Citi Calls $11.6 Billion Lawsuit Extortion From ‘Fantasist’

(Bloomberg) -- Citigroup Inc. said an enigmatic money manager who accused the bank of owing him 10 billion euros ($11.6 billion) is a fantasist and a fraud.

Olgun Halil Shah, the registered director of the Lex Foundation, says money transferred to a Citigroup account in April never materialized. The foundation -- which says it funds United Nations humanitarian projects and had a Saudi royal on its board -- filed the London suit in July seeking to recover the money.

But Citigroup said the money “does not exist,” and alleges a document showing the transfer happened was a forgery. The foundation is illegitimate and has never had any involvement in funding UN projects, according to defense papers the bank filed at the U.K. High Court Sept. 30.

Shah is “a fantasist and the claim is part of a false and fraudulent attempt to extort vast sums from Citi,” Clifford Chance, the bank’s lawyers, said in the documents.

“The fund was paid into a global or ‘treasury’ account operated by the defendants,” the foundation’s lawyers said in their particulars of claim. “If so, that was not done with the prior consent or knowledge of the claimant.”

Lawyers representing Lex Foundation declined to comment beyond the legal filings. Lawyer, Marc Beaumont, originally filed the claim on behalf of the company. It is now represented by Mackrell Solicitors. 

Little is currently known about the Lex Foundation. Although registered at a London address the company doesn’t appear to have a website, email address, or much of an internet presence.

The Lex Foundation “manages the funding of high value humanitarian projects on behalf of the United Nations and funds dedicated to research in science and medicine,” the company’s lawyers said in court filings.

A United Nations spokesperson said they could find no trace of the Lex Foundation on the UN’s Financial Tracking Service database, which stores information on humanitarian funding flows.

Saudi Prince

The Lex Foundation opened the Citigroup account this year “in connection” with an existing private banking relationship between Citigroup and Prince Abdulaziz Bin Nawaf Bin Abdulaziz Al Saud, a member of the Saudi Arabia ruling family. The prince was a director of the Lex Foundation at the time and an “acquaintance” of Shah, Citi’s lawyers said.

The prospect of 10 billion euros arriving in the empty account first emerged in correspondence between a member of the prince’s team, and an account manager at Citigroup. The assistant said the prince was told by Shah that the sum had been transferred into the account, the bank said in its defense arguments.

She then sent the Citi manager a Whatsapp message from Shah showing an alleged Swift message, a banking system used to send money transfers, confirming the transaction. It said that Deutsche Bank AG was “ready and willing” to transfer the sum to the account to fund “major international U.N.-approved projects,” according to Citi’s lawyers. 

The Swift message was “a forgery created or instigated” by Shah, lawyers for Citi said in the documents. Citi doesn’t allege that either the prince or the assistant knew the message was a fake.

The transaction was confirmed and completed by by Deutsche Bank on April 22, the foundation’s lawyers said in the filings.

The account number is not authentic and Deutsche Bank has no record of any genuine account with this number, a spokesperson for Deutsche Bank said in an emailed statement. Lawyers for Citi made similar claims about the authenticity of the account number in their defense papers.

The Saudi prince resigned as a director of the Lex Foundation and “severed” ties with Shah around April 28, close to the time the account was closed, according to Citi’s filings. The account was open for only two months, they said. 

Direct contact details for the prince couldn’t be found. A message was left with the prince’s assistant at a London address found through Companies House. 

‘Fantastical’ Claims 

After setting up the account and allegedly transferring billions Shah sent a sent a barrage of emails and letters that copied in a who’s who of finance -- including Andrew Bailey, the Governor of the Bank of England, Citigroup CEO Jane Fraser, and European Central Bank president Christine Lagarde, according to the bank’s lawyers.

The emails, sent from his personal account, included various claims including that “sources in intelligence” advised him Citigroup had “taken steps to use the funds for its own benefit.” He said that if the Bank of England opened an account for his company, he would “arrange to remit a further 500 billion euros to that account from other legitimate sources,” the court documents from Citi’s lawyers said. 

A spokesperson for the Bank of England declined to comment.

Second Lawsuit

Shah is currently a defendant in a separate case in London. Shah and the Lex Foundation are being sued for $14 million by an American doctor, Sunil Gupta, who alleges he was a victim of a fraudulent investment program, according to court documents filed by Gupta’s lawyers at Portner Law in August.

In the Citi suit the bank’s lawyers allege that Shah may have brought the lawsuit against them for “ulterior motives” to “achieve an advantage in other U.K. proceedings,” they said in their defense papers.

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