Monday, 2 November 2009
Saad chief accused of Ponzi scheme
The filings cast doubt on the nature of foreign exchange transactions between Mashreq and Al Gosaibi. These were, in fact, “short-term loans”, Al Gosaibi alleges, rather than genuine foreign exchange transactions, and were not based on genuine remittance business.
“The volume of forex transactions $4.97bn exceeded the volume of the remittance business $66.75bn by 75 times. The remittance business had nothing to do with the scheme, nor could Mashreq have thought that remitting money to foreign workers could remotely have approached the scale of these transactions,” said Al Gosaibi’s lawyers, the US firm of Baach Robinson and Lewis.
The filings also contain further allegations that Mr al Sanea committed forgery with Mashreq’s knowledge: “When Al Sanea directed employees to refuse to provide a notarised signature on loan documents, because the chairman of the Al Gosaibi company was comatose and could not sign, Mashreq agreed to waive the rules.”
In a statement, Mashreq responded: “The central facts in this case remain that the defendant, the Al Gosaibis, by failing to complete foreign exchange transactions totalling approximately $150 million, is in default of agreements with Mashreq, and we look forward to presenting our case to the court.
“As for Al Gosaibi’s allegations that its own organisation was riven with massive fraud and forgery, Mashreq saw no evidence of this, and at all times acted in good faith in dealing as a counterparty with Al Gosaibi. In making these claims, Al Gosaibi is trying to avoid its lawful obligations to Mashreq and the more than 100 other international financial institutions to which Al Gosaibi is now in default.”
In separate legal moves in New York, Mr al Sanea’s lawyers filed documents accusing Al Gosaibi of “forum shopping” – bringing actions in multiple jurisdictions around the world. They also disputed the jurisdiction of the New York courts as the appropriate arenas for the legal actions and argued that Saudi Arabia would be the best place to litigate the dispute.
Ian Edge, the director of the Centre for Islamic and Middle Eastern Law at the University of London’s School of African and Oriental Studies, said: “In my opinion, Saudi Arabia is the most appropriate forum – probably the only appropriate forum – for the settlement of this dispute. It maintains an effective judicial system that is fully capable of adjudicating commercial disputes.”