How a Pakistani crook ‘stole’ $ 100 million from Bill Gates

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 impact investing, which sought to make money for investors while doing good for the world. He spent the week hanging out with some of the richest and most powerful people in the world, including Bill Gates, Bill Clinton and Lloyd Blankfein, then CEO of Goldman Sachs.

But as he sought to impress the world’s actors, 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), now available.

It turned out that Naqvi would have withdrawn around $ 780 million from his funds, of which $ 385 million has still not been accounted for. He now faces 291 years in prison. And all because “while Arif was in New York, the employee broke ranks and sent an anonymous email to investors. . . [warning] over years of wrongdoing at Abraaj. It was a bombshell that led to “the greatest collapse of a private equity firm in history.”

But how did one man tell a story that allowed him to swindle some of the smartest investors in the world?

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Naqvi was born in 1960 in Karachi, Pakistan, where he attended the city’s highly selective high school. He then attended the London School of Economics.

In 2003, he created Abraaj after raising $ 118 million, largely from “governments, royals and traders in the Middle East,” and announced his intention to invest in ways that help defeat poverty in the world.

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 delivered a speech on the importance of impact investing and how one billion children would need training and jobs in the decades to come.

“It can’t happen,” Naqvi told the rally, “through entrepreneurship”.

Two months later, the US government invested $ 150 million in Abraaj.

Naqvi put his money where his mouth was – to a point.

After taking control of his local power company, Karachi Electric, in 2008, Naqvi made the electricity more reliable and the business profitable. But it also cut the workforce by 6,000, leading to riots.

Meanwhile, he distracted the West with massive charitable grants.

“Arif has donated 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 chair after Abraaj,” write the authors. “Following in the footsteps of billionaire philanthropists like Bill and Melinda Gates, Arif launched a $ 100 million charity called the Aman Foundation to improve healthcare and education in Pakistan.”

But Naqvi also enjoyed the high life, flying “a private Gulfstream jet with a personalized tail number – M-ABRJ – and cruising yachts to meet new investors who could help him increase his fortune.”

In 2007, Naqvi had moved into “a lavish new mansion in the upscale, exclusive Emirates Hills district of Dubai … known as the Beverly Hills of Dubai”.

He was a regular at Davos and similar conferences, where he befriended Gates, who was the guest of honor at a dinner at Naqvi in ​​2012.

“Bill and Arif had a lot to discuss,” write the authors. “They agreed that their charitable foundations would work together on a family planning program in Pakistan. Arif seemed to be exactly the one Bill was looking for. He was rich and concerned about the poor.”

Naqvi received 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 an additional $ 900 million from other investors.

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“This is an important co-investment partnership,” Gates said of the deal. “It’s also an example of the type of smart partnerships that hold great promise for the future.”

In fact, Naqvi had already started abusing money with a “secret treasury department” that even most of its employees did not know about, the authors write.

“Abraaj really was made up of a tangled web of over three hundred companies based mostly in tax havens around the world.”

Forced by regulators to keep millions of dollars in a bank account for emergencies, the account was typically nearly empty, the authors write.

“Just before the end of each quarter, when Abraaj Capital was due to report to the regulator, Arif and his colleagues transferred money to the account to make it look like it contained the required amount. [later], they emptied the account again. ”

Abraaj employees also frequently raided a fund to pay dividends to others in “a kind of gross fraud known as the Ponzi scheme,” the authors write.

On January 9, 2014, when Naqvi was alongside Richard Branson at the head of an Oxford forum on social entrepreneurship, an official in his finance department wrote to him that “we will have a deficit. $ 100 million by January 15. ”

Naqvi “had to choose between telling the truth to investors and lenders, and pretending everything was going according to plan. He chose the path of deception,” the authors write.

In 2015, Naqvi “got paid $ 53.75 million” and also “kept $ 154 million of the proceeds from [a] sale of stocks to spend as it sees fit and deprived its investors of their gain, ”the authors write.

Soon after, a Gates Foundation fund manager Andrew Farnum began to be suspicious. Although the Abraaj Group shows no movement on previous investments, the organization was still asking for hundreds of millions of dollars in additional investments from Gates.

In September 2017, Farnum wrote an email asking for the location of Gates’ current funds and how they were invested, as well as a schedule for upcoming investments.

“Andrew’s tone was polite, but the implications of his questions were worrying,” the authors write. “He was asking Abraaj to prove that he was not using the money of one of the richest men in the world.”

As Abraaj sent vague assurances and old bank statements, Farnum demanded more details.

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A week later, Abraaj’s anonymous employee sent the incriminating email to the fund’s investors, revealing the organization’s shady deals.

“Do your due diligence and ask the right questions. You’ll be amazed at what you find,” the email read.

“The areas you should focus on are like unrealized earnings assessments – they’re manipulated beyond anything you’ve seen in a fund and easy to find. Don’t believe what partners send you … don’t believe what they tell you and check the fact. Protect yourself. ”

Immediately, the walls collapsed.

“Investors no longer trusted Abraaj and wanted their money back. The problem was that Abraaj didn’t have it,” the authors write.

The Gates Foundation hired a team of forensic accountants to investigate Abraaj’s books. Throughout it all, Naqvi was always meeting with potential investors, trying to raise $ 6 billion for a new fund.

Around this time, Naqvi appeared in a televised debate on global healthcare in Davos with Gates.

“Bill shifted uncomfortably in his seat and pursed his lips,” write the authors. “Whenever Arif tried to make eye contact or strike up a conversation with him, Bill would look away.”

In October 2018, the authors published an article exposing Abraaj’s alleged wrongdoing in the Wall Street Journal.

“At least $ 660 million in investor money has unwittingly been transferred to Abraaj’s hidden bank accounts,” the authors reported. “Then over $ 200 million was transferred from those accounts to Arif and his relatives.”

Finally, US prosecutors accused Naqvi of leading a criminal organization. On April 10, 2019, he was arrested at the Heathrow Airport extrat in London. His extradition was ordered so that he could stand trial in New York for fraud.

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Despite the written record, Naqvi has “maintained his innocence” while he remains under house arrest in London pending a decision on his appeal. The name of his company was withdrawn from the professorship at the LSE.

In the meantime, her shocking story serves as a warning to wealthy – but gullible – investors seeking to fight global poverty.

The poor, the authors write, would have “benefited more if Arif had carried his millions to the top of a tall building in Karachi and tossed them into the sky, letting the wind scatter the dollar bills across the city.”

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