme Court of New York State 60 Center Street Manhattan New York City

Copyright Djmutex 

GNU Free Documentation License

 

The National has a report today that Judge Lowe seems to be leaning towards accepting Mr. AlSanea's argument that New York is a forum non conveniens.

One of the key arguments for that is that the principals in the case don't speak English well enough to participate in a US Court Case.  One wonders how they managed to conduct their global businesses,  though SMS is known to strike in the most unlikely places.

But could not a counterargument against forum non conveniens be made on similar grounds, arguing from the technical nature of the  matters before the Court.  This case involves rather complicated financial transactions that are relatively rare in occurrence.  Matters that are very likely not to be self evident.  Lots of complicated transactions to boot.

That has two major consequences.

First, with respect to the analysis of and  presentation of evidence.

1. A variety of experts are going to be required to testify on the data and give their analyses.   Many, if not most,  of these documents appear to be in the English language.  Not Arabic. Deal tickets for FX transactions, confirmations of those deals, records of conversations over the Reuters Dealing System.  Applications for letters of credit.  And note the application forms supplied by a Kuwaiti bank to its client in Saudi Arabia are in English!  And the correspondence between The International Banking Corporation (a bank in Bahrain) with the applicant on that letter of credit are again in English!   Copies of documents presented under those letters of credit.    Copies of instructions to transfer funds.  By the look of it The International Banking Corporation ("TIBC") had a high volume treasury.  US$ 6 billion or so  just in April 2009. More than 100 loan and customer files at TIBC.  No doubt multiple loan requests, interest payments, and other correspondence for each client and each loan.   Borrowings by TIBC or other entities with major international banks.  Complicated loan agreements subject to NY or English law.  Billions of dollars worth.   One might argue all highly technical documents.  And lots and lots of them.  Reams of pages.  Few in Arabic.
2. As well there are allegations that  signatures and documents were forged.  That transactions were fraudulent in the inception.  That what appear to be foreign exchange deals are in effect disguised loans.  That letters of credit were really not for trade transactions.  All matters requiring expert testimony to help determine if the allegations have merit.  Matters requiring the utmost precision in analysis. And clarity in testimony.
3. The experts with the greatest ability to speak to these issues are likely to be from the USA or Europe.  Why?  Sadly, these events occur more frequently here.  And thus US or European experts have more experience with these cases.  As a result, they have had more chances to develop their analytical techniques and skills.  And refine them including in the crucible of a courtroom setting.  One thing is for sure.  These witnesses do not speak fluent Arabic.   I'm willing to bet their Arabic is much worse than the purported unfamiliarity with English of some of the witnesses.  If the evidence is not properly presented, what chance is there of a fair trial?  And that applies of course to both parties - defendant and plaintiff.  And it's very likely the questions directed at them and their answers going to be at a much more technical than the questions posed to other witnesses.
4. One might also wonder about the translation of  these highly technical reports and testimony into Arabic.  Is the technical vocabulary as advanced as in English?  Is there an exact word in Arabic for the English term?  Will something be "lost in translation"? A subtle nuance glossed over? A technical explanation as to why a particular finding is justified made incomplete?  Will the translations reflect the specific limits of  the expert's analysis?

Second on the familiarity of the Courts with this sort of evidence.

1. I'd bet that more cases of this nature are held in New York State (USA#1!) than in the Saudi Courts.
2. As a result, NY Judges sitting in the Supreme Court of New York are going to be more familiar with the concepts, with the testimony and the ability to evaluate it.  As are the counsel of both parties and so better able to defend their clients' interests.   All officers of the court well versed and equipped to evaluate the case.  Experienced hands and minds.
3. Will a judge in Saudi Arabia or one of the parties' Saudi counsel have that same knowledge.? I think that's highly unlikely.  In the interests of justice would a judge in New York with  good old Midwestern common sense want to take that chance? 
4. In fact, it's a pretty well known that King Abdullah is engaged in an effort to bring the Saudi Court system out of the Middle Ages.  The Saudi Consultative Council just spent the early part of this year reviewing a comprehensive plan for such reform.  And here I'm talking about competence, training,  systems and equipment, etc.  Not the law to be applied.  But the ability to apply the law.  Judges are being sent abroad for training because they are not felt by the King to be up to the level he believes appropriate.  Additional resources are being provided to ease the burden of judges.  More and trained assistants.  Modernization of facilities, equipment and systems. 
5. Of course, neither of the two parties wants to disparage the Saudi Courts, though I suppose counsel have reviewed closely the comments on Saudi Law and enforcement in the Offering Circular for Golden Belt Sukuk #1 a US$650 million offering undertaken  for the benefit of Mr. AlSanea's company.  They are  after all good Saudi citizens.  Perhaps, one day they might well wind up in Saudi Courts on this or another matter and don't want any excess baggage in the courtroom with them.  Major law firms no doubt don't want to needlessly burn any bridges with negative comments.  But who could argue with the concept of greater familiarity with technical matters?  Familiarity which will give the NY judges an advantage in sifting through the evidence.   If a Saudi has a heart problem and needs mitral valve surgery, his decision to go to Cleveland for an operation would probably be considered a wise one.   The Cleveland Clinic has a world renowned reputation in that field.   Not a condemnation of Saudi medicine.  Just a choice of of the surgeon and hospital with greater experience.  More successful operations performed.
6. What might give pause to the forum non conveniens argument is the famous case in a neighboring Kingdom where when confronted with a forward FX transaction the learned judge asked "Who buys fish in the sea?"   A country whose judicial system is considered more advanced than that in Saudi.

Bahrain - Already Big Money Laundering Scandal to Get Even Bigger?

BrokenSphere /WikiCommons 

Creative Commons Attribution ShareAlike 3.0

You might wonder how the current money laundering investigation could get any bigger.  After all, a former senior member of the Government has been interrogated by the Bahraini authorities in connection with allegations of money laundering and has been removed from his ministerial duties.  Whether the latter is just for the duration of the investigation or is permanent is not clear to me.

A couple of things seem to be pointing that there's a lot more to come in this story.

Before we go too much further, this is an appropriate place to note that what follows is based on  accounts and rumors circulating in the market. So a healthy does of skepticism is warranted.

It seems the number of financial institutions and other entities alleged to be involved  in money laundering is fairly extensive. The Al-Seyassah article I quoted in an earlier post has this language:  دائرة موسعة من الجهات شاركت في غسل الاموال

A recurring theme in these accounts is that the current investigation directly resulted from the two forensic investigations that the CBB launched into TIBC and Awal Bank last year.  That in particular the investigation into Awal Bank provided the loose thread that when pulled led to larger revelations.   The nexus is supposedly a Bahraini bank with significant ownership by two banks from a country in the region through which Awal made some transfers reportedly through Azerbayjan.  If the accounts are correct (and there's no way to know for sure at this point), further checking of transfers through that bank uncovered other transactions the Bahraini Government decided to pursue.   And the current investigations concern those other transfers.

As you'll recall the Hibis Report which was filed in the Supreme Court of New York in support of the AlGosaibi's claim against Mr. AlSanea had Evidence Case File #3 redacted.  From a later exhibit which was not removed, it appears this section dealt with allegations of money laundering.

And here it is appropriate to note that Mr. AlSanea has vigorously denied any wrongdoing in any of his businesses or conduct thereof.  And that as well the former Bahraini Minister also denies any wrongdoing.  The legal process in Bahrain is the proper forum in which legal determinations will be made.  At this point, we should allow this process to proceed and defer any judgments until the Court speaks.

AlGosaibi v Maan AlSanea - The Importance of Singularis

Sunday's AlSeyassah Newspaper from Kuwait has published what it claims is new information on the above case from letters that the Central Bank of Bahrain ("CBB") Governor HE Rashid al Maraj sent to the legal authorities in Bahrain as well as some additional information about the recent Cayman Islands Court ruling against Mr. AlSanea regarding what the Court deemed were violations of Order to freeze his assets.

The latter is the most important bit of "news" in the article.  Most press reports have focused on the US$60 million payment and in passing noted the attempt to liquidate Singularis, one of the companies in the Saad Group.  Not much more is said about Singularis.  The hot topic is the US$60 million.  AlSeyassah believes the US$60 million is relative "chicken feed".

According to AlSeyassah's "legal source", Singularis holds Mr. Al Sanea's 3% stake in HSBC which is worth roughly US$5.39 billion as of the close of business 29 March 2010.  This source asserts that the attempt to liquidate Singularis was an attempt to get the HSBC shares outside of the freeze order.   Singularis being one of the companies specifically named in the Caymans Freeze Order.

The Court has ordered the return of the US$ 60 million within 30 days.  More importantly, its action supposedly will put the stop on the "thawing" of the HSBC shares ensuring they remain under the Cayman Freeze Order.

What else does the AlSeyassah article state? 

As usual my comments appear in blue italics and preceded by AA.

1. First, the documents that AlSeyassah based its article upon date from approximately one year ago.  AA:  Given that time period, there may have been a refinement of earlier findings and charges as  further investigation took place and/or new data came to light. That might possibly even include a retraction or reduction of earlier charges. Or additional charges.  As is clear from other press reports, the investigative process in Bahrain continues with respect to both Awal and TIBC.  Once the process is complete, then the Kingdom's legal authorities will decide what cases, if any, to file.
2. HE Rashid Al Maraj, Governor of the Central Bank,  referred violations of law at Awal Bank to the Attorney General of Bahrain, Mr. AlSayyid Abdul Rahman Al Sayyid, and at The International Banking Corporation ("TIBC") to the Public Prosecutor, Dr. Ali Bin Fadl AlBuAynayn,  and recommended that certain individuals be prohibited from leaving the Kingdom.  I've posted on this before and here is the link.
3. With respect to Awal Bank, the preliminary results (AA:  note the word "preliminary") disclosed numerous violations ( مخالفات = as in violation of a law or rule) of CBB rules and improper actions  (تجاوزات = improprieties or exceeding boundaries) in the management of the Bank that constitute a form of deception, abuse of trust, embezzlement, and money laundering.  
4. Continuing on Awal Bank, that the management of the bank created the appearance of profits through fraud and forgery.  The bank did not apply the regulations for anti money laundering which led to the suspicion of the bank's involvement in these operations.   AA:  You'll recall that the Hibis Report submitted in the New York Supreme Court Case had Evidence Case File #3 redacted, though not completely.  Page 26 of the Report was labeled money laundering.  And if you don't, here's the link.  Allegations of money laundering may conjure up images of narcotraficantes with suitcases full of currency.  But one can launder money in one's possession just as one can launder one's own clothes. 
5. With respect to TIBC, the report is free of mention of the AlGosaibi Family.  Rather it states that the management of TIBC co-operated with an external party in the  completion of most of the operations which the bank engaged and from which this external party benefited against the interests of the bank. According to AlSeyassah, HE AlMaraj's letter names Mr. AlSanea as that external party saying he was in direct contact with TIBC's management for years to effect these schemes.
6. Continuing on TIBC, that the management conspired to take loans and deposits from local and international banks to fund a loan portfolio to imaginary and paper individuals and companies.  And that loan files were forged to give the appearance that the loans were valid.
7. That Mr. AlMaraj's letter stated that the violations at The International Banking Corporation included the forging of the signatures of the owners (AlGosaibi) in some documents.

And as usual some caveats on what was just presented.

1. First, not everything one reads in the press or on the Internet is true. 
2. Second, an allegation is just that, an allegation.  It is proof of nothing.  Even an allegation by an official government body or officer of a government.
3. Third, an official indictment for a crime is also not equal to a conviction.  It is not a proof of guilt.  It is merely the start of a process which hopefully leads to the determination of the facts of guilt or innocence.
4. Fourth, the Court makes that determination.  As of today, I'm not aware that any court has made any ruling.
5. Fifth, Mr. AlSanea and his counsel are on the record as vigorously contesting the allegations made against him and his companies.

Damas Signs Debt Standstill with Majority of Lenders

Damas announced today on NasdaqDubai that it had signed a standstill agreement with a majority of its lenders and was currently developing a restructuring plan which would be implemented at the end of the standstill period.  The length of the standstill period is not mentioned in the announcement.

Then taking a leaf from the Dr. Esam Janahi playbook, Damas then goes on to assert how this demonstrates "the confidence of the Company’s bank lenders in the strength of the underlying business model of Damas, the leading retail jewellery company in the Middle East".

Or then again it may just demonstrate the Company's bank lenders' experience in the backward local court system whose lightning quick procedures require an inordinate amount of time and result in abysmally low recovery rates.

And, yes, if you're wondering, a standstill agreement is only effective when 100% of the creditors have signed it as the TID experience has demonstrated.

Cayman Islands Court Declares Maan AlSanea In Contempt

The Financial Times reports that a Cayman Islands Court has declared Mr. AlSanea in contempt for violating the US$9.2 billion asset freeze it imposed.

Two violations were cited:

1. Transfer of US$60 million to the Saad Specialist Hospital last July
2. Putting one of his companies, Singularis, into voluntary liquidation.

Mr. AlSanea offered the following defenses.

Re the SSH transfer:

1. He was not aware that the freezing order applied when he made the transfer
2. His net worth is US$12.4 billion and so the transfer of US$60 million has no material impact on the freeze.

Re Singularis:

1. He was merely following legal advice and did not know that placing the company into liquidation violated the order.

The Court apparently did not buy these arguments. Here's the FT's characterization of the Court's assessment.

The judgment said it was "clear that an order for imprisonment would be futile and in any event perhaps unjustified", but the court found that "specific breaches of its orders" had "amounted to contempt

In light of the Court's reaction, I think it is really unfortunate that the FT didn't provide a bit more on Mr. AlSanea's defense regarding the requirements of the freezing order.   He certainly deserves his day in Court - including the Court of Public Opinion.

I would like to know if Mr. Al Sanea's is asserting that:

1. The legal draftsmanship skills of the Cayman Islands' Court are so poor that the Order was unclear.
2. The Order was clear but the Court delayed in communicating it to Mr. Al Sanea and his counsel.
3. The Order was clear and promptly delivered to his counsel, but they failed to notify him in time, i.e. before he took these actions.
4. Or the Order was clear, delivered to his counsel promptly and they relayed it to him promptly with sound legal advice, but the chap in the mail room forgot to bring it to him in time.
5. Or the Order was clear, delivered to his counsel promptly, relayed to him promptly and delivered by  that mail room chap the same day, but his counsel misinterpreted the Court Order.  And thus gave him what turned out to be faulty legal advice.
6. Or the Order was clear, delivered to his counsel promptly, relayed to him promptly with sound legal advice, delivered the same day by the mail room chap, but that he  simply forgot.  This is perhaps the most tragic explanation of all:  senior manager syndrome.  Or "SMS" as it's known to corporate lawyers.  It's as pernicious as Alzheimers, though it appears to be work related, not genetic. 

I have seen the most senior levels of my home country government or senior executives at major multinational firms  forced by relentless questioning in Congress to admit the terrible toll their office has taken on them.  That is, they are under such pressure from the volume and highly stressful critical nature of their work that their memories are affected.  Not only can they not remember what was discussed at a meeting, they may not even recall the meeting took place.  They don't  appear to remember much of what they do or why they did it.  Entire days or issues disappear from recollection.  I recall seeing one Harvard JD holding the most senior legal position in my country being forced by heartless Congressman to reveal that he really couldn't remember much of anything.  A rather pathetic sight, though luckily, he apparently still knew his own name.  Perhaps a sign that there is a hope for reversal. 

What's even sadder is the lack of public concern or compassion.  During the entire health care reform debate, I did not hear a single politician - conservative or liberal - raise the plight of this group - many struck down by SMS in the prime of their careers.  I believe that Aristotle said something on how one could judge a civilization by how it treated a certain group. I'm sure this is the group he was thinking of.

Mashreqbank v AlGosaibi - Motion by Mashreqbank to Consolidate Its Two Legal Cases

Mashreqbank's original legal strategy was to pursue two cases:  one against the partnership and a separate case against the heirs.

 

You'll recall earlier that earlier this month Judge Lowe ruled against Mashreqbank in its case against the heirs of Ahmad Hamad Al Gosaibi.  And if you don't remember this, here's the link to an earlier post.

Judge Lowe had stated that since Mashreqbank (a) had not joined the general partners to the suit against the partnership and (b) had not alleged  alleged that the partnership was insolvent or otherwise unable to pay its debts, it had no legal basis for pursuing a judicial order against AHAB's general partners.  

His ruling was "without prejudice" meaning that Mashreq's lawyers had the opportunity to attempt to remedy the legal shortcoming.

On 24 March Mashreq's lawyers, Cleary Gottlieb, filed a motion for consolidation of NYSC Case 601650/2009 (against AHAB) and 602171/2009 (against the general partners of AHAB).   If accepted this will apparently neatly resolve the legal issues cited in Judge Lowe's ruling.  The documents are filed at the NYSC website.  For Case 601650, it is Document  117.  For Case 601171, it's Document 47.

You'll find instructions on how to access the Supreme Court of New York's website in the earlier post linked above.

More on Omar Bin Sulaiman

Here's an update on Dr. Omar Bin Sulaiman by way of a press item from WAM, the Emirates Official News Agency.   

It seems the AED 50 million consists of bonuses he awarded himself for his performance while Governor of the DIFC.

What's highly interesting is the last sentence in the press release.

He also said a number of similar cases will soon be referred by the Public Prosecution to the court of justice.

Not because I'm particularly shocked that there was corruption but that it seems to be being pursued.   

In an article based on this press release, Gulf News comments:

A number of high-profile corruption cases have gone to court with the Dubai Court of Cassation handing irrevocable imprisonment and a fine of millions of dirhams to two former Nakheel executives.
The same court handed a similar jail term and fine of about Dh14 million to an Emirati former executive of Dubai Industrial City.
The Cassation Court will issue its ruling against five officials involved in the same graft case.
The Appeals Court and the Court of First Instance are looking into ten cases of corruption involving more than a dozen officials of companies such as Deyaar, Tamweel, Waterfront, Nakheel, Mizin and Dubai Islamic Bank.
Some have been sentenced and others are being questioned in court. Gulf News has learnt that Deyaar's former CEO could be facing a fifth case.

Four Nakheel Employees Under Investigation for Corruption

AlQabas reports that six individuals are under investigation for corruption - four employees of Nakheel and two from a private company over the payment of bribes.    Quoting "The Emirates Today", AlQ says that the investigation is preparatory to formal charges.

They are accused of demanding bribes and forging certain documents (unclear to me what these are) and then using them.  Perhaps, sale documents for properties.

The chief accused the former Head of Marketing for Nakheel is accused of having received AED 930,000 (note the article does not state the currency) according to investigations carried out by the Public Prosecutor during his imprisonment from last June to January.

According to the article this is the fourth corruption case at Nakheel.

With all the hot money sloshing around Dubai during the boom years, it's no surprise that there was corruption of this sort.   It would have happened in almost every other place in the world.

Former Head of DIFC Arrested on Corruption Charges

Yesterday the Gulf News reported the arrest of a former prominent individual at the DIFC  for abuse of his post and AED 50 million (US$ 13.6 million) in financial irregularities.  At that point identified only with the initials OS.     

This morning he's been identified in the press - but not by the authorities - as Dr. Oman Bin Suleiman.  You'll recall last November Shaykh Mohammed relieved Dr. Omar from his position as Governor of the DIFC.

Those who remember their history will recall that back in 2004 the then Head of the DFSA Philip Thorpe and one of his colleagues were summarily ejected from their posts because of their temerity in raising some questions about real estate deals done by the DIFC with related parties. 

Damas Debt Restructuring Deal Near?

The National reports that Damas may be near to striking a deal with its lenders to restructure some AED3.2 billion (US$812.7 million).  That number seemed a "tad" high based on my recollection of their31 March 2009 financials.  If you look at Damas' 30 September 2009 financials, you'll see that that amount is the total of all liabilities.  Bank debt is some AED1.028 billion (US$280.1 million).  This is the amount to be restructured with the banks.  The Directors' Loan of AED150 million is likely to be set off against the Abdullah Brothers' obligations to the Company.

The Company reportedly has about 20 lenders.  It has been negotiating with an informal steering committee comprised of  Standard Chartered, HSBC, Emirates NBD, Mashreqbank, Gulf International Bank and ABN Amro.

The recent DFSA action should give the lenders comfort that the most abusive of the corporate looting is now over.  The DFSA Enforceable Undertaking will remove many but not all of those who were  atctive participants or complicit.   I would expect the banks to ask for the heads of the remaining members of  senior management as part of the restructuring deal.

Probably the best recovery for the banks is via a restructuring.  The Company has a complicated web of subsidiaries and affiliates with a jury-rigged ownership structure to get around constraints in other countries on "foreign" ownership.  Getting comfortable with all this will be another headache for the bankers.