International -- Asian Business: Brunei
Brunei's Battle Royal (int'l edition)
As sultan and prince go to court, the economy suffers
Poor little rich Brunei. For the past two years the tiny sultanate, which controls vast oil fields off Borneo's coast, has been wracked by a squabble between Sultan Hassanal Bolkiah and his brother Prince Jefri Bolkiah. Jefri left for London after his sprawling Amedeo Group collapsed under $10 billion in debt--blowing a sizable hole in the national budget. Although auditors suspect Jefri and his associates of embezzling billions from the state treasury, there was hope the feud would end when Jefri returned from London in January.
Not a chance. On Feb. 21 the government sued Jefri in Brunei High Court for the funds he allegedly "misappropriated." Government lawyers then filed injunctions--in Brunei and London--freezing Jefri's assets. Now, both sides are drawing battle lines across the U.S. and Europe to fight what palace watchers in Bandar Seri Begawan, Brunei's humid capital, are calling "the mother of all legal battles."
That may not be far off the mark. At this point, it's not even clear how much Jefri may have siphoned off during his years as finance minister, chairman of the Brunei Investment Agency, and head of Amedeo--all hopelessly intertwined positions. The Borneo Bulletin, a Bandar daily owned by Prince Mohamed Bolkiah, another of
Jefri's three brothers, says Jefri is accused of making off with $9 billion. John M. Callagy, a lawyer at Kelley Drye & Warren LLP in New York, says it's $40 billion--and that the charges are false. Kelley Drye represents Amedeo Hotels Ltd., one of 68 companies the government contends Jefri controls.URGENCY. There's some urgency to all this. For one thing, Brunei (population 300,000) needs the missing billions to help recast its economy. In February, the Brunei Economic Council, headed by Mohamed, issued an economic diversification plan and warned that with dwindling reserves, the sultanate's dependence on oil--even amid rising prices--is "unsustainable." For another, the sultan wants the mess cleared up before November, when Brunei hosts a regional summit that is to include President Clinton and the Japanese Prime Minister. "They're anxious to settle," a diplomat in Bandar says. "They want to improve their image."
That won't be easy. In 16 months of negotiations before Jefri returned, the sultan insisted that his errant sibling unload a pile of assets that includes everything from Old Master oils to a global hotel chain and a yacht. But Jefri hasn't parted with much. Many of his baubles, palace watchers say, are too vulgar to fetch anything close to what the prince paid. In the case of Amedeo Hotels, whose properties include the New York Palace, Jefri refuses to let go.
Jefri declines to comment. But those close to the palace say his strategy is to buy time and reach a cash settlement. After the Brunei court postponed the date he has to disclose his assets, Jefri challenged the requirement. In another delaying tactic, he petitioned the Bandar court to increase his monthly allowance from $59,000 to $500,000. The court compromised at $300,000 on March 14.
Elsewhere, Jefri is trying to pry loose assets. In a suit filed in New York on Mar. 7, Kelley Drye asserts that Brunei's original court order sequestering his holdings is invalid on technical grounds. At stake, apart from the New York Palace, are the Hotel Bel-Air in Los Angeles and a Las Vegas residence. The next step, say diplomats, may be to file similar suits in Europe to block seizure of other businesses.
Although the battle has barely been joined at the Brunei High Court, palace watchers say Jefri already has a new company and hopes to get back into business. If he settles out of court, Brunei may write off many of the assets once controlled by Amedeo. That might suit the prodigal prince, but it's no way to begin rebuilding a tiny nation's skewed economy.By Michael Shari in Bandar Seri Begawan, with Sheri Prasso in New YorkReturn to top