Saudi corruption: breaking businessmen in Riyadh’s gilded cage

Sharp or heavy objects, from shower glass to ashtrays, were removed from suites at Riyadh’s Ritz-Carlton to thwart suicide attempts as the hotel was turned into a gilded prison for hundreds of Saudi princes and tycoons.

Most of the suspects rounded up in Crown Prince Mohammed bin Salman’s anti-corruption drive were confined to their quarters for weeks, passing the time watching television between bouts of interrogation. Doors, guarded by intelligence officers, were kept open, destroying any semblance of privacy. Contact with other suspects was banned, but detainees were granted regular calls to relatives.

The effect on inmates varied. Some are said to be “broken men”, barely speaking since being released. Others have joked with well-wishers about their trimmer waistlines, thanks to the “Ritz detox”.

“If you were respectful, they were fine, but these intelligence guys certainly gave the impression that you would get knocked around if you gave them any crap,” says the friend of one detainee.

Following the release of most suspects, details are emerging of what occurred in the hotel that reveal the extraordinary measures authorities took in a carefully planned operation that Riyadh hopes will net the state $100bn. The Ritz finally reopened last week, but the repercussions of the purge, which unsettled investors and drew in some of the kingdom’s highest profile businessmen, including Prince Alwaleed bin Talal, are likely to linger.

The Financial Times spoke to more than a dozen friends and associates of those detained in the crackdown that started on November 4. It began for one ageing billionaire when his private jet landed at Jeddah airport. The welcoming committee on the tarmac was supposed to whisk him off for a meeting with Prince Mohammed. Instead, an armed escort took him to a suite at the Ritz.

Many detainees managed to reach family and friends on the phone, but others vanished in the middle of the night, their relatives unable to ascertain their wellbeing for days. “It was horrible, there was just no one to turn to,” says one relative, whose family members initially struggled to get medication for his heart condition.

One suspect, who was arrested at Dammam airport after returning to the kingdom, told friends he arrived to a well-drilled operation at the hotel. Doctors inspected him before he was checked into a junior suite. The businessman was then allowed to phone his family within hours.

As many as 20 Saudis living in the United Arab Emirates were picked up, says a friend of one of the detainees, and flown to Saudi Arabia on private jets.

Saudi officials say the night time swoop was necessary to ensure suspects were not tipped off. A protracted legal process would have been inefficient, they argue. The 492-room hotel served as a comfortable and secure location to conduct the investigation swiftly, they add.

Laws prevented the state from identifying suspects before trial. “But the names were put out there [on social media] to send a message, to show the seriousness of this campaign,” a Saudi observer says.

Reports of physical abuse were denied by those who spoke to the Financial Times.

Investigators would be friendly in the morning but often argumentative in the evening. Sometimes, they woke up detainees in the middle of the night shouting demands, according to one person close to the royal family. One suspect was told to pack his bags in late December in preparation for departure, only to be ignored with no visits for three weeks.

Within days of the swoop, the authorities provided banks and asset managers with lists of accounts to be frozen, including those of relatives linked to the suspects.

“This caused particular distress for some time,” says one banker, who was told suspects’ relatives could draw no more than SAR100,000 ($26,660) a week for living expenses.

At one financial firm, entire departments were told to stay at their desks and wait for investigators who wanted to inspect books and records. On occasions, executives would stay late into the night, only to be notified that an inspection was cancelled.

[Prince Mohammed] has created resentment and — probably on purpose — fear, but all for the price of a minor fluctuation in the oil price

Large entities, such as contractor Saudi Binladin Group, Prince Alwaleed’s Kingdom Holding and Dubai-based Middle East Broadcasting Center (MBC) were allowed to operate normally, although their futures appeared uncertain.

In December, the government began negotiating the settlements with suspects under which the detainees could pay for their freedom by handing over assets to the state.

Bankers received confidential memos ordering cash to be transferred to finance ministry accounts. Swiss bankers say Saudi delegations requested access to accounts, only to be rebuffed with requests that evidence would have to be presented to Swiss judges.

Mohammed al-Jadaan, finance minister, has said several billions of dollars have already been recovered. But reaching the state’s target of $100bn will take time as assets are sequestered and sold on.

Details of financial settlements have been kept under wraps, but people close to the government say they include cash, corporate and property asset transfers to the state.

MBC, for example, has been told that Waleed bin Ibrahim al-Ibrahim, the company’s founder, who was among those detained, will keep his 40 per cent stake in the group, with the remainder seized by the government. Yet, like other firms, the final settlement is still pending.

Most of those who secured a settlement have been released, but they remain banned from travel. Those willing to co-operate with the government will be allowed to return to their companies, observers say.

At the end of last month, 56 suspects who refused to settle were heading for trial, the attorney-general said. Others, who have told their families that they should be released soon, remain in custody in government guesthouses as the details of their agreements are finalised.

As he left the Ritz, Prince Alwaleed told Reuters that he had not transferred assets, describing his incarceration as a “misunderstanding”. He has since returned to work at his opulent offices at the top of Kingdom Tower in the heart of Riyadh.

“The company says, it’s all OK, the chairman [Prince Alwaleed] is back in the office — but it is a bit more complicated than that,” says one Dubai-based banker.

The challenge for Riyadh now is to restore investors’ faith in the stability of Saudi Arabia’s business climate — particularly as Prince Mohammed needs foreign investment to back his ambitious plans to overhaul the oil-dependent economy. Analysts suspect the purge was in part motivated by the heir apparent’s desire to cement his hold on power.

“He has created resentment and — probably on purpose — fear, but all for the price of a minor fluctuation in the oil price,” says one adviser to a family involved in the investigation.

The government is betting that investors will have short memories as business opportunities arise. Ending the culture of endemic corruption, officials say, is a necessary precursor to Prince Mohammed’s reform plans.

“If you do economic and financial regulation and don’t deal with enforcement, you will fail,” says a government official.