In September 2017, Arif Naqvi was speaking in New York, trying to raise billions for a new fund.
As the head of private equity firm The Abraaj Group, Naqvi was a pioneer in the field of impact investing, which sought to make money for investors while doing good for the world. He spent the week rubbing shoulders with some of the world’s richest and most powerful people, including Bill Gates, Bill Clinton, and then-Goldman Sachs CEO Lloyd Blankfein.
But as he sought to impress the world’s movers and shakers, one of his employees was about to bring it all down, write Simon Clark and Will Louch in their new book, “The Key Man: The True Story of How The Global Elite was Duped by a Capitalist Fairy Tale” (Harper Business), out now.
It turned out Naqvi had allegedly taken around $780 million from his funds, $385 million of which remains unaccounted for. He is facing a potential 291 years in jail. And all because “while Arif was in New York, the employee broke ranks and sent an anonymous email to investors … [warning] about years of wrongdoing at Abraaj.” It was a bombshell that led to the “largest collapse of a private equity firm in history.”
But how did one man spin a story that allowed him to con some of the world’s smartest investors?
Naqvi was born in 1960 in Karachi, Pakistan, where he went to the city’s highly selective grammar school. He later attended the London School of Economics.
In 2003, he established Abraaj after raising $118 million, much of it from “Middle Eastern governments, royals, and traders,” and announced his intention to invest in ways that would help conquer global poverty.
While at this New York conference in 2017, an employee for Arif Naqvi (center) broke ranks and sent an anonymous email that brought him down.Bloomberg via Getty Images
In April 2010, he was invited by President Barack Obama, along with 250 other Muslim business leaders, to a Presidential Summit on Entrepreneurship. There, Naqvi gave a speech about the importance of impact investing and how a billion children would need training and jobs in the coming decades.
“It can only happen,” Naqvi told the gathering, “through entrepreneurship.”
Two months later, the US government invested $150 million in Abraaj.
Naqvi did put his money where his mouth was — to a point.
After taking control of his local electric company, Karachi Electric, in 2008, Naqvi made the electricity more reliable and the company profitable. But he also reduced the workforce by 6,000 employees, leading to riots.
Meanwhile, he distracted the West with massive charitable grants.
“Arif gave millions of dollars to universities around the world, including Johns Hopkins University in the United States, and the London School of Economics, which named a professorship after Abraaj,” the authors write. “Following in the footsteps of billionaire philanthropists like Bill and Melinda Gates, Arif started a $100 million charitable organization called the Aman Foundation to improve health care and education in Pakistan.”
While Naqvi sought funds from mega donors to help the poor, he was living in luxury in the Beverly Hills of Dubai.Bloomberg via Getty Images
But Naqvi also enjoyed the high life, flying around on “a private Gulfstream jet with a personalized tail number — M-ABRJ — and sailed on yachts to meet new investors who could help increase his fortune.”
By 2007, Naqvi had moved into “a palatial new mansion in Dubai’s luxurious, gated Emirates Hills district … known as the Beverly Hills of Dubai.”
He was a regular at Davos and similar conferences, where he became friendly with the likes of Gates, who was the guest of honor at a dinner at Naqvi’s home in 2012.
“Bill and Arif had much to discuss,” the authors write. “They agreed that their charitable foundations would work together on a family planning program in Pakistan. Arif seemed to be precisely who Bill was looking for. He was wealthy and concerned for the poor.”
Naqvi was granted a $100 million investment from the Gates Foundation to supposedly invest in hospitals and clinics in emerging markets. This investment, in the new Abraaj Growth Markets Health Fund, helped Naqvi attract $900 million more from other investors.
“This is a significant co-investment partnership,” Gates said about the deal. “It is also an example of the kind of smart partnerships that hold huge promise for the future.”
In 2010 at a Presidential Summit on Entrepreneurship held by Obama, Naqvi gave a speech about the importance of impact investing in children’s futures.AFP via Getty Images
In reality, Naqvi had already started misusing the money with a “secretive treasury department” that not even most of his employees knew about, the authors write.
“Abraaj was really made up of a tangled web of more than three hundred companies based mostly in tax havens around the world.”
It was required by regulators to keep millions of dollars in a bank account for emergencies, but the account was usually close to empty, the authors write.
“Just before the end of each quarter, when Abraaj Capital had to report to the regulator, Arif and his colleagues moved money into the account to make it seem like it contained the required amount. A few days [later], they emptied the account again.”
“They are manipulated beyond anything you have seen in a fund and easy to discover. Don’t believe what the partners send you.”
anonymous email that blew the lid off Naqvi’s scheme
Abraaj’s employees also frequently raided one fund to pay dividends…