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Pakistani family brings fraud case against Deutsche Bank

LONDON: Lawyers for Pakistan’s former Minister for Investment and Privatisations Waqar Ahmed Khan ha

January 19, 2013
LONDON: Lawyers for Pakistan’s former Minister for Investment and Privatisations Waqar Ahmed Khan have told the Royal Court of Justice’s Commercial Court in London that Deutsche Bank cheated and defrauded their client and members of his family, including his politician parents and siblings.
At the start of the three week long complex litigation trial here, Justice Hamblen heard from the Khan family that Deutsche Bank convinced the family to move their business to Deutsche Bank from UBS by promising them an attractive investment and loan package using the family properties in London as security.
Despite signing the loan agreement, Deutsche unlawfully changed their mind to lend the full amount and then tried to cover up their mistake by sending one of their relationship managers to the family home of the Khans in Lahore to obtain signature of a document allowing the bank to reduce the amount to be drawn down by £11 million. If proven, this amounts not only to a breach of contract by the bank but much more seriously, a potential fraud against their private clients.
At the centre of the dispute is the future ownership of a planned £80 million London “super mansion” at the Bishops Avenue, famously know as billionaires’ row where Arab royal families and business tycoons live, and six luxury apartments worth around £40 million in Knightsbridge, a stone throw away from Harrods shopping centre. The Khan family won planning permission in 2009 to demolish it and replace it with a 46,000sq ft residence, which would have been London’s largest mansion house after Buckingham Palace. But the Khan family claims that Deutsche Bank unlawfully withheld £11 million which was required to carry out the development of the Hampstead mansion.
The result was that the family was unable to carry out its property development plans and lost substantial profits, said to run in to tens of millions of pounds, say the court papers seen by The News.
In addition, the

family claim that Deutsche tried to cover up the fraud by engineering a default on the loan agreement using dubious valuations and charging a default rate of interest 3 times the agreed rate. The Deutsche will argue that the property portfolio fell almost by half in value in 2008 and 2010 giving them the right to terminate the loan.
The expert valuations obtained by the Khans assert the overall security value did not fall beneath the required levels. The Khan’s case further alleges the bank behaved badly by breaching their confidence and spreading rumours in the market that the loan was not performing which further prejudiced the perception of value in the market negatively as ‘distressed assets’. Deutsche are also accused of mis-selling the investment products and prematurely liquidating them. In a surprise move shortly before the trial, the Deutsche Bank dropped its claim that five family members, including Senator Waqar and both his parents, are jointly and severally liable to repay a sum in the region of £60 million. The Bank maintains a claim against Senator Gulzar Khan on a guarantee.
This appears to be a landmark case where the attitude of banks and their commitments to their clients is being examined in the wake of the financial crisis. Banks have been accused of abandoning the interest of their clients in place of their corporate profits.
The Khan family’s solicitor, Richard Slade, told this scribe: “It is surprising to put it mildly that having sued significant private clients of the bank and maintained in the proceedings for nearly two years that they are liable for a sum approaching £60 million, the Bank has decided to abandon that claim, a few days before trial.”
It is interesting that this high-profile trial involves a Pakistani origin banker named Nasim Ahmad, who is now Regional Head for Global South Asia, for the Middle East and Pakistan in Deutsche’s Private Wealth Management Division, and acted as the Khan family’s veteran relationship manager. It is believed that Nasim Ahmad approached the Khan family to open account with the Deutsche bank and offered them heavy incentives. It is claimed that when Mr Ahmad was involved in Deutsche’s attempts to win the business, he was still employed by UBS. It is also alleged that Mr Ahmad, who is believed to be originally from Lahore, was involved in obtaining the family’s signature to a supplemental document after the event.
The same banker, in his previous role at UBS, managed the account of the Nigerian convicted money-launderer and impeached state governor, Diepreye Alamieyeseigha, when the latter was depositing millions of dollars at a time when he declared an annual income of £6,000. The relationship between Alamieyeseigha and UBS featured a book called A Swamp full of Dollars written by the Financial Times journalist Michael Peel. The author claimed in his book that Mr Ahmad encouraged the Nigerian to deposit more money as “a nest egg”.
Richard Slade told The News that his client looked forward to “put under the microscope in court” the bank’s dealing with him.
The Deutsche bank has recently been in trouble as German prosecutors and police, in December last year, raided the Bank’s Frankfurt headquarters, arresting five employees, in a tax probe involving the sale of carbon-emission certificates. In the same month, the bank was convicted by a court in Milan of overseeing the fraudulent sale of derivatives to the city of Milan and the offices of the Bank in Germany were raided a second time as part of an investigation into the possibility that executives had given false testimony in court proceedings in its long-running court battle with media mogul Leo Kirch. In a separate case, also in December, the High Court of Singapore found that Deutsche and a “self-interested relationship manager” had breached the bank’s duty of care to its client and awarded damages against the bank of $49 million.
When approached for a comment, the lawyers acting for the bank said: “We do not comment on client matters that are subject to ongoing legal proceedings”, but a spokesman at the Deutsche Bank told The News: “This is a straightforward case of borrowers taking out a loan and failing to meet their obligations.”