|

US Court asks former Bahrain banker to answer $9b fraud claims

A Los Angeles Federal Court on Tuesday refused to dismiss a lawsuit brought by Ahmad Hamad Algosaibi & Brothers Company (AHAB) against Glenn Stewart, an alleged key lieutenant in a $9 billion Ponzi scheme. Stewart, who illegally fled Bahrain while under criminal investigation, now lives in Pacific Palisades, CA, according to a statement issued by Graham Miller from Sphereconsulting.

“We are very pleased that AHAB’s case against Stewart will be allowed to proceed. Stewart was integral to this Ponzi scheme and also siphoned off tens of millions of dollars to his own offshore companies through sham commissions. We look forward to proving AHAB’s claims against Stewart at trial,” AHAB’s global legal coordinator Eric Lewis in a statement said.

“AHAB alleges that Stewart was one of the principal architects of a massive international fraud and money laundering scheme masterminded by the Saudi / Kuwaiti national Maan Al Sanea, who was entrusted by AHAB with the operation of a small financial services wing of the conglomerate, used his position to engage in billions of dollars in unauthorized borrowing, and then misappropriated the proceeds. Stewart tried to persuade the California court that it should dismiss AHAB’s lawsuit, arguing that AHAB’s claims were barred under Saudi and Bahrain law, but Judge Dale Fischer of the U.S. district court rejected those contentions, describing Stewart’s claim that AHAB lacked standing to sue him as “frivolous,” Sphereconsulting in a statement added.

“The complaint alleges that in2003, Stewart hit upon a scheme to incorporate shell banks in Bahrain as a way to leverage even more unauthorized borrowing that could be siphoned off to Al Sanea. Al Sanea signed off on the plan, and together they launched The International Banking Company (TIBC). Al Sanea and Stewart allegedly backed TIBC’s borrowing with forged AHAB guarantees, raising billions of dollars in the international capital markets. At one point TIBC was, according to its financial statements, the fourth-largest bank in Bahrain, but in fact it was entirely a sham, with no real customers or business according to the complaint. Stewart is alleged to have set up his own companies to extract tens of millions of dollars to him through secret commissions on sham transactions.

The Central Bank of Bahrain and the Bahrain Public Prosecutor ordered investigations of TIBC and Al Sanea’s other bank, Awal Bank, and investigators were appointed. Three separate reports commissioned by the Bahrain government—by Ernst & Young, Kroll, and Hibis International—all found evidence of serious wrongdoing, and criminal charges were lodged against Al Sanea, Stewart, and other top executives and employees of TIBC and Awal. Stewart was placed under a travel ban during the pendency of the Bahrain investigation, but he violated the ban and fled the country in May 2010 for Los Angeles,” the statement further said.

Judge Fischer held that AHAB could pursue all of its claims under Bahrain law and all but one under Saudi law. The permitted claims include AHAB’s principal claims against Stewart for aiding and abetting fraud, aiding and abetting conversion/misappropriation, and unjust enrichment, as well as mismanagement and conflict of interest with respect to TIBC.

“The court also allowed AHAB to proceed with claims relating to a series of trade-finance deals from which Stewart allegedly extracted bogus commissions for work not actually performed. The one claim that the court did not recognize was for direct breach of a duty of trust: the court found that Stewart’s relationship with AHAB was too remote to create a direct duty of trust, but that Stewart would have to answer AHAB’s fraud, misappropriation, and other claims.”

Short URL: http://www.twentyfoursevennews.com/?p=25788

Posted by on Oct 11 2012. Filed under Banking & Finance, Headline. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

*

Breaking News
Arabia Corporate Social Responsibility Awards
Standard Chartered Bahrain
Shariah Scholar Journal
Subscribe to Newsletter
Enter your email to receive updates