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Hoor Asrar Rauf reports on the biggest financial fraud
The high-flying Arif Naqvi and his financial firm Abraaj Group was brought down under financial fraud charges. It was pointed out that Abraaj at its peak managed $14 billion in assets across emerging markets but then it was caught defrauding its investors. The fall-out of this large-scale bust-up had international repercussions that also reverberated in Pakistan where Abraaj had also used its fund to buy controlling shares of K-Electric and also managed many healthcare facilities including network of ambulances known as Aman. Arif Naqvi is currently under practical house arrest in London fighting the case to avoid being extradited to America that has charged him for much of the financial fraud.
In this context it is now reported that the Securities and Exchange Commission of Pakistan announced settled charges against Tennessee resident Mark Bourgeois, the Abraaj Group’s former Head of Global Fundraising for his actions in 2017 and 2018 that helped now-defunct Abraaj mislead investors and potential investors about the Dubai-based private equity firm’s performance track record in the offer and sale of its newest fund. According to the SEC’s order, in offering investments in Abraaj’s new $6 billion global emerging markets private pooled investment vehicle, called APEF VI, potential investors were provided with an inflated performance track record for existing investments in prior funds managed by Abraaj’s investments.
It was added that the order finds that from 2017 through the beginning of 2018, AIML investment personnel responsible for valuations stated internally that certain write-downs were needed for a number of portfolio companies held by private equity funds managed by AIML. According to the order, Bourgeois is one of Abraaj’s managing partners, the CEO of its New York office and the global head of fundraising and investor relations and was aware of these advised write-downs on at least two separate occasions. The order finds that Bourgeois recommended that AIML not apply the write-downs or delay doing so to avoid the negative impact on APEF VI fundraising he anticipated would result if AIML’s lower track record was shared with potential investors.
The SEC’s order finds that Bourgeois, on behalf of the Abraaj Group willfully violated the antifraud provisions of the Securities Act and willfully aided and abetted and caused AIML’s violations of the antifraud provisions of Sections 17(a) (1) and (3) of the Securities Act and of Section 206(4) of the Advisers Act and Rule 206(4)-8 there under. Bourgeois agreed to a cease-and-desist order, to pay disgorgement of approximately $2 million, to cooperate in the Commission’s ongoing investigation and litigation relating to Abraaj and to a collateral associational bar and investment company.
The action of Securities and Exchange Commission of Pakistan is in tandem with the overall cases against Abraaj Group and in particular against its former founder and chief executive Arif Naqvi. Earlier, Naqvi was fined $135.6 million and banned from Dubai’s financial center for his role in the private equity firm’s 2019 collapse. The gist of the charges leveled against Naqvi by international regulators is that he personally proposed, orchestrated, authorised, and executed actions that directly or indirectly misled and deceived the investors. Naqvi founded Dubai-based Abraaj in 2002 and built it to become one of the world’s most influential emerging-market investors. He was the face and personality of the group and was knowingly involved in misleading investors over the misuse of their funds through Cayman-registered Abraaj Investment Limited.
Abraaj, with $14 billion under management, was forced into liquidation after investor concerns over its health-care fund. Abraaj backers included the Bill & Melinda Gates Foundation and the World Bank’s International Finance Group. Its investments included stakes in health care, clean energy, lending and real estate across Africa, Asia, Latin America and Turkey. Key charges against Naqvi included were instructed use of investor funds for Abraaj Group’s working capital, commitments and it was central to the cover-up of a $400 million shortfall across two funds by temporarily borrowing money for the purpose of producing bank balance confirmations and financial statements to mislead auditors and investors. Abraaj also approved the change of a fund’s financial year end to avoid disclosing a $200 million shortfall. Moreover, Naqvi personally arranged to borrow $350 million from an individual to make the Abraaj Group appear solvent.
Earlier in this connection SEC Pakistan had taken action against Sivendran Vettivetpillai for his actions in 2017 and 2018 that helped the now-defunct, Dubai-based private equity firm the Abraaj Group misappropriate client cash and mislead investors and potential investors about the firm’s performance track record in the offer and sale of its newest fund. In July 2021, Vettivetpillai pleaded guilty to federal criminal charges in connection with this conduct. According to the SEC’s order, Vettivetpillai, as a principal executive of the Abraaj Growth Markets Health Fund, agreed to delay using cash from that fund and its investors so that Abraaj could use it for its own benefit and the benefit of its investment adviser subsidiary, Abraaj Investment Management Limited (AIML) and also helped AIML conceal its misappropriation and desperate financial condition from Health Fund investors that were demanding information about the use and whereabouts of the fund’s cash. TW
Hoor Asrar Rauf has remained a national swimming champion and recently Graduated from UCF-USA in Hospitality and Event Management
