By Liz Hoffman, Emily Glazer and Dawn Lim
The star-studded desert conference was supposed to celebrate
Saudi Arabia's arrival on the global financial stage.
Instead it has become a high-stakes test for Wall Street and
corporate titans weighing the potential profits from dealings with
the kingdom against the risk of a public backlash, as grisly
allegations that the Saudi government murdered dissident journalist
Jamal Khashoggi threaten to derail the summit.
On Sunday and early Monday, three 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 the
event, ratcheting up the pressure on their peers.
As of midday Monday, executives from Goldman Sachs Group Inc.,
Bank of America Corp., Citigroup Inc. and HSBC Holdings PLC were
still planning to attend the conference, set to begin on Oct. 23.
Ken Moelis, a banker who advised the Saudi government on its
efforts to take the national oil company public, will also be
present, a spokeswoman confirmed. So will David Bonderman, a
co-founder of private-equity firm TPG, which counts the Saudi
government as an investor, according to a person familiar with the
matter.
Some Saudi officials have come to see the conference as a
loyalty test of sorts. One financial executive, when confirming his
attendance with a senior Saudi official via text message this week,
received a heart emoji in response.
Conference organizers on Monday declined to comment on the
cancellations and indicated the event would go forward as
planned.
Wall Street firms have cozied up to the Saudi government and its
33-year-old crown prince, Mohammed bin Salman, who has been the
public face of the oil-dependent kingdom's efforts to reinvent
itself as a premier financial and investment hub.
Last year's inaugural conference, dubbed "Davos in the Desert,"
was a coming-out party for that pivot and was widely attended by
Western executives. Backing out of the event this year could put
Wall Street firms on the outs with the kingdom for years to
come.
The stakes are especially high for JPMorgan and Blackstone.
Saudi Arabia's sovereign-wealth fund last year committed $20
billion to Blackstone's infrastructure fund, which could be as big
as $40 billion. JPMorgan, a Saudi business partner for more than 80
years, has advised the kingdom on numerous deals, including a
recent purchase of Tesla Inc. stock and the now-stalled initial
public offering of national oil company Saudi Aramco.
Over the weekend, as pressure mounted on the Saudi government to
explain Mr. Khashoggi's whereabouts, Messrs. Schwarzman, Dimon and
Fink discussed among themselves whether to back out of the event,
according to people familiar with the matter. They also pressed
conference organizers to cancel or postpone it, the people
said.
Other executives at JPMorgan and BlackRock also reached out to
officials at the U.S. Treasury Department over the weekend to ask
them to lean on the Saudis to cancel or reschedule the conference,
some of the people said. Treasury Secretary Steven Mnuchin is
slated to attend. A spokesman for the agency said it would monitor
information released over the coming week.
On Sunday, Mr. Dimon decided to withdraw and got word to
BlackRock and Blackstone, whose executives announced Monday morning
they were backing out. When informed of their decisions, Saudi
government officials said they were disappointed but understood,
people familiar with the matter said.
Mr. Dimon was slated to be a featured speaker at the conference
and, as the longest-serving CEO of a major Wall Street bank, is
often looked to as a voice for the industry. JPMorgan has done
business with Saudi Arabia since its modern founding in the 1930s
and has advised the kingdom's sovereign-wealth fund, the Public
Investment Fund, on investments in Uber Technologies Inc. and
Tesla.
JPMorgan is among a group of banks that circled the Saudi Aramco
IPO, a deal Mr. Dimon personally discussed with the crown prince
before he publicly unveiled plans for what would be the world's
largest such offering in early 2016.
Mr. Schwarzman has spent years wooing PIF, which was expected to
reap much of the proceeds from the now-stalled Aramco IPO. 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," Mr. Schwarzman said.
The crown prince has endeared himself to Western executives
through a carefully cultivated charm offensive that involved
embracing limited reforms. During a visit to the U.S. last spring,
Prince Mohammad visited Goldman Sachs's then-CEO, Lloyd Blankfein,
who posed for a photo and joked on Twitter about their matching
beards.
Executives of Goldman and SoftBank Group Corp. -- which has
raised $45 billion from the Saudis for an investment fund -- have
been in touch with, and likely will take their cues from, U.S.
government officials, people familiar with the matter said. Absent
a finding that the Saudi government was responsible for Mr.
Khashoggi's disappearance, they and others are likely to
attend.
Goldman plans to send executives Dina Powell and Sheila Patel to
the conference. Credit Suisse CEO Tidjane Thiam was planning as of
Sunday to attend, according to people familiar with the matter.
Citigroup, which reopened offices in Saudi Arabia this year
after a more than decadelong absence from the country, was set to
send two executives, Michael Roberts and Jay Collins, as scheduled
speakers. A spokeswoman declined to comment on their plans.
As of late last week, Bank of America Corp. Chief Operating
Officer Thomas Montag was slated to attend the event. The bank is
still evaluating its role in the conference, Chief Financial
Officer Paul Donofrio said Monday.
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.
The British bank first opened branches in the kingdom in 1950, and
played a lead role in helping the country raise its first sovereign
loans and bonds. It also owns a stake in a Saudi investment-banking
business.
--Summer Said, Miriam Gottfried, Maureen Farrell and Margot
Patrick contributed to this article.
Write to Liz Hoffman at liz.hoffman@wsj.com, Emily Glazer at
emily.glazer@wsj.com and Dawn Lim at dawn.lim@wsj.com
(END) Dow Jones Newswires
October 15, 2018 19:31 ET (23:31 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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