Financial group: ‘Hundreds of millions of dollars missing’ from Cayman fund

Gulf Investment Corporation (GIC), a financial institution owned by six Gulf states, claims “hundreds of millions of dollars are missing” from The Port Fund L.P., a Cayman Islands-based exempted limited partnership, set up in 2007 to invest in “port-related assets around the world”.

In a discovery application filed on 26 Dec. 2019 in the Southern District of New York, and published by Offshore Alert, GIC raises questions over the conduct of KGL Investment Company (KGLI), the sponsor and placement agent of the Port Fund and owner of Port Link (GP), the general partner of the private equity fund.

In separate originating summons filed in the Cayman Islands Grand Court on 26 Nov. 2019, GIC stated concerns that “KGLI, acting in its capacity as sponsor of the Port Fund, may have been involved in the misappropriation of assets belonging to the Port Fund.”

These “concerns” relate to an alleged discrepancy between sale proceeds from the fund’s investment in an airport infrastructure project in the Philippines, Clark Global City, and the amounts distributed to the limited partners of The Port Fund.

While financial filings in the Philippines had put the sale price at about US$1 billion, the US discovery application said the widely reported exit amount for The Port Fund’s sale of the asset was only half of that amount.

“Specifically, The Port Fund belatedly reported that the proceeds from its sale of the Clark Asset amounted to US$496 million (after its principals initially claimed it was far less than even that amount). The half-billion-dollar discrepancy has never been acknowledged, let alone explained, by the Port Fund,” the US application said.

GIC’s Cayman application was made to obtain full information from The Port Fund and its general partner, Port Link, about the fund’s state of business and financial condition. The US filing, on other hand, is seeking discovery from 12 US correspondent banks about the fund’s financial transactions.

GIC, which is owned by the governments of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, said that the sale proceeds of US$496 million were transferred to an account at Noor Bank in Dubai held in the name of The Port Fund’s general partner, Port Link, rather than the fund’s regular bank accounts with HSBC or Al Ahli Bank in Kuwait.

When the funds arrived at Noor Bank, the money was immediately frozen by the UAE Central Bank for suspected money laundering. Although the money was returned to The Port Fund in February 2019, only a portion of the funds, $305 million, were distributed to The Port Fund’s limited partners, the US filing said.

Neither the $500 million discrepancy between the $1 billion sale price and The Port Fund’s reported exit amount of $496 million, nor the $191 million difference between the exit amount and the payments distributed to investors had been explained by The Port Fund and its principals.

The US filing identifies Marsha Lazareva, the chief executive officer of KGLI and a former director of Port Link, and Saeed Dashti, the chairman of the KGL Group of Companies and director of Port Link, as key individuals.

Lazareva was arrested in November 2017 on charges of wasting public funds and embezzlement from the Kuwait Port Authority.

She was sentenced to 10 years in prison before the decision was overturned when the sole witness presenting evidence against her was found guilty of forging documents used to convict her. However, in November last year, she was sentenced to 15 years in prison over what her legal team described as bogus charges. Dashti was also convicted by a Kuwaiti court in November 2019 and sentenced to imprisonment for 15 years in connection with misappropriation of public funds.

Lazareva’s case caused a media stir in the United States where, according to Politico, KGLI and The Port Fund spent $2.5 million on lobbyists in the first quarter of 2019 alone. Prominent advocates for Lazareva include Neil Bush, a brother of former US President George W. Bush, and Cherie Blair, wife of former UK Prime Minister Tony Blair, who defended Lazareva on human rights grounds.

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