How Dawood Rawat’s deception was unravelled

Corporate News

Mr Dawood Rawat is now a fugitive. PHOTO | FILE 

By FRED MBUGUA

In Summary

• Dawood Rawat is now a fugitive accused of profiting from an elaborate scheme to cook the books at BAI Co (Mauritius) that saw liabilities played down and assets overvalued.

The big man’s black Mercedes S600 — with the vanity licence plate ‘BA1’ — has not been seen in weeks making the dash from his home in Curepipe to the SSR International airport at one end of Mauritius or Port Louis at the other.

Dawood Rawat, whose friendship with the country’s previous Prime Minister has been described by a current Cabinet minister as “toxic”, is on the run.

Once chairman emeritus of the British American group of companies, he is now a fugitive accused of profiting from an elaborate scheme to cook the books at BAI Co (Mauritius) that saw liabilities played down and assets overvalued.

While Mauritian authorities concede some of the former Britam director’s companies were clearly in trouble, it wasn’t until his failure to make a cash injection led to Bramer Bank’s suspension that a crisis was touched off, revealing the true extent of his deception.

“We found there was a huge fraud case,” Financial Services, Good Governance and Institutional Reform minister Roshi Bhadain told the Business Daily during an interview in Port Louis on Friday.

“Policyholders money which had come into the insurance company had been passed out through various subsidiaries in Mauritius. Some of the funds taken (from) new investors were being used to repay old ones and the interest rates that they were giving were high, in some cases going up to 10, 12 and even 14 per cent (well above the average of three to four per cent). It had all the hallmarks of what is commonly referred to as a Ponzi scheme.”

According to a confidential report from the firm’s conservators, as at December 31 last year, BAI Co (Mauritius) Ltd’s assets were “substantially overvalued” at 33.6 billion rupees (Sh89 billion) and were only worth about Rs17.2 billion (Sh45 billion).

The total liabilities, estimated at Rs26 billion by BAI, were worked out to be Rs28 billion (Sh74 billion). Of this, Rs23 billion (Sh61 billion) were the result of the controversial Super Cash Back Gold scheme that government officials say was being run like a Ponzi scheme.

READ: Ponzi scheme fells Mauritius bank tied to Britam director

The value of key subsidiaries like Iframac, Courts and the Apollo Bramwell Hospital were also revised downwards with by the conservators.

As a result the firm was not in a position to meet its obligations, even if it had not lost Rs6 billion (Sh15 billion) loaned to Bramer Bank when the liquidity crisis led to the loss of the bank’s licence.

The interim document, BAI Co (Mauritius) conservator André Bonieux says, shows a clear trail of bad investments through subsidiaries involved in everything from car dealerships to a private hospital. Britam, the 4.5 billion rupee “jewel in the crown”, stands in contrast to distressed assets like Iframac and the Apollo Bramwell Hospital.

BAI Co also has a profitable toehold in Equity Bank and Housing Finance through its Kenyan investment vehicle.

“The main problem was the underperformance of BAI’s subsidiaries,” said Mr Bonieux, listing the largest “distressed” investments as Iframac, the Apollo Bramwell Hospital and Bramer Bank.

“And, of course, some of the insurance products they were selling were (being offered) at too high a rate.”