Arif Naqvi, CEO of the Abraaj Group, a now-defunct private equity firm that operated in six continents, had allegedly embezzled $780 million from the firm’s funds, including a $100 million investment from the Gates Foundation.
In September 2017, Naqvi was addressing in New York to raise billions for a new fund. In April 2019, he was arrested at Heathrow Airport for playing the leading role in a multimillion-dollar fraud. Earlier this year in January, a UK judge approved Naqvi’s extradition to the US as he faces a potential 291 years in jail.
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In their recently published book “The Key Man,” authors Simon Clark and Will Louch, Wall Street Journal’s reporters who first broke the news of investors’ concerns about the Abraaj Group in February 2018, have explained how Arif Naqvi managed to defraud some of the world’s smartest investors, including Bill Gates.
Here is how it all went down:
Arif Naqvi was born in 1960 in Karachi, where he went to Karachi Grammar School. He later attended the London School of Economics.
In 2003, he set up Abraaj Group after raising $118 million, mostly from Middle Eastern governments, with an aim to tackle global poverty.
In 2010, the then US President, Barack Obama, invited Arif Naqvi along with 250 other Muslim leaders to a Presidential Summit on Entrepreneurship.
During his keynote address, he highlighted the importance of impact investing and how a billion children would need training and jobs in the coming decades.
“It can only happen,” Naqvi told the Summit, “through entrepreneurship.” Two months later, the US government invested $150 million in Abraaj Group.
In 2008, Arif Naqvi also took control of K-Electric. While he made the company more profitable, he also laid down over 6,000 workers which led to riots against him. He distracted the West with massive charitable grants while he faced pressure back home.
Arif gave millions of dollars to universities around the world, including Johns Hopkins University in the United States, and the London School of Economics, which named a professorship after Abraaj.
He regularly addressed Davos and similar conferences, where he became friends with Bill Gates, who was also the guest of honor at a dinner at Naqvi’s home in 2012.
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The Gates Foundation invested $100 million in the Abraaj Growth Markets Health Fund to improve the hospitals and clinics in emerging markets. Following in the footsteps of billionaire philanthropists like Bill Gates, other investors also invested in the fund, bringing in an additional $900 million.
After investing in Abraaj Health Fund, Bill Gates said:
This is a significant co-investment partnership. It is also an example of the kind of smart partnerships that hold huge promise for the future.
However, in reality, Arif Naqvi misused the investment in Abraaj Group with a “secretive treasury account.” Most employees of Abraaj Group did not know about the secretive account as the equity firm comprised of more than 300 companies, based mostly in tax havens around the world.
The account was close to empty most of the time. Since regulators required millions of dollars to keep in the account for emergencies, Arif Naqvi and his colleagues moved money into the account to make it seem like it contained the required amount just before the end of each quarter. They emptied the account again a few days later.
Arif Naqvi and his colleagues also frequently used one fund to pay dividends on others in a fraud known as a Ponzi scheme.
On 9 January 2014, a manager of one of Abraaj Group’s fund’s finance department, informed Naqvi that the firm will have a deficit of $100 million by 15 January. Instead of telling the truth to the investors, Naqvi chose the path of deception and pretended that everything was going according to plan.
In 2015, he not only paid himself $53.75 million but deprived investors of their gains by keeping $154 million received from the sale of shares.
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Soon after, the fund manager at the Gates Foundation, Andrew Farnum, got suspicious as the Abraaj Group kept asking Bill Gates for hundreds of millions of dollars in additional investment without giving any dividends on the previous investment.
In September 2017, Andrew Farnum wrote an email to Arif Naqvi, asking him to share the location of Bill Gates’ current investment and prove that he wasn’t misusing the money of one of the world’s richest men.
In response, Naqvi only sent vague assurances and old bank statements.
A week later, an anonymous employee of the Abraaj Group sent an incriminating e-mail to all investors of the firm, revealing the organization’s fraudulent activities.
The email read:
Do your due diligence properly and ask the right questions. You will be amazed at what you discover.
The email shattered investors’ confidence in Abraaj Group and they demanded Arif Naqvi to return their money. The Gates Foundation hired a forensic accounting team to investigate Abraaj’s books.
Throughout this episode, Arif Naqvi continued meeting with potential investors, seeking to raise $6 billion for a new fund. He also shared the stage with Bill Gates in a televised debate on global health care at Davos.
During the debate, whenever Naqvi attempted to make eye contact or engage Gates in conversation, he looked the other way.
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In 2018, Simon Clark and Will Louch exposed Arif Naqvi’s alleged misdeeds in The Wall Street Journal.
At least $660 million of investors’ money was moved without their knowledge into Abraaj’s hidden bank accounts. Then more than $200 million had flowed from these accounts to Arif and people close to him.
While Arif Naqvi, who is currently under house arrest in London, awaits a decision on his appeal against his extradition to the US where he faces 291 years of potential jail time, he maintains his innocence and denies any wrongdoings.
Via: New York Post
