$200 Million Fraud & Fall of K-Electric Parent Company Abraaj Group

In this report by highlight number of events, we try to narrate the story of how the local political struggle marks the downfall of one of the largest equity fund Abraaj Group, downfall which ended up exposing over $200 Million security.

Last night Former CEO of Abraaj Group (Parent Company of K-Electric) got bailed from the court in the UK in $20 Million, he is facing fraud charges after allegedly working with former Managing Partner Abdel-Wadood to defraud investors of hundreds of millions of dollars before the $13 billion private equity firm collapsed last year.

The size of Naqvi’s bail payment, however, underscores how seriously the court viewed the case, attorneys said.

Abraaj was the largest private equity player in the Middle East until its collapse last year following a row with investors that included the Gates Foundation over a $1 billion health care fund.

What went wrong??

The Abraj group has taken 100 Million loans from the Kuwaiti pension fund which was due on 3rd June 2018. Group failed to return 100 Million loans to the pension fund, fund published a legal notice in the United Arab Emirates’ daily The National.

On 8th June 2018, Kuwait Public Institution for Social Security (PIFSS) o filed a petition in the Grand Court of the Cayman Islands for the liquidation and winding up of Abraaj Holdings.

The Abraj group was expecting to get half of the $1.77 billion worth of sale proceeds from the sale of its shares in K-Electric. The Wall Street Journal which claims that Dubai-based Abraaj Group, allegedly offered $20 million to a Pakistani businessman Naveed Malik for his assistance in securing cooperation of Sharif brothers in the sale of Abraaj’s stake in Pakistan’s K-Electric. Abraaj announced the sale of the majority stake it controls in K-Electric to China’s state-controlled Shanghai Electric Power Co.

A Political Twist

When in Octobar 2016, Abraaj annouced the sale of the majority stake in the power company K-Electric, the power company was unable to meet demand due to gas shortages beacuse of dispute of over $1 Billion with Gas company.

Frequent power shortages & overbilling caused havoc among citizens of Karachi which result in series of protests leading by JI (Jamaat-e-Islami). JI even surrounded the K-electric head office several times & organized sit-in protests outside Govern House Sindh.

Such protests put immense pressure over Nawaz Shariff led Federal Govt & forced the National Electric Power Regulatory Authority (Nepra) to hold a hearing against the power company.

Haifz Naeem-ur-Rehman Chief Patron of JI Khi chapter even present a case in front of NEPRA.

This results in the National Electric Power Regulatory Authority to set a lower multi-year tariff for K-Electric that disappointed the Abraaj Group and Shanghai Electric Power.

The deal has remained stuck for the last almost three years also because
delay in issuance of a national security clearance certificate by the Privatisation Commission.

Abraj & PTI

Reportedly, Naqvi is a close friend and adviser to Prime Minister Imran Khan and has also funded the PTI in the last general elections after getting disappointed from Sharif Brothers. And have seen sitting in numerous meetings led Prime Minister.

He also close ties with the President of Pakistan, even when arrested in UK he wrote President’s number. He was even denied bail by a London judge on last Friday after prosecutors deemed him a flight risk, due to the fact he wrote down the phone number of the Pakistani president when he was arrested earlier this month.

“I’m concerned to see he had the president’s number on him… If he were to be granted bail, I’d be extremely concerned he would leave the country,” Judge Emma Arbuthnot told the Westminster Magistrates Court, according to Bloomberg.

On Friday, prosecutors had called an offer to post a 1.5 million-pound security a “drop in the ocean” for him. “This is the largest bail security I can recall being imposed by Westminster Magistrates Court in an extradition case,” said Thomas Garner, an extradition lawyer at Gherson in London, who isn’t involved with the case.

Now American prosecutors have alleged that the Abraaj executives defrauded their investors, including the Bill & Melinda Gates Foundation. The US is seeking his extradition on charges of conspiracy, wire fraud and securities fraud after being accused of defrauding investors of hundreds of millions of dollars.

As per the indictment by US district court, Southern District of New York, in the case between Securities and Exchange Commission and Abraaj Investment Management Limited, Naqvi defrauded the Abraaj Growth Markets Health Fund and the United States investors by misappropriating over $230 million from at least September 2016 until at least June 2018


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