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12 July 2018
In a landmark ruling for the Cayman Islands, the Grand Court has emphatically dismissed a multibillion-dollar claim in Ahmad Hamad Algosaibi & Brothers Company (AHAB) v Al-Sanea, which involved allegations of fraud arising from one of the largest corporate collapses of the financial crisis.
Dismissing the claims, the court found that the AHAB partners knew of and authorised fraudulent borrowing through the Money Exchange, as well as AHAB's other financial businesses over a period of 30 years.
Maan Al-Sanea was the head of AHAB's investment division, known as the Money Exchange, and married to the daughter of one of AHAB's founding partners. It was alleged that, over a 30-year period, Al Sanea abused his authority to enter into billions of dollars' worth of revolving credit facilities using only the AHAB name as collateral, unknown to the AHAB partners.
Matters came to a head in 2009 when crisis-weary banks began calling in their loans. The AHAB partners insisted that they had no knowledge of the level of borrowings incurred on their behalf and that they were the victims of a $9.2 billion fraud (which they were required to reduce to $6 billion during the proceedings). The claims included allegations of forgery and the siphoning off of proceeds of fraud to special purpose vehicles incorporated by Al Sanea in the Cayman Islands, Switzerland and Bahrain (including defendant SIFCO5). The defendants successfully defended these allegations.
In addition to the key finding in relation to knowledge and authority set out above, the court's 1,300-page judgment found that the 'new for old' case pleaded by AHAB did not exist and constituted a recent invention by AHAB, which was unsupported by the evidence.
Through 'new for old', AHAB had belatedly (several years after the proceedings) sought to maintain that it implemented a policy in 2000 to restrict borrowing by Al Sanea to loans which had already been taken before the time of the policy's implementation. The court found that "'New for Old' is indeed a recent invention, raised in a desperate attempt to salvage AHAB's falsified case" and held that:
The quid pro quo was that Al Sanea was allowed to deploy a similar strategy for his own purposes as well – all resulting in the spiraling vortex of indebtedness which inevitably overwhelmed the Money Exchange.
The case showcased the court's ability to manage high-profile large-scale litigation, demonstrating especially the quality of the Cayman Islands judiciary and the court's ability to use cutting-edge technology, as well as the resources and flexibility to manage a year-long, multi-jurisdictional trial.
For further information on this topic please contact William Peake at Harney Westwood & Riegels' London office by telephone (+44 20 7842 6080) or email (firstname.lastname@example.org). Alternatively, contact Gráinne King or James Elliott at Harney Westwood & Riegels' Grand Cayman office by telephone (+1 345 949 8599) or email (email@example.com or firstname.lastname@example.org). The Harney Westwood & Riegels website can be accessed at www.harneys.com.
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