Judge Blocks Saudi Prince From Moving Real Estate Proceeds Out of U.S.

WASHINGTON – A federal judge has temporarily blocked Prince Bandar bin Sultan, the former Saudi ambassador to the United States, from removing real estate sales proceeds from the United States pending resolution of a class-action lawsuit.

The suit filed last September by a tiny Michigan city retirement system accuses current and former directors of BAE Systems PLC, a giant British defense company, of breaches of fiduciary duties in connection with $2 billion or more in alleged illegal bribes paid to Bandar in connection with an $86 billion BAE arms sale to Saudi Arabia in 1985.

Bandar also is named a defendant in the suit, along with the former Riggs Bank of Washington and its successor, PNC Financial Group.

BAE and Bandar have strongly denied that illegal payments were made to Bandar.

Without ruling on the merits of the case, U.S. District Judge Rosemary M. Collyer said in a temporary restraining order, signed Feb. 5, that the suit by the City of Harper Woods Employees' Retirement System raises serious questions of law that warrant a temporary order keeping Bandar from taking the proceeds of real estate sales out of U.S.-based accounts.

The order directs that such sales proceeds "be deposited and/or invested pursuant to a prudent man standard" in U.S. accounts, but specifically notes that it "does not prevent him from selling real property" and "only interferes with his ability to invest and/or deposit any sales proceeds in a minimal way."

The order further notes that "it may, of course, be terminated or modified upon application to the Court by Prince Bandar." A hearing was set for Feb. 14 on whether to issue a preliminary injunction extending the temporary order.

The retirement system suit maintains that Bandar used funds illicitly obtained from BAE Systems to acquire U.S. real estate, including a Colorado ranch and mansion once placed on the market at $135 million and the former William Randolph Hearst mansion in California, offered for sale last summer at $165 million.

Harper Woods is a community of 14,200 people covering 2.63 square miles bordering the northeast corner of Detroit. It is the home of Eastland Center, one of the Detroit area's first enclosed shopping malls.

A message seeking comment on the case was left Saturday night at the office of Harper Woods City Manager James Leidlein.

Bandar had denied previously through a London law firm that he received improper commissions through accounts at Riggs Bank in Washington.

"The accounts at Riggs Bank were in the name of the Saudi Arabian Ministry of Defense and Aviation (MODA). Any payments into those accounts made by BAE were pursuant to the Al-Yamamah contracts and as such would not in any way have been secret from the parties to those contracts," Bandar's statement said. Al-Yamamah was the name given to an agreement under which BAE supplied Tornado fighter jets and other military equipment to Saudi Arabia, which paid the British government with oil.

"Whilst Prince Bandar was an authorized signatory on the accounts any monies paid out of those accounts were exclusively for purposes approved by MODA," the statement said. "In addition, the accounts in question were audited on an annual basis by the Saudi Arabian Ministry of Finance on behalf of MODA."

In London, lawmakers disclosed last month that Britain's head of overseas intelligence had warned that Saudi Arabia probably would stop sharing vital information on terrorism if prosecutors pursued an investigation into alleged corruption in the arms deal.

MI6, Britain's overseas intelligence service, believed Saudi Arabia would probably end information-sharing with Britain if investigators continued the inquiry, former Attorney General Peter Goldsmith told the committee. MI6 raised objections to the prosecution before Britain's Serious Fraud Office decided to end the case, he said.

After the inquiry was dropped, Saudi Arabia signed a $8.7 billion agreement with Britain to buy 72 Eurofighter Typhoon jets from BAE.

The company announced last June that the Justice Department has begun an investigation of the company's dealings with Saudi Arabia, looking into whether it complied with anti-corruption laws.