KARACHI: The founder of Dubai-based private equity fund Abraaj Capital, Arif Naqvi, was arrested at Heathrow Airport in London on fraud charges filed in New York by the Securities and Exchange Commission (SEC).

Reports said the arrest was made last week. His managing partner, Abdel-Wadood, was also arrested from his hotel in New York on Thursday where he had just arrived with his wife and son.

Authorities said they moved fast upon learning of Mr Wadood’s presence on the US soil through a geotracker they had managed to install on his phone.

Arif Naqvi faces extradition to US; his managing partner arrested in New York

The complaint filed in a Manhattan court by the SEC alleges that Mr Naqvi misappropriated more than $230 million of his fund’s money between September 2016 and June 2018. The complaint says that money was moved out of one of the investment funds managed by Abraaj into other funds without the permission or prior knowledge of the investors who had entrusted those funds to Abraaj for purposes of investing in health care facilities to serve the poor in countries like Pakistan, India and others.

“While Abraaj Investment Manage­ment and Naqvi falsely reported to the Abraaj Health Fund and its investors that their money would be invested in health care-related businesses in emerging markets, Abraaj Investment Management — under Naqvi’s control — misappropriated the money to cover cash shortfalls at Abraaj Investment Management and its parent company, Abraaj Holdings Ltd, a separate entity that Naqvi largely owned and controlled,” the complaint filed by the SEC says.

The SEC is not seeking any jail term in the complaint, though more detailed charges will be filed by the end of May. At the moment, the only relief being sought by the SEC is “that the court enjoin defendants from committing further violations of the federal securities laws as alleged in this complaint, and order defendants to pay disgorgement, plus prejudgment interest, and a monetary penalty based upon these violations”. The amounts have not yet been specified.

In January this year, Finance Minister Asad Umar had confirmed to Dawn that Mr Naqvi was advising the government on various matters, though he did not provide specifics. “Yes, he is advising the government on more than one matter, in line with his expertise,” the minister had said.

In court during Mr Wadood’s hearing, the prosecutor described Abraaj Capital as “a massive fraud”. Mr Wadood’s lawyer did not seek bail at this time. Mr Naqvi in the meantime faces extradition to the United States to face charges there. The UK law allows extradition to the United States for a wide range of offences, including white-collar crimes.

Mr Naqvi had raised a new investment vehicle specifically for “impact investing”, a new and fashionable trend to raise private sector money for investment in the provision of social services like health care for poor segments of the population in developing countries. He had managed to get the Bill and Melinda Gates Foundation, along with the World Bank and a number of other large partners, to invest up to $850 million in this new vehicle called the “Abraaj Health Fund”, according to the SEC complaint.

The complaint states that once deposited, large portions of these funds were then diverted to another investment vehicle within the Abraaj Group, called Abraaj Investment Management, which is solely owned by Mr Naqvi. Funds were drawn down from the health fund and used to pay for the cash shortfalls and debt obligations of Abraaj Holdings and Abraaj Investment Management instead.

By late 2017 and early 2018, the complaint states, “following months of investor demands”, Mr Naqvi’s fund “ultimately returned much of the money it misappropriated, as well as over $13 million in interest to the Abraaj Health Fund investors”.

Published in Dawn, April 13th, 2019