By Karen Freifeld
A Saudi real estate company has sued Barclays for $10 billion, claiming the bank ceased pursuing lease payments due from the Saudi government on military complexes in the kingdom in order to obtain a lucrative banking licence there.
The company, Jadawel International, a unit of London-based MBI International Holdings Inc, claims Barclays "hatched a fraudulent scheme" to secure the rare Saudi banking licence, selling out Jadawel in the process, according to the lawsuit filed in New York state Supreme Court on Tuesday.
"Barclays believes the claim is without foundation and will vigorously defend it," the bank said in an emailed statement.
MBI, founded by Sheikh Mohamed Bin Issa Al Jaber, built two compounds and leased them to the Saudi government in 1999 to house U.S. defence contractors working in the region, the lawsuit said. The payments should have totaled more than $2 billion through 2017, it said.
When Jadawel sought to refinance in 2001, Barclays helped assemble a group of lenders, according to the lawsuit. In 2002, the government partially defaulted and Barclays assumed responsibility to collect, it says. As a result, a lawsuit was filed in Manhattan federal court seeking damages from the Saudi government.
Barclays later caused the lawsuit to be withdrawn, the new complaint said, and sought a bank licence from the Saudi Capital Markets Authority, which was considering granting one to a Western financial institution for the first time in decades.
"Barclays knew that any such licence would be extremely lucrative and that its litigation against the Saudi government made obtaining such a licence impossible," the lawsuit said, accusing the bank of dropping the lawsuit and compromising the claims for its own benefit.
In addition to being deprived of hundreds of millions of dollars in lease payments, Jadawel said it sold the compounds at a "substantial loss."
The bank, meanwhile, also was reported to have bribed a Saudi prince and government official to help obtain the licence, the lawsuit said.
In 2012, Reuters reported that the U.S. was investigating whether Barclays Plc paid bribes to win a banking licence in Saudi Arabia.
That October, Barclays disclosed that the U.S. Department of Justice and Securities and Exchange Commission were investigating the British bank's relationships with third parties who helped it win or retain business and whether such relationships violate the Foreign Corrupt Practices Act, a law that bars bribes to officials of foreign governments.
In November 2012 responding to a newspaper report, Barclays said it did not make any illegal payment to get a Saudi license.
The lawsuit seeks damages of no less than $10 billion for Barclays alleged breach of fiduciary duty, fraud and interference.
The case is MBI International Holdings, et al, v Barclays Bank Plc, New York State Supreme Court, New York County (Manhattan), No. 653397/2014.
