Ahmad Hamad Algosaibi & Brothers Co., a Saudi investment company that defaulted on billions of dollars of debt, won’t defend itself against a $250 million U.K. lawsuit filed by HSBC Holdings Plc and four other banks.
Algosaibi switched course during a London trial after deciding the judge would likely find the company hadn’t done enough to prevent the forgery and fraud it alleges were behind the loans, the family said today in a statement. The company has said Maan al-Sanea, a family relation and founder of Saudi conglomerate Saad Group, wrongfully got about $9.2 billion of loans in Algosaibi’s name.
“It could be found in this case that if the Algosaibis knew there was” improper use of loans “they should have taken more aggressive steps to detect and prevent the massive forged lending scheme,” said Eric Lewis, Algosaibi’s legal coordinator with the law firm Baach Robinson & Lewis Pllc in Washington.
The case follows a global dispute between Algosaibi and al-Sanea, one of Saudi Arabia’s richest men who married into the family before founding Saad Group. Units of the conglomerates, both based in the Saudi oil city of Al-Khobar, defaulted in 2009 after borrowing about $15.7 billion from more than 80 banks. Algosaibi has sued al-Sanea in the Cayman Islands, Saudi Arabia and New York.
James Milton, a spokesman for Saad Group from Cardew Group in London, declined to comment when reached today by phone. The company has previously denied all claims by Algosaibi, sometimes referred to as AHAB.
Algosaibi, whose interests include construction, beverage bottling and finance, alleges Kuwaiti-born al-Sanea forged loan documents while he was running Algosaibi’s Money Exchange unit and later laundered the proceeds.
“The evidence was clear that there was massive forgery and that Maan al-Sanea diverted billions to his companies and that the Algosaibis received no material benefit,” Lewis said in the statement.
The London case, stemming from the largest Saudi default to come out of the credit crunch, includes HSBC’s $85 million claim, British Arab Commercial Bank Ltd.’s $19 million claim, Arab Banking Corp.’s claims totaling $140 million and Credit Agricole SA’s $6 million claim.
“It now appears, after 14 months of bitterly contested litigation and huge legal costs, that AHAB themselves have finally realized their evidential case is completely unsustainable,” said Gregory Mitchell, the lawyer for British Arab Commercial Bank, according to a transcript of the hearing.
Saad Group, which began building sewage and storm-water systems in Jeddah in western Saudi Arabia, expanded into real estate, health care and banking, including taking a stake in London-based HSBC.
HSBC spokesman Brendan McNamara declined to comment on the case until a judgment is handed down.