BAC Bank of America Corporation

By Emily Glazer, Dawn Lim and Liz Hoffman 

Saudi Arabia was supposed to be a fee bonanza for Wall Street. The fallout from the disappearance of dissident journalist Jamal Khashoggi may jeopardize that payday.

On Sunday and early Monday, a trio of Wall Street's most powerful executives -- JPMorgan Chase & Co. Chief Executive James Dimon, BlackRock Inc. CEO Laurence Fink and Stephen Schwarzman, the chief of private-equity giant Blackstone Group LP -- pulled out of Saudi Arabia's marquee business conference following accusations that the Saudis killed Mr. Khashoggi in Istanbul earlier this month.

As of midday Monday, executives from Goldman Sachs Group Inc., Credit Suisse Group AG, Bank of America Corp., Citigroup Corp., HSBC Holdings PLC and Standard Chartered PLC were still slated to attend the conference, set to begin on Oct. 23. Dozens of lower-ranking employees from a wide range of financial firms on Wall Street and beyond were among the confirmed attendees on a list that was recently circulated by conference organizers and reviewed by The Wall Street Journal.

Saudi officials on Monday indicated that the event was still going forward and declined to comment on the cancellations.

Banks, buyout firms and asset managers have worked hard to cultivate strong relationships with the Saudi government and its 33-year-old crown prince, Mohammed bin Salman, to get in on the fee action as the kingdom endeavors to move beyond its oil-dependent economy and become the Middle East's premier investment hub.

The Future Investment Initiative conference in Riyadh, known as "Davos in the Desert," was meant to showcase Saudi Arabia's transformation to the world. Bankers have expressed concern that any Wall Street firm that backs out of the event could be put on the outs with the kingdom for years to come.

Ken Moelis, whose boutique bank advised the Saudi government on its efforts to take the national oil company public, and Eric Cantor, a former U.S. congressman who now works for Mr. Moelis, are still planning to attend, a spokeswoman for Mr. Moelis confirmed Monday. David Bonderman, a cofounder of private-equity firm TPG, also was slated to attend, according to a person familiar with the matter. Saudi Arabia's sovereign-wealth fund is a TPG investor.

Executives at Goldman Sachs and SoftBank Group Corp. -- which has raised $45 billion from the Saudis for an investment fund -- have been in touch with U.S. intelligence officials and will likely take their cues from them, people familiar with the matter said. Absent a finding that the Saudi government was responsible for Mr. Khashoggi's disappearance, they are likely to attend.

Over the weekend, Messrs. Schwarzman, Dimon and Fink discussed their plans for the conference after a number of business leaders backed out, according to people familiar with the matter. They also pressed conference organizers to cancel or postpone the event, the people said.

Other executives at JPMorgan and BlackRock reached out as well to Treasury Department contacts over the weekend to ask them to lean on the Saudis to cancel or reschedule the conference, some of the people said. They didn't speak directly to Treasury Secretary Steven Mnuchin, who was flying back all day Sunday from Bali following annual meetings for the International Monetary Fund and World Bank Group.

A Treasury spokesman declined to comment on conversations with Wall Street firms and said it "will be evaluating the information that comes out this week." Mr. Mnuchin is slated to attend the conference.

On Sunday, Mr. Dimon opted to back out of the event. JPMorgan officials informed their counterparts at BlackRock and Blackstone of Mr. Dimon's decision, and the bank issued a public statement late Sunday.

Messrs. Schwarzman and Fink followed suit. After their decisions were announced Monday morning, senior executives from the firms informed Saudi officials, according to people familiar with the matter. The Saudis, who have denied involvement in Mr. Khashoggi's disappearance, said they were disappointed but understood, some of the people said.

Mr. Dimon was slated to be a featured speaker at the conference. JPMorgan, the largest U.S. bank by assets, has done business with the kingdom since the 1930s and has around 70 employees there. It has been a key adviser to Saudi Arabia's massive sovereign-wealth fund as it has morphed from a little-known holding company for government assets to one of the world's most influential investors.

In 2016, JPMorgan advised that fund, the Public Investment Fund, on its $3.5 billion investment in Uber Technologies Inc. The bank helped PIF buy a minority stake in Tesla Inc. earlier this year and earned a role advising on the now-stalled initial public offering of national oil company Saudi Arabian Oil Co., better known as Aramco.

Mr. Dimon discussed the potential initial public offering of Aramco with Prince Mohammed before the crown prince publicly unveiled plans for what would be the world's largest such offering in early 2016, according to people familiar with the discussions.

Mr. Schwarzman has spent years wooing PIF, which was expected to reap much of the proceeds from the now-stalled Aramco IPO. PIF announced in May 2017 that it would commit up to $20 billion to Blackstone's $40 billion infrastructure fund.

At last year's Future Investment Initiative conference, Prince Mohammed unveiled a 10,000-square-mile development zone, dubbed Neom, that was expected to cost some $500 billion and to be funded by PIF and private investors.

During a panel discussion at that event, Mr. Schwarzman praised the Neom plan and the crown prince. "I'm really dazzled and in awe, and in that regard, I just reflect the world," Mr. Schwarzman said.

BlackRock, the world's largest asset manager, has taken steps to deepen its ties to Saudi Arabia over the past year. Around the time of last year's Riyadh conference, Mr. Fink met with Prince Mohammed and spoke about possible investment partnerships. PIF is a BlackRock client.

Last year BlackRock announced plans to establish an office in Riyadh but the office hasn't opened yet, a person said. The firm, which has no employees based in Saudi Arabia, is in the process of getting licenses to manage assets there, this person said.

As of Sunday evening, Goldman Sachs was planning to send executives Dina Powell and Sheila Patel as well as regional bankers, other people familiar with the matter said. Credit Suisse CEO Tidjane Thiam was planning as of Sunday to attend the conference, according to people familiar with the matter.

Two Citigroup executives, Michael Roberts and Jay Collins, are scheduled to speak on panels at the event, according to the conference agenda. A spokeswoman declined to comment on whether they are still attending. The bank officially opened new offices in Saudi Arabia this year after an absence from the country of more than a decade.

As of late last week, Bank of America Corp. Chief Operating Officer Thomas Montag was slated to attend the event. The bank is advising PIF on the potential sale of its stake in the state's petrochemical giant, Saudi Basic Industries Corp., to Saudi Aramco. Bank of America CFO Paul Donofrio said Monday the bank was "still evaluating" its role in the conference.

A spokeswoman for London-based Standard Chartered said it was "monitoring the situation" for CEO Bill Winters to attend. Mr. Winters told CNBC last month that "fascinating things" were going on in Saudi Arabia around modernizing governance and the economy and the bank wanted to grow its business there.

HSBC CEO John Flint also is scheduled to attend the event. An HSBC spokeswoman declined to comment on the status of his plans.

HSBC is among the companies with the most to lose from any potential Saudi backlash. The British bank first opened branches in the country in 1950, then converted the business into a 40% shareholding in Saudi British Bank, or SABB, in 1978. It took a lead role in helping the country raise its first sovereign loans and bonds and owns a stake in a Saudi investment-banking business.

On Monday, Alphabet Inc. said Diane Greene, head of Google's cloud-computing unit, was canceling her plans to speak at the conference in Saudi Arabia.

--Summer Said, Miriam Gottfried, Maureen Farrell and Margot Patrick contributed to this article.

(END) Dow Jones Newswires

October 15, 2018 16:49 ET (20:49 GMT)

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