| Kippreport.com

The $22B-mystery: how did ‘name lending’ lead to the collapse of banks in the region

June 13, 2011 12:57 by Reuters

DEBT CONCERNS

His brother-in-law wasn’t the only one unhappy about al-Sanea. Ayouti, the accountant, expressed worries about him on various occasions and was concerned that his debts could hurt AHAB, whose financial business was centered around the Money Exchange. “To date, no decision has been reached as to who will settle that indebtedness,” he said in a 2000 auditors’ report.

As early as 1997, the accountant wrote that the Money Exchange suffered a “permanent” liquidity shortage — so much so that it needed to borrow not just to meet the needs of “the partners and their affiliated companies”, but also to service existing debt.

Three years later, Abdulaziz stepped in to reassure the accountant — and creditors who may have been worried about the Exchange. “In his capacity as Chairman and a partner of AHAB”, Abdulaziz backed “the entire debts of Maan Al Sanea and his companies”, says a March 2000 document described as a “pledge”.

The court documents in the London case also show that Abdulaziz’s only son Saud played an active role, and seemed to keep tabs on al-Sanea and his plans. Saud met bankers, dealt with the family’s financial businesses, and was in frequent conversation with al-Sanea.

Saud could be demanding. “Tried to reach you several times last month and this month,” he wrote to Al-Sanea in 2005, according to a court submission. “I understand where you come from, however think the analysis missed several points … would like to suggest meeting with someone from Money Exchange to discuss a workable plan and come up with a scenario.”

Page after page of such exchanges is proof, the banks argue, that the Algosaibis knew what was going on and are therefore responsible for setting things right.

AHAB said it would not comment on statements made in the London court so far, repeating that “the notion that they knew or cooperated in the looting of their business has no logical or legal basis”.

THE GOOD LIFE

Despite the family concerns, Al-Sanea clearly enjoyed the fruits of running an important part of the business, basing many of his companies in the Cayman Islands, where he held much of his wealth.

Al-Sanea had a private plane fitted with plush white carpet, a master bedroom hung with expensive artwork, and a bathroom with gold fixtures, says Ninfa Arellano-Smith, a Cayman Islands banker working for HSBC. She met al-Sanea in 2006 through her husband — the director for the Civil Aviation Authority — and started working for him.

Al-Sanea, an elegant dresser, has a down-to-earth and easy sense of humour, while his wife Sana dressed like a typical western woman on a beach holiday in the Caymans, Arellano-Smith recalls.

“Sana is a very caring lady and soft spoken, but you know she still runs things. It’s how they interact between them: she will pat him on the arm in a joking manner or something. They are a very caring, strong couple.”

The al-Saneas took up an entire floor at the luxurious Ritz-Carlton resort on their 2008 vacation, Arellano-Smith said, flying into Grand Cayman with an entourage that included friends, butlers, caretakers and pilots.

Al-Sanea also inspected the resort’s 20,000 sq foot penthouse with panoramic views of the world famous Seven Mile Beach and an asking price of $44 million. “He liked it, but it was too small,” Arellano-Smith said.

(By Douwe Miedema, Shurna Robbins and Sarah White)

For the pdf of the report, click here: http://link.reuters.com/zyv99r

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Tags: Algosaibi, Algosaibi bank Bahrain, Algosaibi debt, Bahrain, Deutsche Bank, HSBC, Maan al-Sanea, name lending, Saudi Arabia, Societe Generale