According to the Financial Times, Sheikh Mohamed Bin Issa Al Jaber has said the company cost his hotel and property groups, MBI International and Jadawel International, $10bn in damages by covertly obtaining a banking licence in the region.
Jaber alleges the company “betrayed its duty” through the settlement, which involved lease payments due on military complexes, in order to “obtain for itself a rare and lucrative licence to conduct banking in Saudi Arabia”.
Barclays said the claim follows a failed attempt by the New York Supreme Court to obtain the documents earlier this year, adding that it would “vigorously defend” the “unfounded” claims.
The case involves two military compounds built by Jadawel, which were leased to the Saudi Arabian government for $2bn in payments by 2017.
Barclays was allegedly hired to syndicate a $900m loan into a new unit created by Jadawel to refinance a loan it secured from a Saudi bank to build the compounds. This was to be repaid from $1.4bn of the leasing payments due by 2011.
However, when the Saudi government defaulted on the debt in 2002, Barclays took on control of the unit.
In his lawsuit, Jaber says Barclays “actively concealed” a Saudi government payment of $925m, releasing it from any future claims on the lease.
Jaber goes on to claim that, in 2007, the Saudi government informed Jadawel that the lease from 2011 until 2017 had been cancelled, which lead him to unsuccessfully sue the government over the reinforcement of the lease. The Saudi court found that Barclays had settled the Jadawel unit’s claims, leaving it no further recourse.
In September, the UK’s Financial Conduct Authority fined Barclays just under £38m for failing to protect clients’ custody assets, worth £16.5bn.
The fine was the biggest ever imposed by the FCA or its predecessor for client assets breaches, and is the second time Barclays has been fined for this offence.
The regulator said the size of the fine, which is £5m more than that received by JPMorgan Chase for a similar breach, reflects the “significant weaknesses” in the systems and controls in Barclays’ investment banking division.
