Lawyer says Arif Naqvi not responsible for Abraaj collapse

By Murtaza Ali Shah
November 12, 2018

LONDON: Famous businessman and philanthropist Arif Naqvi is not to be blamed in any sense for the collapse of the embattled Abraaj investment fund, his lawyer has said.

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Habib Al Mulla, Executive Chairman of Baker & McKenzie, has said that the Abraaj CEO Arif Naqvi cannot be held responsible for the fall of investment just because he enjoys high profile.

The high profile downfall of Dubai-based Abraaj — now reportedly the world’s largest insolvent private equity fund — has raised questions about corporate mismanagement and transparency in the United Arab Emirates (UAE) and beyond but Naqvi’s lawyer has mounted defence of the Pakistani businessman from Karachi who is now mostly based between Pakistan and London.

The lawyer pointed to local regulators including the Dubai Financial Services Authority (DFSA) and suggested that there were loopholes in the system.

Al Mulla, who is credited with drafting many of Dubai’s modern legislative structures and created the concept of financial free zones in the UAE, said: “Is this incident due to a lack of regulation? I would say categorically no. If you ask me, could the DFSA have done a better job to contain this issue after it happened? I would have said yes,” Al Mulla said. “I think they probably didn’t realise the magnitude of the situation.”

The DFSA, the regulatory arm of the Dubai International Financial Centre (DIFC), had been investigating a range of matters within the Abraaj Group.

“It was the regulators duty to try to circumvent these incidents and try to contain the public damage that has been done,” Al Mulla added. “Had the DFSA come earlier, addressed these concerns and addressed the media, I think yes, this would have been avoided,” he said.

Abraaj was founded in 2002. It grew to become a major fund in the Middle East, with almost $14 billion under management. Arif Naqvi, CEO of the fund, attracted billions from investors, including from the Bill and Melinda Gates Foundation, the World Bank and the US government, on a promise to do good in emerging markets. In February this year, Abraaj group started to unravel and news broke out about the major difficulties it was facing internally.

As the Abraaj story broke, Arif Naqvi denied any wrongdoing and stressed that no misappropriation of funds took place.

Now his lawyer has stressed that there has been no corruption and no misuse of funds.

“If there were any wrongdoings from the directors, or breach of any laws or regulations or even corporate governance, we all would have seen regulators taking a different approach. And we have seen so far that no regulator, neither in the UAE nor in other jurisdictions where Abraaj is doing business, came up with any kind of charges against Abraaj or its directors. It has only been the media.”

Separately, Arif Naqvi has denied claims in a report published by the Wall Street Journal (WSJ) that he offered $20 million to a Pakistani businessman for cooperation in the sale of K-Electric, Abraaj’s stake in Pakistan.

The WSJ report had claimed that Naqvi offered $20 million payment to a Pakistani businessman to secure the cooperation of then prime minister Nawaz Sharif in Abraaj’s sale of its stake in K-Electric, which supplies electricity to Karachi and is also partly owned by the Pakistani government.

Arif Naqvi has said that claims of bribes “are entirely false”.

“They are premised on isolated extracts from illegally obtained documents that have been taken entirely out of context,” he said in a statement.

“It appears that unidentified individuals who are unfairly biased against me and Abraaj are seeking to undermine the sale of K-Electric, damage mine and Abraaj’s reputation and thereby prejudice the creditors of the Abraaj Group.”

Naqvi added that he never “contemplated, directed, authorised or paid any bribes” during the K-Electric sale process, which he said “was and very much remains in the best interest of the country.”

Naqvi also said that he “neither misused nor misappropriated any Abraaj funds.”

“There was nothing untoward about my requests for transfers or Abraaj Group funds to me or my family, or for my personal investments or obligations,” he said.

“In drawing down funds from Abraaj, I acted in accordance with the arrangements put in place by the Abraaj Group.”

Naqvi said that the use of monies from Abraaj’s healthcare fund for general corporate purposes was undertaken only after having “sought and received independent legal advice as to whether it was permissible.”

All un-invested funds were “accounted for and returned to investors in the healthcare fund with interest as of December 31, 2017,” he added.

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