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Apr 06

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Massive Fraud in the Middle East

The New Yorker magazine recently ran a scathing review of the collapse of The International Banking Corporation (“TICB”), the largest credit default and potential Ponzi scheme ever experienced in the Middle East. At its core was a man named Maan al-Sanea, a son-in-law to a prestigious Saudi Arabian family, who borrowed billions of dollars from various banking institutions to fund the operations of his successful merchant bank. He secured funding based on the merits of his extended family’s good name – a popular practice in the Arab world known as “name-lending”. Allegedly, these funds were then made to appear as though they were lent out in legitimate transactions to fictitious TICB borrowers.

The fraud unraveled shortly after the collapse of Lehman Brothers in 2008 as nervous banks which funded al-Sanea’s lending house began to call in their loans.  This led TICB to eventual default on various short-term lending instruments it had undertaken as stopgap measures. Allegedly, al-Sanea’s bank’s inability to pay off its debts was due to the fact that TICB’s borrowers were nonexistent.

Following the default, Bahraini authorities, as well as the family whose name and wealth supported al-Sanea’s actions, hired a slew of consultants, lawyers, and fraud investigators to examine TICB’s books. Many damning facts have been asserted, including that the purported audits of the firm were faked:

In four sets of financial statements …. ostensibly prepared by four separate auditors for four separate businesses—four sentences began with the phrase “Monetary assets and liabilities Denominated in foreign currencies,” with each sentence featuring the anomalous uppercase “D.” In several reports, the word “equity” was repeatedly misspelled as “equty.”

Though litigation has been ongoing since 2009, the matter is not set to go to trial in Bahrain until 2016.  Investigators assert that roughly $10 billion dollars “disappeared” through transaction involving al-Sanea, TICB, and related entities.

The full article can be found here.

A database of articles that similarly detail other frauds can be found at: http://www.fulcrum.com/category/forensic-accounting/fraud-and-other-corporate-investigations.htm

About the author

Devin Yaeger

Devin Yaeger is a consultant at Fulcrum Inquiry, an accounting, finance and economic consulting firm specializing in complex litigation, forensic investigations and appraisal issues across a broad spectrum of industries.

Permanent link to this article: http://betweenthenumbers.net/2015/04/massive-fraud-in-the-middle-east/

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