The Sultan of Brunei's Legal Feud With His Brother

Its implications may not quite rise to the level of Cain versus Abel, but new details about a bizarre dispute between two of the world's wealthiest brothers—Hassan Bolkiah, the Sultan of Brunei, and his younger brother Prince Jefri Bolkiah—could soon be revealed in a New York lawsuit. After years of legal machinations, American lawyers are expecting later this month to question Jefri in a sworn deposition.

The deposition is part of a long-running dispute between the humongously wealthy Jefri and a married couple from Britain who once served as his personal aides and confidants. But, if it happens, Jefri's testimony is expected to illuminate an epic financial and legal battle between the prince and his elder brother who was once the world's richest man. Jonathan Berman, a lawyer for Prince Jefri, confirmed that Jefri's deposition is scheduled for next week and that the prince plans to attend. An American lawyer for the sultan did not immediately respond to a request from NEWSWEEK for comment.

The feud between the sultan and his brother has been going on since at least the late 1990s and has spawned a globe-circling mire of litigation which has ensnared (and enriched) attorneys, solicitors, bewigged barristers, and judges from the isles of Borneo to Britain to Manhattan. The focus of the dispute is, unsurprisingly, money, and the luxuries it can buy.

Even nobles like the royal dynasties of Britain, Holland, or Spain, seem almost petit bourgeois when compared with the Bolkiahs. An enclave carved out of the Bornean jungle by British colonists, Brunei, and its autocratic ruling family, became colossally wealthy when the price for its extensive oil reserves soared. In the 1980s, according to a chronology published in British court rulings, Prince Jefri was one of his brother's most trusted lieutenants, serving as the principality's finance minister and also as chairman of the Brunei Investment Authority, which is supposed to invest vast oil revenues for the nation's benefit.

The dispute that separated the Bolkiah brothers appears to have erupted following an independent 1998 investigation of how and why around $40 billion worth of "special transfer" payments were made between 1983 and 1998 from the accounts of the investment agency. According to a U.K. court ruling, the Brunei government concluded that, "in round figures," of the missing $40 billion, $14.8 billion had made its way into accounts controlled by Prince Jefri, another $8 billion had gone to accounts controlled by the sultan, and $3.8 billion had been used for "government purposes." It could not be determined who received the approximately $13.5 billion balance of "special" payments or where or why they were made.

The discovery of the $40 billion dollar hole in Brunei's national nest egg touched off a worldwide treasure hunt in which Prince Jefri's latest U.S. deposition, scheduled to begin on Sept. 30 at the New York offices of his former aides' lawyers, is only the latest chapter. In February 2000, according to a U.K. court ruling, Brunei's investment authority and government alleged that the $14.8 billion reportedly paid to Jefri allegedly had been "misappropriated." Subsequently, the Brunei government obtained injunctions freezing Jefri's assets in Britain and Brunei.

Brunei and its army of lawyers spent much of the ensuing decade chasing Jefri and his allegedly ill-gotten assets around the world—to London, to Paris, and to the luxurious New York Palace Hotel and Hotel Bel-Air in Los Angeles, which Jefri allegedly acquired with Brunei cash. In a ruling issued last year, Leo Strine Jr., a Delaware judge drawn into the royal brothers' dispute through the subsidiary feud between Jefri and his one-time confidants, set out some of the milestones in the history of the feud between Jefri and the sultan with a mixture of incredulity and wry humor. For a start, Judge Strine noted, even though Brunei authorities—and Jefri's brother was the ultimate Brunei authority—accused the prince of "misappropriating" nearly $15 billion, no attempt was ever made to criminally prosecute Jefri. "This could have been because his brother, the Sultan, still cared for him. It could also have been ... that Jefri had authority for everything he did from his brother, and had misappropriated funds for the Sultan's use as well. But for whatever reason, Jefri escaped a long term in the jailhouse."

In fact, the judge continued, "Although the expenses of Jefri's lavish lifestyle were dwarfed by those of the Sultan, the assets Jefri had taken [from the investment authority] … allowed Jefri to enjoy a posh life in London and elsewhere as a multi-billionaire." After Brunei authorities successfully froze some of his assets, Jefri agreed to a settlement in which he promised to disclose his holdings and return much of them to Brunei authorities. According to a footnote in the judge's ruling, Jefri did return some of the promised assets to Brunei, including "more than 600 properties, over 2,000 cars, 100 paintings, 5 boats, and 9 aircraft." But, "he still retained billions of dollars in other assets."

In order to raise cash to continue to support his lavish lifestyle and finance his legal battles, according to Judge Strine's findings, Jefri set up elaborate networks of companies and businesses in various jurisdictions around the world. "This complex holding structure facilitated Jefri's ability to generate cash, as he could cause entities to sell assets and distribute the resulting funds to support his legal defense and lifestyle costs." As an example of how this worked, Strine cited the corporate structure through which Jefri for years controlled the New York Palace, a luxurious high-rise on Madison Avenue (previously known as the Helmsley Palace) through a series of companies and holding structures. People familiar with the history of the brotherly feud and related litigation said that Jefri eventually surrendered control of both the New York and Los Angeles luxury hotels back to Brunei authorities.

Jefri's willingness to be cross-examined about his involvement in these tangled dealings has been unclear to date. Last year, after Jefri failed to appear to give testimony in a case in England related to the family feud, a British judge issued a warrant for his arrest. Judge Strine reported that both Jefri and two of his children who served as officers or directors of some of the corporations that held his assets had been reluctant to sit for depositions. Legal sources, who asked for anonymity due to the tangled nature of the litigation, said that Jefri did appear two years ago for a deposition in a related New York lawsuit, which by court order is still confidential.

Details of the feud between Prince Jefri and the sultan were not legally relevant for Jefri's 2007 deposition, so he was not asked about them. Because Jefri subsequently surrendered key assets to Brunei authorities, however, legal sources say that the prince's relationship with his brother is now relevant to the continuing litigation between Jefri and his former retainers, and therefore it is likely he will be asked about the long-running dispute if and when he arrives in New York to testify. Ironically, the deposition has been scheduled just as rumors have begun to surface that Jefri and the sultan have been trying to arrange a secret reconciliation. Earlier this year Prince Jefri and a small entourage reportedly stayed—supposedly without registering at the front desk—at the Plaza Athénée, a Paris luxury hotel owned by his brother, according to press reports in Europe. The Borneo Bulletin, a publication reportedly owned by a member of the Brunei royal family, claimed earlier this year that Jefri had visited Brunei in July, something he supposedly would not have been able to do if he and the sultan were still battling each other.