The Key Man by Simon Clark and Will Louch — money for nothing

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To the busy staff at Westminster Magistrates’ Court on April 18 2019, Arif Naqvi was just another name on a list of suspected criminals scheduled for extradition hearings. But to some of the world’s best-known political and business leaders, he was a familiar face.

Before he was accused of fraud and racketeering, the financier had spoken alongside Bill Gates at Davos, won the support of President Barack Obama’s administration and even been hailed as a potential leader of his native Pakistan.

His appearance in the dock was a stark display of his dramatic fall from grace. In The Key Man, a pacy and deeply reported tale, Simon Clark and Will Louch set out how it came to be.

The authors are Wall Street Journal reporters who first broke the news of investors’ concerns about Naqvi’s Dubai-based private equity firm Abraaj in February 2018, and went on to publish a series of hard-hitting stories.

While the book is grounded in Clark and Louch’s journalism from the time, some readers who knew Naqvi or worked with Abraaj — and have followed the story closely — say that even they were taken aback by some of its new details. Others cannot yet bear to read it.

On April 10 2019, Naqvi was arrested at Heathrow airport where he wrote down a list of phone numbers, including that of Pakistan’s prime minister Imran Khan, and handed it to police, perhaps hoping that a man he had known and advised might come to his aid.

He is accused of playing the leading role in a multimillion-dollar fraud, and a London judge has approved his extradition to the US. If found guilty, he faces up to 291 years in jail. He “stole money that banks and investors provided for the purpose of buying companies and used it to pay huge salaries, bonuses, and for his extravagant lifestyle”, the authors write. Naqvi has denied wrongdoing.

Abraaj claimed it was making 17.9 per cent annual returns for its investors, an impressive figure. But “the numbers were fiction”, the book’s authors write.

Aside from the alleged fraud, the tale reveals how easily the world’s wealthy business and political leaders have built a consensus around the idea of “impact investing” that Naqvi rose to prominence by championing.

Many billionaires and chief executives still claim they can make money while making the world a better place, Clark and Louch write. “Solving poverty by raising taxes for governments to spend on healthcare and education wasn’t a popular idea with billionaires or their advisers,” they note.

One troubling revelation is how blue-chip law firms, investors and auditors, and even a top academic, helped enable Naqvi’s rise, apparently without asking the right questions.

KPMG gave an Abraaj fund a clean bill of health, seemingly without noticing that money had been pumped in days earlier to plug a gap. Harvard professor Josh Lerner, a paid consultant to the firm, wrote a report that endorsed how Abraaj valued its investments, though he later said he had made an “inadvertent mistake” in doing so.

Hamilton Lane, whose clients include pension funds that manage teachers’, nurses’ and police officers’ money, invested in Naqvi’s funds while employing dozens of analysts who were meant to be assessing the credibility of claims made by private equity executives like him. Part of its $150m went into a fund Naqvi was allegedly “plundering”, Clark and Louch write.

There is little in the book to reassure readers that, elsewhere in the $4tn private equity industry, which now controls growing portions of workers’ pensions, executives’ claims are facing much more scrutiny.

Among the authors’ concluding thoughts is a call to action: “If accountants and regulators can’t keep private equity firms on the right track then more people are going to have to take an interest in how they operate.”

It is an important message. But in a world where much power is concentrated in the hands of buyout groups and their wealthy executives, who often avoid the limelight or seek to control the flow of information, it might be difficult to bring about.

The Key Man: How the Global Elite Was Duped by a Capitalist Fairy Tale by Simon Clark and Will Louch Penguin Business, £20, 352 pages

Kaye Wiggins is the FT’s private capital correspondent

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