Saudi Arabia: $3.5bn fraud case set to define crown prince’s anti-graft campaign

Once one of the most powerful security officials in Saudi Arabia, Saad al-Jabri was feted by western powers. He was integral to multibillion-dollar counter-terrorism efforts and advised senior members of the Saudi royal family before falling foul of Crown Prince Mohammed bin Salman’s rise to power and going into exile in 2017. He would later accuse the prince of sending a hit squad to Canada to kill him, an allegation with echoes of the 2018 murder of the journalist Jamal Khashoggi in Istanbul.

But in the latest twist of a bitter dispute that goes to the heart of Saudi power, al-Jabri is the one who now stands accused. In January, 10 companies owned by the Public Investment Fund, the sovereign wealth fund that Prince Mohammed chairs, filed a civil lawsuit in Canada accusing the former interior ministry official of masterminding a $3.5bn fraud using front companies that were established more than a decade ago as cover for Saudi Arabia’s covert counter-terrorism operations. The Ontario court issued a worldwide freeze on al-Jabri’s assets. In March, it rejected an attempt to have the order lifted.

Supporters of the crown prince insist the case is part of a broader anti-corruption campaign designed to break down systems of patronage. Others view it as a blatant effort to silence someone who knows many of the kingdom’s deepest secrets.

It is a struggle that goes to the heart of Prince Mohammed’s brash and autocratic rule. To his loyalists, the anti-corruption drive, backed by his father, King Salman, is necessary to cleanse a rotten system and fulfil the crown prince’s pledge to modernise an economy addicted to state petrodollars and riddled with patronage networks. To others, the dispute with al-Jabri epitomises the young royal’s ruthless pursuit of rivals and perceived opponents as hundreds of Saudis, including princes, businessmen and civil servants, have been detained.

“There has been corruption and there is still corruption, and this is like a mafia eliminating competitors within the whole regime,” says Madawi al-Rasheed, a Saudi professor at the London School of Economics. “This used to happen with every king in Saudi Arabia in the past, but not in this kind of violent, obvious, blunt way.”

Whatever the merits of the al-Jabri cases, they provide a rare glimpse into workings of the Saudi patronage system that has for decades enriched royals, their lieutenants and connected businessmen. The conservative kingdom is being forced to air its dirty linen in public like never before, creating anxiety among western intelligence officials about the treatment of someone they considered a credible and respected ally. 

A senior Saudi official insists that the anti-corruption drive had to be given “teeth” because previous campaigns were not taken seriously. “We needed a very significant shock to the system to get it to shift, because people weren’t changing,” he adds. “And in some cases there were huge amounts of money being taken out of the system.”

An ‘existential threat’ to Riyadh

The al-Jabri case is one of the most high-profile in the kingdom’s crackdown. He was the right-hand man of Prince Mohammed bin Nayef, often referred to as MBN, the former interior minister and crown prince who has been detained in Saudi Arabia for the past year. 

Western intelligence officials credit the pair with transforming the kingdom’s security apparatus into a modern system that has been crucial in the fight against terrorism. 

A former senior western intelligence official says “intelligence agencies have a memory,” and operate in a world where “we look after people who work with us. Those friendships are very deep and involve a huge amount of trust.” 

But, he adds, Saudi Arabia remains an important security partner. “A lot of the people we work with at the next level down are very good, and are still there . . . but Saad al-Jabri played a really important role and that won’t be forgotten,” says the former official. “The way compensation systems work in Saudi Arabia you could probably nail anyone.”

The al-Jabri family claim he became a target after MBS replaced Prince Mohammed bin Nayef as crown prince in June 2017. MBN supporters described the shake-up as a palace coup designed to neuter one of the heir apparent’s rivals for the top job.

In his US lawsuit against the crown prince, al-Jabri claims he is “uniquely positioned to existentially threaten” Prince Mohammed’s standing with the US government. It adds that he “was privy to sensitive information” about the crown prince’s “covert political scheming within the royal court” and “corrupt business dealings”.

The alleged assassination plot against al-Jabri is said to have occurred in October 2018 — the same month Khashoggi was murdered, an operation that was authorised by MBS, say US intelligence agencies. The alleged attempt on al-Jabri failed after Saudi agents “aroused the suspicion of Canadian border security officials,” according to his US lawsuit against MBS. 

When MBN was deposed in June 2017, al-Jabri was outside the country and decided it was best not to go home. Instead he moved to Canada, claiming that he made the move to protect himself and his family from the crown prince’s clutches. Two of his children, Sarah and Omar, who were in the kingdom, were barred from leaving, say the family.

Just five months later — on November 4, 2017 — the anti-corruption campaign was announced to the world in spectacular fashion. Hours after Prince Mohammed was appointed chair of a newly established Supreme Anti-Corruption Committee, the authorities closed Riyadh’s private airport to prevent the rich and powerful from escaping a crackdown that was to rock the kingdom. In a co-ordinated operation, more than 300 princes, including sons of the late King Abdullah, and businessmen were rounded up and taken to the Ritz-Carlton in the capital, Riyadh.

Simultaneously al-Jabri’s Saudi accounts were frozen, and an investigation into his activities was placed under the SACC. For three years, the family kept silent, but after Sarah and Omar were detained in March 2020, family members spoke out. In November the children, both in their early twenties, were convicted at a closed trial of “attempting to flee” Saudi Arabia “unlawfully” and money laundering offences, according to court documents filed in Ontario.

In January 2021 the front companies — now owned by the PIF — filed their lawsuit alleging that al-Jabri used his position in the interior ministry to establish entities “to perform anti-terrorism activities” but that they were instead used in a fraudulent scheme to “steal” billions of dollars.

The plaintiffs claim he oversaw a scheme involving at least 21 co-conspirators across 13 jurisdictions to misappropriate at least $3.5bn, with the funds hidden across the world, including in the US, Canada and Europe. The other defendants include al-Jabri’s wife, sons, relatives, friends and companies affiliated to him. His lawyers have argued that if there was a fraud, “which al-Jabri denies and will refute, the victim of the fraud would be . . . Saudi Arabia, which is not a party” to the action.

A ‘valued partner’ to the US

The front companies were established after King Abdullah provided funding for the scheme to Prince Mohammed bin Nayef, then assistant for security affairs. Al-Jabri “directed” the creation of 17 companies, according to court documents. Neither MBN or al-Jabri held formal roles at the companies, which covered sectors ranging from technology to aviation, cyber security, real estate and security. But al-Jabri was to receive 5 per cent of the companies’ profits as compensation, according to court documents, which the plaintiffs say would be illegal under Saudi law.

In one deal cited in the court documents, Sakab, one of the plaintiffs, said it agreed to buy encrypted fax machines at artificially inflated prices, transferring $122m to al-Jabri’s brother, Abdulrahman, between 2008 and 2011 for products that “either did not exist or did not work”.

Although he is not a defendant in the US case the plaintiffs allege that MBN received at least $1.2bn from the fraudulent scheme. They also claim that al-Jabri, and Dreams International Advisory Services — an offshore entity he set up in 2007 — picked up direct payments of $480m from the front companies. In one transaction alone, Dreams International is said to have received $113.6m two months after al-Jabri was dismissed as state minister in September 2015. It is also alleged that al-Jabri appointed friends and relatives as nominee shareholders to the front companies.

Al-Jabri’s total compensation package from the state between 2008 and 2015 was $4.2m, according to court documents, but the plaintiffs allege he owns “luxury” properties in Canada, the US, the UK and elsewhere worth $83.2m.

The case could also prove embarrassing for HSBC, which appears to have been al-Jabri’s bank of choice for both his personal business — he opened multiple accounts — and entities he allegedly used to execute the fraud, according to court documents. HSBC said it would not comment on an ongoing legal case.

HSBC was also trustee of a $55m al-Jabri trust called Black Stallion which he set up in Jersey. According to the documents, it was involved in property transactions by the front companies, including the sale of a Geneva building — in which the bank is a tenant — in a $310m deal.

Al-Jabri gifted his assets to his son Mohammed in June 2017. Yet in a subsequent declaration to the court he listed assets of more than $63m held in bank accounts and trusts outside the kingdom, as well as a portfolio of real estate in Canada, Malta, Morocco, Saudi Arabia and Turkey, including a residence in Toronto purchased for $10.4m and a fleet of more than 20 vehicles including Porsches and Bentleys.

His defence team claims the plaintiff’s calculation understated his income during the period as it excluded “patronage” from senior members of the royal family, arguing that while Saudi civil servants have salary limits, “it is well known that, as a matter of custom, they receive lavish gifts as a sign of favour and reward for loyalty”.

After King Salman named al-Jabri a state minister in January 2015, the monarch gave the official a SR20m ($5.3m) cheque, Khalid al-Jabri, the former official’s son, told the court in Ontario. In 2015 alone, al-Jabri received gifts of about $14.7m, according to defence court documents.

His subsequent dismissal in 2015 is blamed by some on an unauthorised meeting between al-Jabri and John Brennan, the then CIA director, and/or political manoeuvring by MBS to weaken MBN.

Al-Jabri’s reach was highlighted after the family went public about the detention of his son and daughter last year. Four US senators wrote to Donald Trump urging the then president to secure their release, saying the former Saudi official had “been a valued partner to the US government”.

‘We’re not swimming in cash’

The investigation into the front companies began after they were incorporated into Tahakom Investments Company, a newly established subsidiary of the PIF, following a royal order in December 2017. EY was hired to do due diligence on some of the entities. After the auditor reported irregularities, Deloitte was engaged to conduct a forensic review, which is at the core of the case against al-Jabri. Its investigation is continuing.

A motion filed in the US in December, to dismiss the al-Jabri case against the crown prince, alleged that of $19.7bn allocated by the Saudi authorities to combat terrorism after the September 11 2001 attacks in the US, $11bn had been “misspent or outright stolen by al-Jabri and his associates”.

It is not just the defence and security sectors — long viewed as the most vulnerable to large-scale corruption — that have been the subject of the crown prince’s campaign. Nazaha, a Saudi anti-corruption watchdog, has initiated criminal cases against dozens of people, including employees at commercial banks, the health ministry, a meteorology agency, local government workers, a retired judge, National Guard members and policemen since the start of 2021.

The Saudi official says a new procurement law and processes are designed to improve transparency in the awarding of state contracts. “It [anti-corruption] is very important because we’re not swimming in cash the way we used to, so right now everything we spend is important,” he adds. “We have no choice but to do things differently.”

Some Saudis say the clampdown has had a dramatic impact in reducing corruption, especially in government procurement. “Things are generally getting done much faster at government offices as there are no delays for bribes,” says one Saudi industrialist.

Other businesses, however, complain about officials being paralysed with fear that they will be accused of corruption. “I’ll probably end up in the Ritz” has become a common phrase among Saudi bureaucrats, says one of them.

Most of the Ritz detainees were released, but only after many bought their freedom by transferring assets and cash over to the state. Reports of maltreatment — denied by the government — accompanied the operation, which Riyadh said would net at least $100bn for the state coffers.

The anti-corruption drive, says one Saudi analyst, is popular among many Saudis, adding: “[But] it’s very unpopular among the business elite.”

“They are reluctant to invest in future Saudi projects, their culture has been that they have connections to royals or government departments, and this is how many get large projects,” the Saudi analyst says. “Now there’s a sort of monopoly that is concentrated, or associated, with MBS.”

Prof Rasheed, at the LSE, says a lack of transparency has undermined the anti-graft message.

“If there was an independent judiciary in Saudi Arabia, you could put those arrested or held hostage, on trial,” she says. “But we can’t consider what MBS is doing [as positive], when all the negotiations with the detainees are done in secret. Then we have a figure released that he has received $100bn from that. On what basis?”

David Rundell, a former US chief of mission in Riyadh and author of Vision or Mirage, Saudi Arabia at a Crossroads, disagrees that the campaign has been used as part of a “power grab,” arguing that corruption has been on King Salman’s radar for a “very long time”.

Yet he questions whether one group is simply being replaced by another. “It’s not clear whether [MBS] is cleaning up the sea or whether he’s just creating a new crew of pirates, it’s probably a bit of both,” he says. “We’d be naive if we didn’t think he was rewarding those closest to him.”