Wheels of justice are turning in Abraaj case

▶ The fraud charges brought in the US against Arif Naqvi show long reach of law

Fraud charges brought in the US against Arif Naqvi, founder of the Dubai-based Abraaj Group, and his former managing partner Mustafa Abdel-Wadood, show the full, powerful reach of the law. Just as financial powerhouses are global, so are many of the rules and regulations that govern them and their executives. As a result, those committing a crime in one jurisdiction can be liable for their actions in another. This is a moment of reckoning for any executive, regardless of wealth or title, who misleads investors. Following his arrest in London, Naqvi now faces the possibility of extradition to the US. Despite the seriousness of the charges, his comments to The National shortly before his arrest suggested he had yet to grasp the precariousness of his position. While his multibillion-dollar private equity fund has collapsed amid acrimony, the Pakistani businessman insisted no one had “a bad word to say about me”. Naqvi and Abdel-Wadood are entitled to their day in court but regardless of the outcome, there will be repercussions for the region’s private equity industry, both in terms of undergoing a period of self-reflection and in introducing even more stringent guidelines.

Abraaj, which managed assets worth $14 billion at its peak, began to unravel in February last year when four investors in its $1bn health fund alleged mismanagement of funds and hired investigators. As confidence fell, Abraaj placed itself in provisional liquidation. The collapse of a regional giant sent shockwaves through the industry, already suffering from slower returns following the crash in oil prices in 2014. It also confirms that local regulators need to be more active in ensuring compliance. However, that these fraud charges have been brought in America demonstrates not only the strength of the US dollar in global finance but also the long reach of US authorities. There are long-term consequences for this region. With at least 14 UAE companies exposed to Abraaj’s alleged misdemeanours – including Sharjah-based Air Arabia, to the tune of $336 million – it is important that due process is followed. But once the dust settles on this troubling chapter, serious lessons must be learnt about regulation and corporate governance to ensure this episode is not repeated.