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Wed 29 Jul 2015 12:16 PM

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Fifth of Libya’s wealth fund untraced since Gaddafi

The Libyan Investment Authority plans to identify any corrupt investments made by the Gaddafi regime following an audit by Deloitte

Fifth of Libya’s wealth fund untraced since Gaddafi
(AFP/Getty Images)

An estimated 20 percent of Libya’s $67bn-plus sovereign wealth fund, the Libyan Investment Authority (LIA), has yet to be fully traced since the death of Colonel Gaddafi.

The LIA appointed Deloitte in 2012 to conduct an audit of all of its assets – many of which are tied up in investments outside the country.

The auditor’s report was sent to the LIA in 2013 but has never been made public.

The only detail the LIA released was the fund’s total value, estimated by Deloitte to be around $67 billion.

This makes it the 22 largest sovereign wealth fund in the world, according to the SWF (Sovereign Wealth Fund) Institute’s latest ranking.

The audit involved sourcing, verifying and valuing the assets of a fund its chairman Hassan Bouhadi describes as a “big black hole” whose contents are unknown to all but a few.

However, Bouhadi, who was appointed last October, told Arabian Business in an interview this month that Deloitte has only assessed 80 percent of the assets.

He said: “The rest are smaller ones and [Deloitte] needs more time to evaluate and verify them.”

The LIA was set up in 2006 to invest and diversify the country’s finances. It has interests in huge multinationals including Pearson, GE, Vodafone, Unichem, Orange, Finmeccanica and Siemens, among others.  

However, as political unrest grew, the fund was increasingly used as a conduit for Gaddafi’s own interests.

The consolidated books of the LIA had never been opened before the appointment of Deloitte, so it was not known how much money had slipped into the pockets of those loyal to Gaddafi.

It is feared highly complex, potentially corrupt investments made by the Gaddafi regime could be among the unevaluated 20 percent, worth hundreds of millions of dollars. And, because of this, the true value of the country’s wealth is not yet known.

When asked whether any corrupt investments had been identified by Deloitte so far, Bouhadi said: “It is not for me to say. Of course, if there are indications of corruption following a forensic analysis, this will be highlighted.”

He said the LIA plans to publish Deloitte’s report – covering just the 80 percent that amounts to $67 billion – later this year.

It shows that at least half of the fund is made up of a mix of direct equity investments, cash and cash equivalents, bonds, stocks and real estate, while 40.9% is split into five subsidiaries that between them hold 550 companies, some of which are owned outright; some through stakes.

Specific GCC interests include 15 percent of First Energy Bank; “sizeable” investments and matured UAE bonds held by Arab Banking Corporation in Bahrain; a $100m stake in a Dubai-based private equity fund the LIA will not name; and a stake in a MENAdrill-owned company based in Bahrain. The headquarters of Libya Oil and Lap Green are in Dubai.

The assets have been frozen since the Arab Spring uprising, and Bouhadi is lobbying the United Nations Sanctions Committee for permission to actively manage any returns they are generating to help support the economy and benefit the Libyan people.

The LIA has also initiated legal action against various parties to recoup assets it believes it is owed. For example, it is pursuing cases against four African countries - Rwanda, Zambia, Chad and Niger – which it claims took advantage of the political instability in Libya to nationalise LIA investments within their borders.

Bouhadi said: “Some people are trying to take advantage of the transition process Libya is going through from a dictatorship regime to a civil democracy and instill doubt in others, and this is unfortunate.

“[The LIA] is accountable to the Libyan people and is responsible for making the right decisions.”

The LIA's leadership is being
contested between Bouhadi and Abdulmagid Breish, who was appointed chairman of
the LIA in June 2013 but agreed to step aside a year later when a political
isolation law was passed by the General National Congress (now the House
of Representatives) preventing those with ties to the Gaddafi regime from
holding public office.

Breish appealed, arguing that the isolation law did not
apply to him. In April this year, the Libyan Court of Appeal issued a judgment
that Breish claims restores him to his previous position, but the LIA claims simply
enables him to make representations to the board of directors and ask to them to
consider him as a new chairman, which it alleges he has not done. The dispute
continues.

Read the full interview with Hassan Bouhadi in Arabian Business on Sunday.