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New $1.9bn lawsuit filed against Al Gosaibi

Manama, May 9, 2014

Administrators of a collapsed Bahraini bank have filed a $1.9 billion lawsuit against the Saudi conglomerate Ahmad Hamad Al Gosaibi and Brothers (AHAB) caught up in a global fight over massive debts.

Trowers and Hamlins, which has been administrating The International Banking Corporation (TIBC) since its collapse in 2009, has filed the case AHAB at the Bahrain Chamber for Dispute Resolution (BCDR), according to the report in the Gulf Daily News, our sister publication.

It says "deliberate misappropriation of funds" allowed "enormous sums" of money to be raised through the creation of a fraudulent loan book "at the heart of TIBC's operations".

AHAB on paper had a majority stake in TIBC, but claims it had no knowledge of what was taking place there.

The new case filed at the BCDR argues the money was used by AHAB to trade for its own account, although the latter denies this.

"The claim was filed at the Bahrain Chamber of Dispute Resolution and names AHAB itself, along with each of its individual partners, as defendants," Trowers and Hamlins, which was appointed by the Central Bank of Bahrain, said in a statement.

It added the $1.9 billion claim was the latest in a series of actions it has brought against AHAB, which includes a $430 million claim in respect of listed securities used to capitalise TIBC and a $720 million claim in respect of a series of foreign exchange trades - both of which have gone before the courts of the Saudi Arabian Capital Markets Authority and Saudi Arabian Monetary Authority.

"The claim filed on Wednesday forms part of a wider asset recovery strategy being implemented by Trowers and Hamlins LLP, assisted by independent corporate advisory and restructuring firm Zolfo Cooper, to recover assets for the benefit of TIBC's creditors," added the Trowers and Hamlins statement.

It means the total amount now being sought from AHAB by the TIBC administrator is more than $3bn.

"The case we have launched at the BCDR is the most substantial claim to date that we have made on behalf of TIBC against its parent AHAB," said Abdullah Mutawi, the Trowers and Hamlins partner leading the asset recovery programme.

"It follows a painstaking forensic analysis of the TIBC loan book, the fraudulent means by which it was created and operated and precise mapping of the flow of funds over several years.

"We were greatly assisted in this task by a US Bankruptcy Court order requiring AHAB and its bankers (Bank of America in New York) to disclose banking records."

The lawsuit filed at the BCDR alleges that AHAB received and controlled billions of dollars in remittances from TIBC to its bank accounts - a claim that AHAB denies.

"As we have indicated before, AHAB is the single biggest debtor of TIBC, owing $3.2 billion," said Mutawi.

"We remain determined to continue with our strategy of seeking recourse against TIBC's material debtors, including AHAB and others, with a view to realising TIBC's assets for the benefit of all its creditors - which include international and regional banks owed in the order of $2.6bn."

The lawsuit was filed against AHAB on the same day that it offered a settlement to banks chasing it for debts of around $6bn, not including TIBC, during a creditor meeting in Dubai.

Creditors owed money by TIBC were not invited to the meeting, with AHAB adamant that it should not be held responsible for the losses they incurred.

"The timing of this filing is clearly strategic," said AHAB acting chief executive Simon Charlton.

He claimed TIBC was "fraudulently established" to "misappropriate billions of dollars from banks" and that the signatures of AHAB partners had been forged.

"Where guarantees were purportedly obtained from AHAB we have been able to rebut these as forgeries, and with no claim for restitution, these claims fail," he said. "Those with claims against TIBC should pursue recovery against TIBC."

The settlement offered to banks by AHAB on Wednesday would see them paid at least 20 cents on the dollar, with 10 per cent of claims settled up front and a plan to recover a total of 40 to 60pc of the cash through legal action AHAB is itself taking to recover money from Maan Al Sanea, who married into the Algosaibi family.

AHAB, which claims the debt was run up against its knowledge and argues it was the victim of an elaborate fraud, is taking action against Mr Al Sanea and his entities in the Cayman Islands and Saudi Arabia, with lawsuits also filed against two Saudi banks.

Al Sanea is among 13 former bank executives on trial in Bahrain in connection with the 2009 collapse of TIBC and Bahrain-based Awal Bank, which was established by Mr Al Sanea's Saad Group.

However, he denies wrongdoing.

It is estimated that financial institutions are owed a total of $22bn by the two banks and other entities, including AHAB's Money Exchange and other businesses in Bahrain including Algosaibi Trading Services and Algosaibi Investment Holdings. – TradeArabia News Service




Tags: Law suit | TIBC | Al Gosaibi | AHAB | Trowers and Hamlins |

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