Whistleblowers at the trade finance fund Barak. Investigation initiated
Auditors investigate whistleblower complaints Barak Fund Management as the company is seeking approval to restructure a $ 1 billion trade finance fund that has left investors with hard-to-sell assets.
Some employees have filed complaints with the Mauritius-based investment firm over the past year, according to people familiar with the matter. Two raised concerns about the quality of collateral related to some loans, while another warned of the overvaluation of some assets, said those who asked not to be named as the details are private.
The company admitted that an email response to questions had received three complaints, two of which related to “allegations of inappropriateness”. The concerns were raised long after the alleged events related to the complaints and days after the company launched a layoff process that affected two of its employees in April last year, the company said.
“The whistleblower allegations have been reviewed by the fund’s compliance officer, and a second review by an external auditing firm will be completed shortly,” a Barak spokesman said in a statement. “No misconduct, corruption, fraud or criminal activity or any other matter affecting the financial statements of any of the Funds has been identified.”
Barak banned investors from withdrawing from its flagship fund in April last year because much of its holdings were difficult to value. The company that finances businesses with lack of money across Africa is search now Restructuring the Fund by moving its illiquid assets into new vehicles. Barak announced to its clients last month in a document sent to investors and viewed by Bloomberg that the strategy’s objectives were “no longer reasonably achievable” and an attempt was made to realize the assets gradually.
Barak said in a separate statement last week that a “high percentage” of investors shown support for its restructuring plan and expressed confidence that it would be approved.
Catherine McIlraith, a member of Barak’s independent board of directors, also confirmed whistleblowers’ complaints, reiterating that they had received an email response to questions some time after the alleged events. Investors were not informed of the concerns as the board believed no further communication was needed, she added.
“Fairness to investors is the main driver of the process and we cannot jeopardize the restructuring process by commenting on the status of the valuations or collateral,” said McIlraith.
PricewaterhouseCoopers stepped down as auditor for Barak’s Trade Finance Fund last year before completing its 2019 audit, Bloomberg reported last week. At least one of the whistleblowers had also complained to PwC, but it is not known whether this was related to the company’s resignation, the people added. A PwC spokesman declined to comment.
The company’s new auditor, Macintyre Hudson, has further delayed signing the fund’s 2019 financial statements. According to the restructuring document sent earlier this month, it had previously expected to complete the already delayed process by the end of February.
Macintyre Hudson “did not have a firm commitment on that date and we understand that the amount of work involved has exceeded their original expectations, causing a slight delay,” the Barak spokesman said in a separate statement last week.
Barak’s investment problems are the latest sign of trade finance difficulties. Greensill Capital based in London recently submitted for administration after key backers left the supply chain finance firm due to concerns about the valuation of its assets. Events have highlighted potential liquidity problems for funds that generate stable returns through opaque investments in unlisted assets.
In 2019, a separate whistleblower alleged a potential conflict of interest related to Barak chief investment officer Prieur du Plessis, who allegedly received cash and the use of a motor vehicle from a company affiliated with a coal customer, two of the People said . Barak conducted an investigation and resolved the matter after warning du Plessis, who said the deal was repayment and security for a personal loan, one of the people said.
The allegation made with a Barak employee was made by someone who was never employed or affiliated with Barak, the company said in its email response, without confirming any details. The complaint, which related to events between 2014 and 2017, was “raised in May 2019, reviewed by an independent lawyer and resolved in June 2020 on the basis that there was no evidence of wrongdoing or fraud”.
Founded in 2009 by Jean Craven and du Plessis, Barak grew its wealth and investments rapidly to manage more than $ 1 billion in 2018 as insolvent companies sought alternative sources of capital after the financial crisis. The fund never had a bad month until last March when the pandemic crippled economies around the world.
Some well-known investors have supported Barak, attracted by the prospect of steady returns from providing capital to small and medium-sized businesses.
The Botswana Public Officers Pension Fund, the largest pension fund in Botswana, had invested 1.36 billion pula ($ 123 million) in the company as of March 31 last year, according to its latest annual report. The Pension Fund’s CIO did not respond to a request for comment.
IFC, a member of the World Bank Group, granted Barak a $ 60 million loan in 2018 to provide trade and commodity finance to businesses in Africa. The loan was repaid last year, according to an IFC spokesman.
Barak’s illiquid investments, according to the restructuring document, comprise more than half of the fund’s assets in sectors such as coal mining, consumer goods and fertilizer production.
Investors who want to stay in the fund will be transferred to new products, the spokesman said in the statement.
“Those who do not wish to proceed will receive an initial cash payment that will represent that portion of the underlying investments that is liquid and readily available for accurate valuation, and the remainder will be paid out to investors in due course.”
– With the assistance of Roxanne Henderson
(Updates with restructuring details in the last paragraph)