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Some Top Wall Street Executives Shun Saudi Conference

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10/15/2018 | 05:31pm EDT

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

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA -0.27% 29.4 Delayed Quote.19.64%
GOLDMAN SACHS GROUP INC -0.47% 213.52 Delayed Quote.27.82%
HSBC HOLDINGS PLC 0.20% 662.7 Delayed Quote.2.44%
JP MORGAN CHASE & COMPANY -0.99% 113.54 Delayed Quote.17.47%
STANDARD CHARTERED -0.14% 713.2 Delayed Quote.17.05%
STANDARD CHARTERED PLC 1.45% 70.2 End-of-day quote.15.46%
STANDARD CHARTERED PLC 1.69% 57 End-of-day quote.16.77%
UBER TECHNOLOGIES INC -1.21% 43.18 Delayed Quote.0.00%
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