Dubai regulator probes Abraaj over ‘mismanagement’

Dubai’s financial regulator is investigating allegations of mismanagement at private equity firm Abraaj, which is on the verge of financial collapse after a scandal over its use of investor money, two sources familiar with the matter said.

The Dubai Financial Services Authority (DFSA) has interviewed the firm’s founder, Arif Naqvi, and other senior executives in the past few months as part of the probe, the sources said.

The DFSA declined to comment. Abraaj said in a statement discussions between it and the regulator were “ongoing.” The DFSA is kept apprised of developments in the overall Abraaj Group and has our full co-operation on all relevant matters,” Abraaj said.

“While we do not comment on confidential discussions with our regulators, we are highly focused on strengthening our corporate governance and internal controls.” A third source said Abraaj co-chief executives Omar Lodhi and Selcuk Yorgancioglu were among those questioned by the regulator.

There was no immediate comment from Naqvi or his legal representative. There was also no immediate comment from Lodhi. Yorgancioglu referred a Reuters request for comment to Abraaj.

The investigation heaps more pressure on Abraaj which is trying to sell its investment management business to Colony Capital following a dispute with some of its investors over the use of money in a $1 billion health care fund.

This erupted late last year, when investors including the Bill & Melinda Gates Foundation and the International Finance Corp made allegations that Abraaj mishandled their money in the health care fund. Abraaj has denied misusing the funds. The allegations triggered a solvency crisis at the fund, the biggest buyout fund in Middle East and North Africa.

After halting fundraising activities and shaking up management, Abraaj last to work toward safeguarding month filed for provisional the interests of investors.” liquidation in the Cayman DFSA has the power to fine Islands as it seeks an agreement or ban individuals from working with creditors and is in financial services within selling parts of its businesses. the Dubai International

Summary findings of a Financial Centre (DIFC) and review by Deloitte, appointed has in the past imposed penalties by Abraaj to audit its operations, for rule breaches. For said that a cash shortage companies, that can lead to a at the firm led it to dip into fine or even a suspension from investor funds. operating in the centre.

Deloitte said on June 4 Abraaj has a regulated entity, there was no evidence of Abraaj Capital, in the DIFC. embezzlement or misappropriation, In its statement, Abraaj said but highlighted a lack it was premature to speculate of “adequate governance” and on actions that the regulator “overall weakness” at Abraaj. may or may not consider.

In a statement on June 21, We believe these are decisions the DFSA had said it would be best communicated by “discussing various matters with the regulator in the fullness of the Joint Provisional Liquidators time and early speculation is of Abraaj Holdings and unhelpful to the process, the Abraaj Investment Management statement Limited said. and would continue

Deloitte said there was no evidence of embezzlement but highlighted lack of ‘adequate governance’ and ‘overall weakness’ at Abraaj