What’s in a name?

Startling times for Mashreq Bank. In May it issued court proceedings against Saudi dynasty Hamad Algosaibi and Brothers (AHAB) over $219m it said it was owed.

In response, AHAB quickly went from appearing puzzled by the claim to angrily accusing Mashreq of complicity in what could be the biggest fraud the Gulf has ever seen. AHAB is now suing Mashreq for $1bn in damages.

Either Mashreq is very sure that when the facts emerge in court it will be proved to be beyond reproach, or heads within the bank must be rolling as you read this. Was it really worth antagonising AHAB in this way? We’ll soon see.

The Algosaibi brothers believe they have been defrauded by next door neighbour and brother-in-law Maan Al Sanea to the tune of $9.2bn. Of this figure, they believe $4.7bn was diddled by Al Sanea in cahoots with Mashreq. In court documents filed in New York, they say Mashreq knew what was going on all along, and that the bank indulged in “aiding and abetting fraud, conversion and breach of fiduciary duty” and “unjust enrichment and bad faith.”

Mashreq’s terse response says that the charges are “completely without merit.”

AHAB has also issued proceedings against Al Sanea, from whom it says it wants its $9.2bn back, plus $1bn in damages. To issue the writ, the Algosaibis took out a full page advert in a Saudi newspaper.

There are currently teams of forensic accountants and the world’s best legal minds working around the clock on both the Algosaibi brothers and Al Saneas’ cases. Little has been said in public (the Algosaibi brothers have issued statements referring to “thievery,” Al Sanea that all allegations are “scurrilous and untrue”), but when the storm finally breaks it will be earth shaking, particularly for this part of the world. Between them, the two families are said to owe $22bn.

Beyond the issue of why two prominent Saudi families are going to war so publically —the Kingdom is famed for the privacy its wealthiest citizens covet — the scandal raises so many tantalising questions. Not least of these is why Al Sanea, whose Saad Group last year reported assets of over $30bn (including $7.1bn in cash), would need to indulge in fraud? Last year, Moody’s slapped an investment rating on the Saad Group. If AHAB prevails in court, Moody’s will have plenty of explaining to do.

Then there’s the question of how the Algosaibi brothers could have had no idea they were being swindled out of so much money over “many years”? And, further, how many banks were involved?

It has been reported that at a creditors meeting in late June, AHAB revealed it owes $9.2bn to 120 banks all over the world. Is this the right number? Many suspect it’s more.

While Gulf banks may be renowned for the practice of “name-lending” — that is providing credit on the strength of a surname — banks across America, Europe and the Far East who pride themselves on their rigorous due-diligence checks would certainly not like to associated with the practice. How then could Maan Al Sanea, as AHAB claims, have fleeced so many banks to lend so much to what they believed was AHAB on the strength of a few forged documents and signatures?

Fraud court cases destroy the reputations of individuals and companies. One of this magnitude, if it is not settled out of court, will do serious damage to the credibility of not only those directly involved in it, but of the banks that have been drawn in, knowingly or not. It could also spell the end of name-lending. That’s for the best — the prestige of a name can change so fast.

Damian Reilly is the editor of Arabian Business English.

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