National Bank of Oman (NBO) has initiated legal action against Ali Redha Trading Group (ARTG) and their auditors, Arthur Andersen and Co., the bank's deputy chairman, Taufiq Ahmed Sultan, confirmed yesterday.

According to a senior bank manager, the legal action against auditors Arthur Andersen was initiated for failure to disclose the financial status.

Ali Redha owed 51 million Omani riyals to five banks in Oman but when the group failed to pay instalments, an agreement was reached to reschedule the loans.

The Omani business group was also given a breathing period after it cleared part of the loan (19 to 20 million riyal).

Then, Arthur Andersen prepared the rescheduled repayment scheme (after a breathing period) to clear the rest of the amount (31 million riyals). The group, however, failed to pay the instalments after this period, prompting banks to initiate legal action.

The other banks that have filed cases in the commercial court against Ali Redha, the proprietor of ARTG, include Bank Muscat, Oman International Bank, Oman Arab Bank and Bank Dhofar Al Omani Al Fransi.

According to a NBO official, ARTG owes it around 11 million riyals, out of a total of 31 million riyals to five banks.

The NBO deputy chairman also confirmed that Aubyn Hill had left after serving the leading Omani bank for 11 years.

"On July 10, he signed a two-year contract with the bank and proceeded on his annual vacation. Hill called the bank chairman on August 8 and said he had found a job in Jamaica and would not like to come back."

He was advised by the chairman to come back and hand over the charge but he failed. According to Taufiq, Hill even called him in Switzerland where the bank deputy chairman was holidaying. "I advised him that absconding from the bank would be a serious mistake," Taufiq added.

Now, according to him, the bank has asked its auditors to see if there was anything wrong. "The case is being reviewed," he added.

NBO acting chief executive and general manager, Stephen Davies, admitted that the bank was facing problems but refused to spell out the size of the problem by taking refuge in the fact this is September and close to the end of the third quarter of the year.

He confessed that the bank's overseas branches were facing problems, in particular the Egypt operations. "The total loans in Egypt is 100 million riyals and is only 14 per cent of the total loan portfolio with the bank," he said.

"We do have a problem in Egypt but it is manageable," he reiterated. "The plans include downsizing corporate exposure in Egypt and Abu Dhabi."