Today, Mr. Sanea and his wife are battling it out with his in-laws -- the Gosaibi clan -- over fraud accusations and a multibillion-dollar pile of bad debt. In court documents, the Gosaibis allege Mr. Sanea bilked them out of billions of dollars and forced the family business, Ahmad Hamad al Gosaibi & Bros., or Ahab, into default. Mr. Sanea's lawyers have denied wrongdoing.
At least 110 local and foreign banks loaned the two sides more than $15 billion in recent years. Some Arab lenders are writing off hundreds of millions of dollars. Deutsche Bank AG and others are suing Ahab subsidiaries and Mr. Sanea's company, Saad Group, as well as their board members, in New York, London, Dubai and the Cayman Islands.
The Gosaibi-Sanea soap opera is roiling the wealthy enclave here in Khobar, where the two families live in side-by-side estates.
In one sign of the tension: For about two months, a cardboard box has been sitting in front of Mr. Sanea's estate, near a palm tree. It holds a court summons and documents from his in-laws that he has declined to accept, say lawyers who tried to serve the papers.
On the local social scene, it's been a summer of gossip and consternation. Khobar's ladies who lunch were torn about how the feud might disrupt invitation lists for the massive late-evening parties that are traditional during Ramadan, the month when Muslims fast during the day.
Nibbling canapés and homemade date pastries earlier this summer, the wives of two local businessmen fretted over whom to invite to their Ramadan parties -- Mr. Sanea's wife, or her sisters. "We don't know if it's OK to invite both," said one.
Ahab claims it was the victim of a $9.2 billion fraud from 2005 to 2009, perpetrated by Mr. Sanea, according to a filing this summer in New York State Supreme Court. In that filing -- part of Ahab's defense against a case brought by a creditor -- Ahab alleges Mr. Sanea forged family members' signatures to receive loans, falsified the books of family companies, and siphoned Ahab funds into Mr. Sanea's Saad Group companies.
Mr. Sanea, through a London public-relations firm, declined several requests to comment or to answer written questions.
Saudi Arabia's central bank has frozen some domestic bank accounts of both families. A Saudi royal commission has been set up to help restructure debt owed to Saudi lenders. Two Bahraini banks, one controlled by Ahab and another by Saad Group, are in administration, a form of bankruptcy protection.
Saad Group has said it has defaulted on debt, although it doesn't specify the amount. A statement by Mr. Sanea's representatives over the summer said Saad was experiencing "liquidity problems."
Meanwhile, the Gosaibis have won court orders in London, the Cayman Islands and Geneva to freeze some of Mr. Sanea's assets. On Oct. 5, Mr. Sanea's lawyers gave a London High Court a written statement from Mr. Sanea saying he denied forgery and all the other allegations.
"There is simply no truth in them whatsoever," Mr. Sanea's lawyer said, according to a court transcript.
In the middle of the feud is Sana'a al Gosaibi, whom Mr. Sanea married in 1980. She is a major stakeholder in both Saad Group and Ahab. She owns 10% of Saad, according to a Moody's Investors Service rating report issued in 2008, and is one of 20 family members who are Ahab's principal investors.
In a London High Court hearing Oct. 5, a judge froze £989,000 ($1.6 million) that had been wired to an HSBC account in the names of Mrs. Gosaibi and her daughter from Saad National Schools, a Khobar-based educational company.
Mrs. Gosaibi declined to comment. A representative for the family said the school isn't owned by Saad Group or by Mrs. Gosaibi and that the transfer wasn't improper.
Saad Group's Web site lists Saad National Schools as one of its affiliates.
In more than a dozen hours of interviews this summer with seven top Gosaibi shareholders, all of whom are family members, they discussed the family's predicament.
Four immediate family members say Mrs. Gosaibi no longer speaks with her only brother, Saud al Gosaibi, who now runs Ahab. Her interaction with other relatives has become limited mainly to phone calls and weekly visits with her sisters and elderly mother, according to several family members.
The Gosaibis and Saneas are each others' closest neighbors, although the size of their properties means they're still about a mile apart.
The Gosaibi estate has two separate mansions: a bigger one built by a previous generation, and a smaller one built by Saud, the current patriarch. Inside his home, Impressionist paintings hang on the walls, and elaborate dinners are sometimes served with cans of Pepsi. (The family, among other things, owns the local Pepsi bottler.)
Mr. Sanea lives down the road with his wife, Sana'a al Gosaibi, behind an ornate iron gate with a grand domed entryway with painted arabesque trim. The walled compound is staffed with uniformed security.
On an August visit to the front gate, the cardboard box containing the summons was sitting on the left side of the entry. An attempt to get a closer look at the box was thwarted by guards.
The box has contributed to the public spectacle. Because the summons sat uncollected for so long, the Cayman court told the Gosaibis to publish it in a national Saudi newspaper. They did so in August.
The financial mess has roots earlier in the decade, when international banks rushed in to finance Saudi Arabia's powerful family businesses as oil prices soared. Ahab and Saad seemed like good bets.
An old Bedouin family that once scratched out an existence diving for pearls, the Gosaibis gravitated to Eastern Province -- Saudi Arabia's oil patch -- in the 1940s. Family patriarch Hamad Ahmad started a canteen catering to oil workers.
The Gosaibis diversified into pipe-making and Pepsi, stevedoring and finance. Two extended family members are now in the Saudi cabinet.
By 1980, the family's next generation, Abdulaziz al Gosaibi, was being groomed to run the empire. When Abdulaziz set out to find a husband for his eldest daughter, he chose a young fighter pilot -- Mr. Sanea.
The young Mr. Sanea was an up-and-comer in the Gulf. He had grown up in Kuwait, then considered more cosmopolitan than Saudi Arabia. His panache seemed to impress his future father-in-law, family members say.
Not everyone was won over. Mr. Sanea's Rolls Royce wedding entrance rankled some of the more button-downed family members, according to two who attended the ceremony. It was "a bit unseemly," says a senior member of the Gosaibi clan.
After the wedding, in 1981, Mr. Sanea was named managing director of the Gosaibi family's currency-exchange business, Money Exchange, according to the Gosaibis. The business helped foreign oil workers in Khobar send money home.
Soon after, Mr. Sanea founded his own company, Saad Group, focused on real estate. He appeared driven to succeed in his own right, associates say. "He didn't want anyone saying that he got his money from his father-in-law," says the head of a Saudi petrochemical company who knows Mr. Sanea from the local chamber of commerce.
Earlier this decade, Mr. Sanea's personal empire took off. By 2005, Saad Group had moved beyond home building and into financial activities and investment. Promotional material from the time described it as the seventh-largest diversified company in Saudi Arabia.
A sign of his financial might: In 2007, Mr. Sanea bought a 3.1% stake in HSBC Holding PLC for $6.6 billion, making him one of the bank's biggest shareholders.
By 2008, Forbes listed Mr. Sanea as the 62nd-richest person in the world. He owned an Airbus A-320 Prestige private jet and tooled around Khobar in a gold-colored Maybach.
As Saad Group expanded, Ahab faced a transition. In 2003, the family patriarch, Abdulaziz al Gosaibi, died. Hewing to tradition, the family named the new patriarch, his elderly brother, Sulaiman al Gosaibi, as chairman.
Sulaiman, family members and employees say, divvied up responsibility among three prominent male family members: Saud al Gosaibi controlled the industrial division, a cousin of his oversaw food and retail, and Mr. Sanea, they say, oversaw the family's financial units until this spring. Today, however, Mr. Sanea's responsibilities, and their timing, are key to the dispute.
The bulk of Ahab's debt trouble stems from its financial operations, according to the Gosaibis and their creditors. Gosaibi board members say Mr. Sanea was in charge of the group's financial units as recently as May.
In a June 2 statement, the London-based spokesman for Mr. Sanea said he previously was managing director of Money Exchange but "has not acted in such capacity for many years." His recent ties to Ahab have been on "an arm's-length commercial basis," the spokesman said.
It's difficult to determine Mr. Sanea's previous job titles or specific roles in Ahab. According to internal corporate documents provided by Ahab forensic accountants and reviewed by The Wall Street Journal, Mr. Sanea appears to have signed documents as "managing director" of Money Exchange. He also appears to have signed documents at other Ahab financial units, without including a job title.
Ahab's chairman, Sulaiman al Gosaibi, died in February. Soon after, things started to fall apart, Saud al Gosaibi said in an interview. Sometime in April, Saudi bankers started calling to demand payment on about $1.6 billion owed by Money Exchange, say two Ahab executives.
Gosaibi family members say they met privately with Mr. Sanea on May 10 to assess the financial situation at the unit. By late May, however, the bankers' phone calls were still coming, says Mr. Gosaibi. So he ordered auditors to examine Money Exchange's books.
"What they discovered was that things had gone very wrong," Mr. Gosaibi says. "The annual reports didn't reflect the reality of the business."
About the same time, Mr. Sanea's empire also began to crumble. Credit agencies dropped ratings from investment grade to "selective default."
The Gosaibis' legal filing in the New York court alleges that Mr. Sanea took out loans and opened credit facilities at Ahab financial divisions without proper approval from Ahab's board. Mr. Sanea then diverted funds to firms under his control, according to court documents.
Gosaibi auditors say in interviews and court papers that they found "hundreds" of documents containing forged signatures of Ahab top brass. In court documents, an auditor from Deloitte Corporate Finance Ltd. said Mr. Sanea procured loans in Ahab's name through the alleged forgeries. Mr. Sanea has denied all allegations of forgeries.
One such document, reviewed by the Journal, appears to be an Ahab board resolution, dated Feb. 21, 2009, and signed by Sulaiman al Gosaibi, the ailing chairman of Ahab at the time. The document approves a new credit facility with a Kuwaiti bank for an unspecified Ahab financial unit. Gosaibi lawyers attribute the signature to Mr. Sanea.
Hospital records reviewed by the Journal indicate that on that day, Sulaiman al Gosaibi was in a medically induced coma after surgery in a Zurich hospital. He died on Feb. 22.
Saud al Gosaibi called a creditors meeting for June 24 to explain his findings to lenders. At a second meeting, in August, he told bankers that Ahab wouldn't honor debts from its financial units until the courts decide who is responsible for them.
Some international banks, frustrated by the lack of transparency, went to court. At least six bank are suing Ahab for recovery of funds, including Commerzbank AG. At least three regional banks are suing Saad for the same reason.
Still, amid the court actions, details trickle out. At the London High Court hearing earlier this month, Mr. Sanea's lawyers failed to overturn an asset freeze in the U.K. But his lawyers did manage to boost the level of spending allowed their client -- to $1 million per quarter from a previous $10,000 a month. Among Mr. Sanea's expenses cited by the lawyers: maintenance of a private zoo, according to a court transcript.
"This is all so embarrassing," says one family member on the Gosaibi side. "In the end, there will be no winner."
—Nour Malas in Dubai contributed to this article.
Write to Margaret Coker at margaret.coker@wsj.com
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