Arif Naqvi's story is really the art of the fleece

A few years ago, I attended the annual international fraud conference in Cambridge. I got into conversation with a leading Australian lawyer. We were discussing the “Nigerian” scams – they always seemed to emanate from Nigeria, hence the title. They’re the ones where an email lands saying the sender has stumbled across a pile of money and in return for a fee, they can share it with you. There is no treasure trove and they disappear.

He said he’d come across a variation where a client was told there was a suitcase of cash and all they had to do was to meet, satisfy themselves it was genuine, make a payment and the stash was theirs. They duly met, the suitcase was opened, the dollar bills looked fine, they paid and walked off with the bag. When they examined its contents, they found that below the top layers of notes there was just black paper. They’d been fleeced.

We laughed at how gullible they’d been. Yes, he said, but worse than that – they were extremely sophisticated, successful in business. Unfortunately, put the prospect of making a killing in front of them and their usual judgment deserted them.

I was reminded of this when reading The Key Man: How the Global Elite Was Duped by a Capitalist Fairy Tale by Simon Clark and Will Louch, the new book by two Wall Street Journal reporters about the rise and fall of Arif Naqvi. The founder of Dubai-based Abraaj Group, Naqvi would surely nod his respect to the suitcase producer and vice versa. Both, if they got together, could smile knowingly at man’s idiocy, how greed defeats caution, even in the sharpest of minds.

Naqvi, 60, is the silver-tongued charmer who persuaded the likes of the Bill & Melinda Gates Foundation, the US Agency for International Development, Washington State Investment Board, the World Bank and assorted governments, including those of the UK and France, to back his impact investing schemes, in using their funds to help the world’s poor while earning them a return at the same time. In all, $780m allegedly went down the chute before law enforcers, including UAE regulators, were able to catch up with him. In April 2019, Naqvi was arrested at Heathrow. The Americans want to extradite him to face charges, which if proven would send him to jail for up to 291 years. He denies the charges and remains holed up in London, in a flat in South Kensington, having posted bail of $15m and wearing an electronic tag, while his extradition appeal is heard.

What the writers dissect marvellously is an all-too common tale of slick patter feeding off a degree of avarice and a large dollop of naivety. The result, as ever, is woe.

It’s not the first occasion that people regarded as smart financially have come unstuck. The unfortunate suitcase buyer and much more famously, the victims of Bernie Madoff, spring to mind. What’s different here is that they were motivated by a desire to do good. Naqvi’s skill was to prey on their wish to spread their wealth, to help others. Instead of benefiting only their shareholders, his formula enabled them to assist the disadvantaged while still earning. Genius. Except, if they’d stopped and thought about it, barely anyone else had ever succeeded in making “philanthrocapitalism” pay, not to the extent that Naqvi promised.

He tapped into the ESG (Environmental, Social, and Governance) investment trend, exploiting consciences and very real concerns, expressed at Davos and elsewhere, about growing inequality. He was a supreme virtue signaller, focusing on guilt and able to attract vast amounts of finance.

The fascination with the Naqvi story is that constant struggle between profit and not-for-profit. Banks, and his biggest targets were some of the world’s mightiest financial powerhouses, are mandated to make money for their owners. The returns must keep rising or else those investors would be better off going elsewhere. Yet, the executives are all too aware of how they’re perceived. Putting image to one side as well, in many instances they really do want to make the world a better place – they’ve got children too; they’re not immune to fears about climate change and social disintegration. In short, although their critics might disagree, they’re also human.

It was precisely this humanity that Naqvi was able to plunder. Likewise, it was human behaviour that saw them fail to realise what was really going on.

He appeared to offer the perfect, win-win solution. He explained how he could supposedly generate profits from benefiting the poor, how the impoverished millions could themselves be consumers, how he was going to turn the planet into one giant marketing and sales opportunity.

Abraaj claimed to manage as much as $14bn, making it the largest private equity firm in the Middle East, managing stakes in hundreds of companies right across the emerging markets. Naqvi moved in the same circles as Prince Charles, Bill Gates, John Kerry. The United Nations was coveting his attention; in his home country of Pakistan, he was hailed as a future leader.

He was a doer, someone who could take on the biggest issues and crack them. In New York, in September 2017, while the UN was gathering, Naqvi was sponsoring a conference at the nearby Mandarin Oriental hotel, where he was seeking to raise $6bn for a new fund for attacking hunger, sickness, illiteracy, global warming, power shortages – nothing was off limits. “To do good does not necessarily mean to compromise returns,” Naqvi assured, walking up and down the stage. “It is gratifying that we are having this event on morning one, day one and hour one of the UN General Assembly week.”

While he paced and held forth to the elite audience, his inbox contained emails from staff telling him the money had run out, that Abraaj could not support his improvement programmes. The reason the accounts were bare, allege the Americans, is because Naqvi had taken the cash – he’d allegedly transferred $780m to accounts belonging to him and his associates. Abraaj desperately needed more resources to stop it from going under. This, rather than a passion for dispensing humanity, lay behind his stellar, imploring performance.

It’s a sorry tale, one that raises important questions about our ability to deliver “ethical” capitalism. Alas, it is proof, yet again, of the investment adage, that if something is too good to be true it probably is. While his backers count their losses and Naqvi battles his US pursuers, it is galling to think that right now, somewhere, a snake oil salesman is doing their darnedest and folks are falling for it. Nothing ever changes.