US prosecutors have widened their case against Abraaj Group and brought charges against three other senior executives of the former emerging markets private equity firm.
On Thursday, US authorities published an updated 78-page indictment. As well as dragging more former executives into the frame, the document alleges money laundering and sheds light on existing fraud charges. These are some of the key takeaways:
- Former director of operations and managing partner Waqar Siddique, chief financial officer Ashish Dave and managing director Rafique Lakhani – described as having day-to-day responsibility for the enterprise’s cashflow – have been added to the indictment. The previous version included Arif Naqvi, Mustafa Abdel-Wadood and Sev Vettivetpillai.
- On more than one occasion, Abraaj “bribed Pakistani elected officials,” the indictment claims. In June 2016, Naqvi authorized a $20 million payment to a Pakistani official with links to a senior elected politician. Abraaj wanted to engage the politician as a “transaction advisor” on a deal involving Pakistani power producer and Abraaj portfolio company K-Electric
3. In 2014-15 at a meeting with a Pennsylvania-headquartered asset manager to discuss potential investments on behalf of its clients, Naqvi made “false and misleading” statements and omitted to mention that it was facing a liquidity crisis, the deposition says. The investment advisor agreed to invest at least $150 million of its clients’ money with Abraaj.
4. The indictment cites a number of instances in which Abraaj, under the direction of Arif Naqvi, allegedly used investors’ funds for personal enrichment. In May 2017, Naqvi is alleged to have told Lakhani to ignore his concerns about cashflow and transfer funds to a family member of Naqvi’s and the company of a former secretary.
5. When faced with investor questions about the use of funds, Naqvi would often claim to be offended and highlight Abraaj’s relationship with a respected US foundation as indicative of its reputation, the document alleges. In September 2017, certain investors received an anonymous email warning about potential misappropriation at the firm. In a written response, Naqvi said he “categorically rejects” the allegation and that it is “bizarre and frankly unintelligible” to insinuate the group would use LP funds as working capital.
6. Among the excuses that Abraaj used for late payments to investors were bank holidays, religious holidays, the travel plans of its executives and counter-party error, the US prosecutor contends.
7. In June 2017, bank accounts linked to Abraaj’s 2015-vintage $1 billion Healthcare Fund received $196 million from an airline at which Arif Naqvi was a director. This came two days before Abraaj needed to prove to LPs in the fund that there were funds in the account, the indictment claims. The funds subsequently were transferred out of the account days later.
8. Vettivetpillai proposed that Abraaj delay making more than $500 million in write-downs until after it had secured additional committed LPs for its flagship APEV VI fund, which was targeting $6 billion. They decided to write down over two quarters to “smooth out” the performance decreases.
9. Among the charges against Abraaj that had not previously come to light is one count of theft of employee pension plans, the document noted. Naqvi, Siddique and Lakhani are accused of having embezzled money obtained from employee welfare and pension benefit funds, including a pension fund for professional musicians for unapproved purposes.
10. An intercepted call between Naqvi and a co-conspirator, described in the document as a US-based investor relations professional recruited to raise APEF VI, reveals Naqvi’s belief that the “primary regulator” will have Abraaj’s back.
“The regulator will act as a shield and will come together for the benefit for global emerging markets, the reputation of the country, and Abraaj,” Naqvi is alleged to have said.
Adam Le and Alex Lynn contributed to this report