Oct. 10, 2012
/PRNewswire/ -- A Los Angeles federal court on Tuesday refused to dismiss a lawsuit brought by
Ahmad Hamad Algosaibi
& Brothers Company (AHAB) against
, an alleged key lieutenant in a
Ponzi scheme. Stewart, who illegally fled
while under criminal investigation, now lives in
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
court that it should dismiss AHAB's lawsuit, arguing that AHAB's claims were barred under Saudi and
law, but Judge
of the U.S. district court rejected those contentions, describing Stewart's claim that AHAB lacked standing to sue him as "frivolous."
The complaint alleges that in 2003, Stewart hit upon a scheme to incorporate shell banks in
as a way to leverage even more unauthorized borrowing that could be siphoned off to
signed off on the plan, and together they launched The International Banking Company (TIBC).
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
, 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 himself through secret commissions on sham transactions.
The Central Bank of
and the Bahrain Public Prosecutor ordered investigations of TIBC and
's other bank,
, and investigators were appointed. Three separate reports commissioned by the
government—by Ernst & Young, Kroll, and Hibis International—all found evidence of serious wrongdoing, and criminal charges were lodged against
, Stewart, and other top executives and employees of TIBC and Awal. Stewart was placed under a travel ban during the pendency of the
investigation, but he violated the ban and fled the country in
for Los Angeles.
Judge Fischer held that AHAB could pursue all of its claims under
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.