The Abraaj Group collapsed under the stewardship of Arif Naqvi, who now faces extradition to the US. Or did it? The truth may be rather more complicated and concerning
The first time I went up Exhibition Road towards Hyde Park to interview Arif Naqvi (for my forthcoming book Icarus: The Life and Death of the Abraaj Group), I wondered if any of the other people walking along knew that someone had been under house arrest here since the spring of 2019. “Under house arrest in South Kensington,” does not trip off the tongue as a status update – but that is Arif Naqvi’s life.
Naqvi created the world’s largest private equity firm investing in emerging markets. His mantra was: “Do good while making money.” He was a regular at Davos; a showman, salesman, loquacious debater. His life was lived large and he performed himself to a point at which he was about to take his firm, The Abraaj Group (abraaj means “towers” or “towering” in Arabic), through to the big time, with $20 billion under management. But then, on 10 April 2019, he was arrested at Heathrow as he stepped off a British Airways plane from Islamabad – and the performance ended abruptly.
For the last two years and two months, the US has been trying to extradite Naqvi to face charges of theft, conspiracy and fraud, which he vociferously denies. If sent to the US and found guilty, he would face a total of up to 291 years in prison. He was indicted with a group of other Abraaj executives, but the others have all cut deals or turned state’s evidence. He is alone in continuing to declare his innocence and fight extradition under the controversial UK-US extradition treaty.
The block he lives in is posh but not overly nouveau riche – it sits in that nether region of London blocks between old and new money. The other “inmates” of the block are a cross section of the international London wealthy, and their staff, coming in and out with lockdown groceries, are a cross section of London domestics. I could not help thinking that if he did nick $385 million, as the Wall Street Journal alleges, then he definitely did not put it into real estate. His doorbell plays the chimes of Big Ben. A child’s red play car, the kind the kid can sit in and drive, dominates the hallway. I remove my shoes, thankful that I had newish socks on and am ushered by his son into Naqvi’s TV den, sitting room, office and – in effect – prison cell.
Our first encounter begins with a slow dance. I am to be seduced. Coffee, tea, water and Jaffa cakes; he is impressed by my CV, appreciates an open-minded take on his story, is intrigued by the idea of stasis as defining our contemporary condition. Before jumping down the rabbit hole of Arif Naqvi’s life, I was researching a book about just that – stasis – and had sent him the links to my blog posts on the subject, as well as to an analysis of the human rights position on his case and the outline of my book. His younger son sits quietly looking at his phone but listening to every word.
I had expected it to be a lot more like a scene from the famous film about the last days of Hitler – Downfall – with Naqvi surrounded by acolytes moving imaginary armies around. But Naqvi knows he is alone, any armies fighting for him would be imaginary. He has his immediate family, and a close network of extended family and friends, many of whom contributed to his record £15 million bail. Then there are the lawyers here and in the US. They face the US Department of Justice, the US Security and Exchange Commission, and the US media. Not a single senior member of Abraaj staff, he tells me, has been in touch since his arrest.
Once the tea-and-cake seduction ends, we get down to business: setting ground rules, and beginning to answer questions. But Naqvi is not a question-and-answer type of person. He is a “monologuer” who can be steered by a well-timed intervention and diverted for a while. I realise, of course, that he is not speaking to me by accident. He has stayed silent throughout his extradition trial. He made a point to say that I was only in his room because the material I had sent him showed that I was not interested in the “paparazzi approach to my life”. Naqvi’s story, to me at least, is far more interesting in terms of the forces that had put him in this room today than in terms of the lifestyle of private equity guys. A one-and-half-hour scheduled talk turned into a four-hour marathon.
The terms of the interviews were clear: this is background and will not touch on the indictment or the case. I cannot quote from it directly unless agreed by him in advance. He does not break his own rules except once. This is surprising because, as I say in the book, if talking were a sport, Naqvi could open the bowling for the Pakistani test team. When he did once stray onto dangerous ground, he quickly pulled himself back, and I am not here to interrogate or try to fit his answers to my preconceived views. Whenever I asked about events mentioned in the media, he would inevitably retort, “Follow the facts.” A lot of our time together was filled by him giving his views on current affairs, Covid and Covax, politics in Britain, and how he would like to devote the rest of his life to criminal justice reform and improving prison conditions.
My wife, Professor Meg Jensen, has literally written the book on trauma and the autobiographical. So I was prepared. Naqvi’s occasional verbosity is a direct function of when he feels he is in his safe zone, but his helplessness in front of the US criminal justice system is all too apparent in his inability to sustain exuberance. As we talked more, it became obvious that his life is measured daily: is this a good day or a bad day? Naqvi is a person with post-traumatic stress disorder (PTSD), telling me the story of his life. The subtitle of Meg’s book is “negotiated truths”. This was a man trying to negotiate between mental illness and truth-telling with visible difficulty, but a palpable courage. This was a man who was suffering.
I interviewed him on four occasions, for about eight hours in all. Four other potential interviews were cancelled at the last moment, another was suddenly cut short either because some traumatic memory was triggered or perhaps the reality of his situation had descended on him. On one occasion when we were talking, he repeatedly lost his train of thought and digressed into telling stories with a manic intensity, walking around and around. In our first meeting, he was charming, fluent, funny and had a simply astonishing memory for names and dates. Of course he did, Meg said to me, he is traumatised, he is living in the moment of his arrest and reliving every circumstance that led to it in every waking moment.
The interviews were only one corner of the foundations of the alternative narrative which took shape in my book. There are three others. Firstly, the documentary evidence is there in abundance and has been all along; the sheer volume of material available online about this case is extraordinary. Secondly, I was lucky to be given a treasure trove of material collected by a junior journalist who did not feel the book they had planned to write would be compatible with their continuing career in the Gulf. Finally, there is what Marxists call the objective truth of geopolitics in our times. It is on these four foundations that I built my case. Icarus challenges the dominant media narrative and some powerful vested interests. It touches on realpolitik, race and identity. The argument of the book is as follows: almost everything you have read in the media about the closing of the Abraaj Group and the arrest of Arif Naqvi is inaccurate. The firm did not collapse, it was destroyed.
This is how it happened. In 2002, Naqvi founded The Abraaj Group, which specialised in investing in emerging markets. By 2016, it was fundraising for its first single global fund, APEF VI, which would have added $6 billion to the funds under management and taken this figure to $20 billion, replacing its existing regional fund model and head count of senior staff required across different regions. Naqvi had also created a health fund with a series of global investors, including the Gates Foundation. This fund was set to invest $1 billion into healthcare, including hundreds of millions of dollars into Pakistan’s healthcare services
Alongside this, there was a clean energy fund. Abraaj had previously invested in energy in Pakistan; in 2008, Abraaj bought a controlling interest in Karachi Electric. By 2016, it was ready to sell its share in Karachi Electric to Shanghai Electric (which would form a strong part of the China-Pakistan Economic Corridor and the Belt and Road Initiative), and Naqvi was ready to take the firm public in an IPO that would allow him to step back and devote himself to full-time public service in Pakistan. The deal to sell Karachi Electric for $1.7 billion was done in October 2016. In November 2016, Donald Trump won the US Presidential election. His campaign was funded in part by the US private equity industry and several key executives from that industry joined the administration. His foreign policy was determinedly anti-Chinese.
Naqvi had long been courted by the US as an advocate of free markets. In 2008, they had welcomed his investment in Karachi Electric. In 2011, he was even mentioned in an East-West Institute report as the potential leader of Pakistan a decade later. He is a Pakistani nationalist at heart. He was advising Imran Khan on economic policy and would later assist with negotiations with the IMF, trying to get a better deal for Pakistan.
Naqvi was also courting Chinese investment into his new global fund APEF VI and was even considering selling a chunk of Abraaj to Chinese investors. This placed him in direct opposition to the Trump administration and in direct opposition to the pro-US elements in the Pakistani establishment. He was also bringing large US institutional investors into APEF VI to sit alongside their Chinese counterparts.
Inside The Abraaj Group, he was vulnerable because the creation of the single global fund would reduce the opportunities for senior staff to continue their lucrative careers in Abraaj – which meant internal relationships began to sour. In turn, US private equity firms estimated it would cost them close to $500 million to build the networks and establish the kind of fund presence in emerging markets that Abraaj had built over 15 years, so they were looking for an opportunity to pick it up on the cheap.
The takedown of Abraaj was carried out in stages. Firstly, the Karachi electric deal was blocked. This blockage created a cash flow crisis in Abraaj because Naqvi had been expecting an inflow of $550 million from the sale into Abraaj itself.
The reputation of the company was then destroyed. An anonymous email, using both sophisticated technology that made it impossible to trace and a fake tone that made it sound like it was from someone whose first language was not English, was sent to key investors; it was almost racist in caricature and, when I read it, the language reminded me of the tone in the emails one used to get a dozen years ago from online scammers. The email told the investors to look at the way in which Abraaj was managing its funds, especially its use of commingling of funds from different sources and its use of these funds to cover running costs.
The existence of the email was leaked to the media, and the Wall Street Journal began to cover the story. A small group of investors asked for an audit even though there had already been two audits completed by KPMG and Deloitte, and an opinion from Abraaj’s Magic Circle lawyers Freshfields that no funds were missing and that the use of funds had been appropriate.
Naqvi continued to try and close the Karachi Electric deal, but because he wanted to continue working with the US investors, he returned all their funds with interest at the end of 2017.
As the sale of Karachi Electric and the fundraising for APEF VI, which included the Chinese investors, had not been stopped by the initial leaks to the press, the Abraaj email server was either hacked by an outside agency or someone senior inside the company leaked selections from it. These carefully curated selections were sent to the press, especially the Wall Street Journal and the New York Times. The Wall Street Journal broke and reported on the problems with the US investors. This was February 2018. This material also went to the US Department of Justice or it was leaked from the Department of Justice to the media. Either way, a coordinated investigation was evidently launched by the DoJ, which the Abraaj executives did not know about until arrests were made in April 2019.
Next there followed a series of ever more sensational articles in the Wall Street Journal, which completed the destruction of the company’s reputation. Naqvi then made some serious tactical errors. Under pressure from the US investment house Hamilton Lane, he decided to release the investors who had committed the first $3 billion to APEF VI from their commitments. Again, he wanted to do this to ensure that they could do business with them again in the future; but, in the rush, Abraaj found themselves on the receiving end from the French bank Société Générale, which had lent them money on the strength of the APEF VI investor identities.
Meanwhile, at the behest of the US, the Karachi Electric sale continued to be blocked by key establishment functionaries in Pakistan. The media reports made it impossible for Abraaj to sell assets, and the release of the investors in APEF VI caused other creditors to start demanding repayments.
Two unsecured creditors put even more pressure on Naqvi. One cashed a security cheque that bounced in the UAE because they had never intended for it to be cashed; it was simply a formal device for reassuring lenders. (This is a normal practice in the Gulf. Cheques are issued as guarantees for leases on flats and in business dealings. They are intended to show that people have the funds, so they are not normally presented to be cashed.) Bouncing company cheques in the UAE, if intention can be proved, is a criminal offence.
The other unsecured creditor pushed hard for liquidation and opposed a restructuring plan that Naqvi had developed. This plan would have ensured that all creditors were paid back. Insolvency 101: unsecured creditors never put a company into liquidation when the secured creditors hold all the cards because the unsecured creditors will get paid back last.
The Abraaj Group was then irrationally split into two parts with separate liquidation processes. That forced the value of the funds down further and these were one by one acquired cheaply by US- and UK-based private equity firms, except for one of the African funds which was taken over by the senior Abraaj executive who was running it.
Naqvi was dealing with the disintegration of his firm and continuing to advise the Imran Khan government on the IMF talks and other reform areas and still pushing for the Karachi Electric deal to go through on an arms-length basis. Three civilian governments and three successive prime ministers, some from different political parties, had given the sign-off in principle multiple times. Again, the Wall Street Journal intervened with allegations of significant inducement payments to the previous government of Nawaz Sharif, which, in a rare display of unity, both main Pakistani political parties, the PTI and the PMLN, vigorously denied.
To finally stop Naqvi, he was arrested at Heathrow Airport on 10 April 2019, under an indictment from the Southern District of New York. The IMF deal was concluded on their terms rather than Pakistan’s terms. The Karachi Electric deal has still not concluded and it might now be broken up and its monopoly removed. Karachi Electric could now be sold in three parts. US firms can bid on these lots. And the monopoly power of Karachi Electric would be gone.
Naqvi remains under house arrest. The extradition treaty between the US and UK means he cannot argue his case in court, but he remains committed to fighting with a naïve faith in the fairness of the UK justice system. Blindly optimistic, as one of his oldest friends summed him up to me.
Naqvi has at least four major forces working against his ability to enjoy justice and a fair due process: his nationality and supposed wealth, the interests aligned against him, the media narrative that is firmly established, and the conservatism of his legal team. These are each interrelated.
His nationality means that, in important respects, the story is framed before it begins. There is an assumption that corruption is a part of the Pakistani system – hence every Western publication has at some stage during the tumultuous media storm referred to Naqvi as “Pakistani born”. It is the same assumption made about Iraq, where I have worked for the last ten years on a range of projects including anti-corruption initiatives. There are fundamental flaws in both the Iraqi and the Pakistani system and corruption is a part of everyday life, but that does not mean that all Pakistanis or all Iraqis are corrupt. That assumption is also based on the false premise that our western systems are not corrupt. No one living through the current UK government or the previous US administration can possibly believe that.
Also, this framing is Islamophobic. Naqvi has been described as the Muslim Bernie Madoff in the media. Would a description “the Jewish Bernie Madoff” pass unchallenged?
There should be a strong constituency in the human rights world getting behind Naqvi on the injustice of the extradition treaty. They are held back because he was a private equity guy and is thought to be very wealthy, or maybe because, as Margaret Thatcher once put it, he is not “one of us”. I doubt he has very much money left as he seems to have put most of it into the failed attempts to save the company, settle with creditors and pay exorbitant legal bills, but the perception continues to dog him despite others putting up his bail and paying his legal bills, some quite openly and proudly.
If impressions are anything to go by, there did not seem to be any alternative to the Asda (as I learnt later) Jaffa cakes on offer.
The interests aligned against Naqvi are extremely powerful. They extend from the US lobby in Pakistan through elements in the US and UK private equity industries, who are doing very well running the funds they picked up at fire sale prices, through to the anti-China lobby in the US. In turn, these forces have organised both the media narrative and assisted in the criminal case against him. Finally, every single one of his lawyers has refused to see me since I became interested in the human rights aspects of the case from the perspective of the extradition treaty. They have failed to fight the case in the media. This has allowed the entire story of the destruction of Abraaj to be framed by Wall Street Journal and whomever has been feeding them.
His lawyers would argue that this silence was needed because of the fear that a judge might one day hold Naqvi in some variation of contempt. That is why he has not made his case in public and why he held back from making it in the interviews with me. If Naqvi ends up in court in the US, he stands no chance of a fair trial and both his and, strangely, the prosecution’s psychiatrist have advised the court that he is at risk of suicide if he is extradited. The magistrate’s response to this assertion amounted to saying, well, they have shrinks in the US, too.
When our final interview ends, as I describe in the book, I can feel the grey haze descend on him. His body folds in on itself and his mind closes down and confines itself to the four walls of his mansion block apartment, where he is now stuck for the night under the terms of his curfew. I set off to walk home to Pimlico, and there is a beautiful sunset. I realise Naqvi, a prisoner in South Kensington, cannot do the simple thing of walking out of his house to watch the sun descend over the Albert Hall or see the gold in the Albert Memorial shine – because his exercise period is over.
ICARUS: The Life and Death of the Abraaj Group will be published by Biteback Publications on 20 July