Deals raise oversight concerns at Abu Dhabi wealth fund

The managing director of one of Abu Dhabi's sovereign wealth funds used his private shell companies to secure deals with businesses closely connected to the fund, raising concerns about corporate governance.

Khadem al-Qubaisi, managing director of state-owned International Petroleum Investment Company, used a Luxembourg-based company to take out a lease in Spain's tallest building, according to documents seen by the Financial Times.

The building, owned by Bankia, the Spanish bank, became the headquarters of Cepsa, a Spanish energy group and subsidiary of Ipic, in July 2014, nine months after Mr Qubaisi closed the deal on the lease.

The transaction raises questions about the efficacy of corporate governance at Ipic, where Mr Qubaisi has been managing director since 2007, and Cepsa, where he became chairman in 2011.

In the Gulf, where board members often channel contracts to related companies, institutions are trying to raise standards of corporate governance and encourage directors to boost best practice.

Ipic and its Aabar subsidiary have become some of deal-hungry Abu Dhabi's most active overseas investors, buying stakes in global hydrocarbons-related companies, European blue-chips and financial groups in Malaysia.

The appearance of personal profit on the back of deals meant to diversify the country's long-term revenue base plays badly among nationals, especially at a time when the government is expected to restrain domestic development spending because of lower oil prices.

Cepsa's code of conduct states that directors, employees and third parties acting on behalf of the company should avoid situations where an actual or potential conflict of interest could arise.

It said the decision to relocate to its new headquarters was made by the executive management "following internal procedures and legal requirements".

A representative of Mr Qubaisi said the relocation arrangement was carried out on "an arms-length basis on normal commercial terms" and was audited by EY, the accountancy, before its completion. Ipic did not respond to requests for comment.

Ipic, formed in 1984, is chaired by Sheikh Mansour bin Zayed Al Nahyan, Abu Dhabi's most prolific royal investor.

Ipic, which originally focused on overseas energy investments, took a stake in Cepsa in 1988, eventually acquiring the company outright in 2011 for €3.7bn. The fund, the second-largest in Abu Dhabi, controls an estimated $68bn, according to the Sovereign Wealth Fund Institute.

Aabar, which Mr Qubaisi chairs, has branched out into sectors ranging from European blue-chips Daimler and UniCredit to Virgin Galactic and Arabtec, the UAE's largest construction company.

According to documents seen by the FT, another Luxembourg company owned by Mr Qubaisi in April 2011 took a 25 per cent stake in Toro Rosso, the Formula One team majority owned by Red Bull.

That same year Cepsa and two other Ipic subsidiaries - Falcon Private Bank, a Swiss boutique created from AIG Private Bank when it was bought out during the financial crisis, and Nova Chemicals, a Canadian multinational - became sponsors in Toro Rosso for an undisclosed amount. Falcon said it had ceased its sponsorship of the F1 team in 2013. Toro Rosso did not respond to a request for comment.

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