Founded in 2002 by the Karachi, Pakistan-born Mr Naqvi, Abraaj attracted global investors by offering easy access to fast-growing markets in the Middle East. Greg Beadle / World Economic Forum
Founded in 2002 by the Karachi, Pakistan-born Mr Naqvi, Abraaj attracted global investors by offering easy access to fast-growing markets in the Middle East. Greg Beadle / World Economic Forum
Founded in 2002 by the Karachi, Pakistan-born Mr Naqvi, Abraaj attracted global investors by offering easy access to fast-growing markets in the Middle East. Greg Beadle / World Economic Forum
Founded in 2002 by the Karachi, Pakistan-born Mr Naqvi, Abraaj attracted global investors by offering easy access to fast-growing markets in the Middle East. Greg Beadle / World Economic Forum

Abraaj's alleged funds misuse includes irregularities at vehichles other than health


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Two separate examinations into the alleged misuse of money at embattled Middle Eastern investment firm Abraaj Group found potential irregularities in its $1 billion health-care fund as well as its other vehicles, according to people with knowledge of the matter.

An audit commissioned some months ago by four high-profile investors including the Bill & Melinda Gates Foundation suggested that money from the health-care fund was being diverted elsewhere, said the people, asking not to be identified because the matter is private. Preliminary findings from a separate review by Deloitte - at Dubai-based Abraaj’s request - also threw up potential discrepancies in the accounting at some of the other pools, they said.

Deloitte, whose review is still underway, is discussing its findings so far with the Dubai Financial Services Authority, the people said. The markets regulator has yet to decide on a course of action, they said.

Abraaj’s leadership team “has been focused on executing on the re-organisation of the business, engaging with all investors, and driving value in Abraaj’s portfolio companies across its operating markets” since announcing broad changes to the company’s governance and operating model in February, a representative for the firm said in a statement. Abraaj didn’t comment on the two reviews of its operations. Spokesmen for the DFSA, Deloitte and the Gates Foundation declined to comment.

The findings may lead to intensified scrutiny by regulators at a crucial juncture for Abraaj as the Middle East’s biggest buyout firm attempts to sell a stake in its funds business while simultaneously trying to placate angry investors. Despite founder Arif Naqvi ceding control of the asset management unit in February and new managers pledging to introduce more rigorous internal controls, the firm has been roiled by liquidity concerns, prompting asset sales and job cuts.

Founded in 2002 by the Karachi, Pakistan-born Mr Naqvi, Abraaj attracted global investors by offering easy access to fast-growing markets in the Middle East at a time when private equity in the region was still in its infancy and there were few competitors. Along the way, the firm transformed itself into an investment giant with almost $14bn in assets held far beyond its home market on behalf of sovereign wealth funds, large pension funds, companies and foundations.

In February -- less than a week after the Wall Street Journal broke the news that the four investors had hired Ankura Consulting Group to investigate what had happened to the money they injected into Abraaj’s health fund -- the buyout firm said an internal review by KPMG had been completed, and found that all payments and receipts were properly accounted for. Representatives for KPMG didn’t return calls and emails seeking comment.

The discrepancy between money it collected from investors and the amounts it invested was due to “unforseen political and regulatory developments” in several markets that led to delays, Abraaj has said. An agreement with clients allowed it to hold on to the cash until it could be deployed, according to the firm, which also said that unused capital was returned to investors at the end of December.

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Ankura reported finding instances of irregularities in the health-care fund, including the diversion of funds from that pool to other investments, the people said. A representative for Ankura declined to comment.

The review by KPMG, Abraaj’s restructuring efforts and the appointment of independent consultants to review its corporate governance failed to appease some investors. Meanwhile, Abraaj returned capital in a new global fund, temporarily halted fresh investments, delayed an initial public offering or sale of its North African hospitals business, and pared about 15 per cent of its total workforce.

Abraaj’s woes have already sent shock waves through the ranks of local dealmakers, contributing to bringing private equity deals and fundraising in the region to a halt, according to interviews with about a dozen financial industry executives who requested anonymity because the matter is sensitive.

Earlier this month, the firm sought to reassure its biggest creditors about any potential liquidity issues, telling them it was close to finding a buyer for a controlling stake in its fund management unit and disposing of its Pakistani utility, people familiar with the matter said. Colony NorthStar, the private equity and real estate firm run by billionaire Tom Barrack, is a front-runner for the holding in the asset management firm, they said.

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UAE currency: the story behind the money in your pockets
ELIO

Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett

Directors: Madeline Sharafian, Domee Shi, Adrian Molina

Rating: 4/5

Sole survivors
  • Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
  • George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
  • Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
  • Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
PROFILE OF HALAN

Started: November 2017

Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga

Based: Cairo, Egypt

Sector: transport and logistics

Size: 150 employees

Investment: approximately $8 million

Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar

The specs: 2018 Audi RS5

Price, base: Dh359,200

Engine: 2.9L twin-turbo V6

Transmission: Eight-speed automatic

Power: 450hp at 5,700rpm

Torque: 600Nm at 1,900rpm

Fuel economy, combined: 8.7L / 100km

In numbers: China in Dubai

The number of Chinese people living in Dubai: An estimated 200,000

Number of Chinese people in International City: Almost 50,000

Daily visitors to Dragon Mart in 2018/19: 120,000

Daily visitors to Dragon Mart in 2010: 20,000

Percentage increase in visitors in eight years: 500 per cent

if you go

The flights

Direct flights from the UAE to the Nepalese capital, Kathmandu, are available with Air Arabia, (www.airarabia.com) Fly Dubai (www.flydubai.com) or Etihad (www.etihad.com) from Dh1,200 return including taxes. The trek described here started from Jomson, but there are many other start and end point variations depending on how you tailor your trek. To get to Jomson from Kathmandu you must first fly to the lake-side resort town of Pokhara with either Buddha Air (www.buddhaair.com) or Yeti Airlines (www.yetiairlines.com). Both charge around US$240 (Dh880) return. From Pokhara there are early morning flights to Jomson with Yeti Airlines or Simrik Airlines (www.simrikairlines.com) for around US$220 (Dh800) return. 

The trek

Restricted area permits (US$500 per person) are required for trekking in the Upper Mustang area. The challenging Meso Kanto pass between Tilcho Lake and Jomson should not be attempted by those without a lot of mountain experience and a good support team. An excellent trekking company with good knowledge of Upper Mustang, the Annaurpuna Circuit and Tilcho Lake area and who can help organise a version of the trek described here is the Nepal-UK run Snow Cat Travel (www.snowcattravel.com). Prices vary widely depending on accommodation types and the level of assistance required.