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The American banker at the heart of the Middle East's biggest financial scandal says he was treated like a slave

Portia Crowe
Manama, Bahrain

(Reuters/James Lawler Duggan)Manama, Bahrain.American banker Glenn Stewart worked as "chief house slave" for Saudi Arabia's billionaire Gosaibi family for nearly three decades, he told The New Yorker's Nicholas Schmidle.

What Stewart was actually doing was running a financial firm for the family, but in 2009, after the fall of the Lehman Brothers, creditors demanded the firm repay its loans.

What followed was the biggest corporate default on record in the Middle East, fraud accusations and lawsuits against Stewart's firm in 10 different countries, and Stewart's eventual escape from Bahrain with the help of an ex-CIA operative.

Schmidle detailed the ordeal, in which Stewart and his Gosaibi family partner, billionaire Maan al-Sanea, are accused of stealing up to $10 billion and driving the bank they established to collapse. 

Stewart claims he was "tricked, big time" and that he really knows nothing about the "cultural environment" in Saudi Arabia and Bahrain, where he lived and worked for 27 years. He told The New Yorker, "I’m just the hired help, way down the f------ food chain."

(According to Bloomberg, Stewart was CEO of the firm that eventually went bankrupt.)

He started out as an advisor to Sanea, an in-law of the Gosaibis who ran their in-house family bank. Later, the two opened a private bank in Bahrain (still technically owned by the Gosaibi family), where they dealt both in regular finance and Islamic banking, which forbids selling debt and collecting interest.

Stewart, who studied Arabic at Oxford, is reportedly an Islamic finance whiz  more so than many of the Muslim Islamic bankers around.

But here's the thing: the bank they established, known as the International Banking Corporation or TIBC, made its money by issuing fake loans.

al-Gosaibi brothers

(Al-Gosaibi Brothers' company website)Members of the Gosaibi family business.Credit bureaus are uncommon in the Gulf, but TIBC was able to borrow its own loans based on the prestige of the Gosaibi family name  even though the bank's books were sketchy and only one loan on record had ever been repaid.

"One of the things about the United States I find very difficult is that there’s no ability to negotiate with the rules and regulations," Stewart told The New Yorker. "Even things that are not necessarily sensible rules, you can’t negotiate. In the Middle East, you can negotiate anything."

In 2009, after the fall of the Lehman Brothers, creditors demanded TIBC repay its loans. The bank of course couldn't call in its own loans because they were fake. So it eventually collapsed, marking the biggest corporate default on record in the Middle East.

After that, things got messy for Stewart. He moved his wife and kids to California, but then the Gosaibis launched a lawsuit, and Bahrain imposed a travel ban on him. He was interrogated and arrested but later let out on bail.

He decided to make a break for it, and in 2010 hired an ex-CIA officer to smuggle him out of the country in a bolted secret compartment of a thirty-four-foot cabin cruiser en route to Iraq.

Now Stewart lives in California and is "pursuing literary projects," including writing his own memoirs.

The Gosaibis dropped their lawsuits against Stewart after realizing they were too implicated in the scandal themselves. And despite his signature being on most of the loan documents, Stewart claims he's innocent and calls the ordeal a "family dispute" between Sanea and the Gosaibis.

But, according to a banker and debt-restructuring expert who examined TIBC's paperwork, "If he didn’t know, then he’s stupid."

Read the full story in The New Yorker »

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