Complex Made Simple

Abraaj founder faces second bounced cheque case

Abraaj founder Arif Naqvi can’t catch a break. As if it weren’t bad enough what his company was going through, he himself has also been under the judicial microscope for quite some time in the past weeks.

Now, a new criminal case is looming over his head.

Naqvi passes the point of no return with Jafar

In his latest court drama, he faces criminal charges over a second bounced cheque worth $217 million he issued to Hamid Jafar, who is the same creditor from the previous cheque case that was supposedly settled out of court two weeks ago, according to lawyers involved in the case. Jafar is the founder of Crescent Group, a privately owned investment management firm.

The current cheque in question is the second of three issued by Naqvi to Jafar as partial security for the sum he received from Jafar during December of last year, when the company was going through financial difficulties. The total sum loaned was $300 million, whereas the first bounced cheque was worth $48 million.

READ: Abraaj founder reaches ‘out-of-court settlement’

Did the initial settlement fall through?

Despite coming to a settlement following the previous cheque case regarding the $48 million and the rest of the $300 million loaned, Jafar is now seeking more legal action in a shocking move.

“The accused has already reneged on what was promised,” Essam al Tamimi, Jafar’s lawyer, said in a statement. “There has been no settlement, and the matter is for the criminal court under UAE law.”

It seems that both parties failed to come to an agreement after Jafar had pulled his case from court. It is likely Jafar has no more faith in reaching an agreement based on trust and mutual understanding and is instead leaving it in the hands of the UAE court in hopes of getting his money back.

Habib Al-Mulla, who is handling the Naqvi’s defense, said the details of the settlement were “pending.”

In his opinion, there is more to this new development than first meets the eye.

“Once again, the criminal proceedings are being used to exercise pressure for better settlement terms,” he added in an emailed response to questions from Reuters.

An arrest warrant for Naqvi was issued following the first case, yet he was out of the country. Currently, he has still not returned to the UAE, and has missed all of his court hearings so far, possibly fearing an arrest that would prevent him from saving Abraaj from collapse. It’s not clear if such a thing is even possible, given the bad blood Abraaj has been creating with investors over the past few months. To make matters worse, Abraaj’s public image might already be beyond repair.

READ: 6 companies that could lose big following an Abraaj collapse

A difficult year? That’s an understatement  

Abraaj’s troubles all started earlier during this year, when an investigation commissioned by investors tasked Deloitte to look into the company’s finances – particularly a $1 billion healthcare fund.

Findings showed signs of negligence, which led to the fund’s sums being mishandled.

Abraaj has had a tough going ever since, with them filing for provisional liquidation in the Cayman Islands in June. Buyers have been eyeing the company ever since, with offers coming in to buy assets in the company, or the company itself.

Last month, several companies disclosed exposure to the embattled private equity firm. Among them were the First Abu Dhabi Bank and the United Arab Bank.

TIMELINE: The rise and fall of Abraaj Group