After a hiatus for the heat of the summer, here is a compliance case of valuation malfeasance. It comes from the biggest collapse of a private equity fund manager. The Abraaj Group and its CEO, Arif Naqvi, were vanguards in emerging markets investments. After some early success buying and transforming Inchcape Shipping Services and Jordanian Express Mail, Mr. Naqvi became a prolific fundraiser. The Abraaj Group at one point managed almost $14 billion, with holdings in health care, clean energy, and real estate across Africa, Asia, Latin America and Turkey.
The Abraaj fundraising was based on the purported success of the prior funds’ private company investments which were very illiquid. Mr. Naqvi also claimed that his investments were doing good for people while making money for the investors.
It turns out that wasn’t true. There are currently many pending actions against the Abraaj Group, Mr. Naqvi and the firm’s personnel in several countries.
The latest action is a case brought by the Securities and Exchange Commission against Mark Alan Bourgeois who was responsible globally for fundraising and investor relations and was a member of Abraaj’s Management Executive Committee. Mr. Bourgeois recommended that Abraaj not apply write-downs (or delay doing so) for investments made by prior funds to avoid the negative impact on the fundraising for its sixth fund. Abraaj did delay applying the write-downs. The result was that investors and potential investors in its sixth fund received an inflated performance track record while Abraaj and Mr. Bourgeois actively solicited investments for the sixth fund.
Mr. Bourgeois agreed to pay a $2 million fine in this case. Mr. Naqvi is currently free on bail in London while contesting extradition for financial fraud charges.
More detail:
- SEC Charges Former Head of Abraaj Global Fundraising for Conduct That Misled Private Fund Investors and Potential Investors: https://www.sec.gov/enforce/33-11036-s
- SEC order against Mark Alan Bourgeois: https://www.sec.gov/litigation/admin/2022/33-11036.pdf
- Abraaj investors were warned ahead of its historic collapse: https://www.pionline.com/article/20190503/ONLINE/190509938/abraaj-investors-were-warned-ahead-of-its-historic-collapse
- The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale https://www.harpercollins.com/products/the-key-man-simon-clarkwill-louch?variant=33007947612194