By Asa Fitch
When liquidators closed the books on the Bank of Credit and Commerce International case in May, a 21-year-old scandal that shook the global financial system and ensnared arms dealers, dictators and even the CIA appeared to be over. Earlier this month, however, creditors of the failed bank got the go-ahead from a judge in Luxembourg to partially reopen the case and make one last attempt to collect $326 million from Saudi Arabia.
The move could add to about $8.5 billion of recoveries made by Deloitte and the bank’s other liquidators since 1991 – already about 86% of what was lost. Led by Adil Elias, a real estate developer from Orlando who has been a central figure in the global effort to recover BCCI assets, the creditors are hoping they will be able to get the extra money thanks to a change in Saudi law earlier this year that streamlined the enforcement of foreign judgments. They made their case in Luxembourg because that’s where BCCI was incorporated in 1972.
“There’s a lot of money on the table,” Mr. Elias said, adding that in closing the case the liquidators “were about to commit a big crime leaving all this money on the table.”
The creditors won the $326 million in a U.S. case more than 10-years ago against Abdul Raouf Khalil, a large BCCI depositor who was found to have participated in the fraud. Mr. Khalil, who died in 2008, had assets valued in the range of $500 million in Saudi, mostly in real estate holdings but also in gold, according to people familiar with the case. He was known as an eccentric.
“Sheikh Khalil had some of the most beautiful items in the world and complete junk,” one of the people said. “If it was gold, he bought it, and it went from exquisite Yemeni sculpture to literally lawn jockeys. He fancied himself a collector.”
After the initial decision against Mr. Khalil in the U.S., the creditors went to Saudi Arabia to get it enforced in 2003. They brought it before the country’s Board of Grievance, which at the time was responsible for deciding whether foreign judgments could be enforced in the kingdom. The BOG dismissed the case the following year on the grounds that the U.S. did not reciprocally enforce Saudi judgments. The creditors appealed, however, and in 2007 the BOG decided it was, in fact, enforceable. Mr. Khalil then made his own appeal, but the judicial panel upheld the decision a few months after he died in 2008.
Mr. Khalil’s heirs brought additional challenges that kept the enforcement unresolved until January, when a Saudi judge again approved it. Meanwhile, Saudi lawyers say they may now have an easier time collecting because of a change in February that took oversight of foreign judgments away from the BOG and gave them to a new execution judge. The execution judge has the power to locate assets and order police or provincial governments to seize them.
“The BOG and the Saudi courts were very busy and had a lot of files, so they couldn’t achieve the tasks on time and enforcement could take five or six years,” said Fadi Daher, a lawyer in Saudi Arabia who submitted an affidavit on behalf of the creditors in the Luxembourg case outlining the changes. “Now it’s just an execution judge with expertise in the enforcement of foreign judgments.”
Mr. Daher said he had tested the new system already by getting a judgment enforced where both parties were Saudi; it took six months. Because the BCCI claim has already been converted into a Saudi judgment, he said it would likely take less than a year to process. The legal reforms, he added, were already giving more confidence to foreign investors and other people with foreign judgments against Saudis.
“I think they have done a great job,” he said. “The law is very clear and the execution is very clear. Previously, when the courts issued a judgment they had to take it to the governorates in each province, there were bureaucratic delays, and people who received the judgments were not experts. Now everything has changed.”
Despite Saudi’s often opaque and slow legal system, Mr. Elias said he didn’t see any major obstacle to the recovery of the money. “It’s not hard at all,” he said. “It’s liquid assets.”