Italians probe Emirati for alleged insider trading in UniCredit

Davide Ghiglione in Milan, Simeon Kerr in Dubai and Caroline Binham in London
Financial Times
APRIL 24, 2017

Prosecutors looking at involvement of a former managing director of Abu Dhabi’s Ipic 

Italian prosecutors are investigating a former Emirati sovereign wealth fund official over allegations of insider trading in UniCredit shares in 2010 as the fallout from the Malaysian 1MDB scandal spreads through Abu Dhabi’s overseas investment portfolio.

Prosecutors in Milan placed Khadem al-Qubaisi, the jailed former managing director of Abu Dhabi’s International Petroleum Investment Company (Ipic), under investigation “several months ago,” said a person briefed on the probe.

The Italian prosecutor’s office confirmed the probe and said it is “currently working to collect the final elements” for the investigation. A spokesman for the office declined to comment further.

The authorities are looking into whether Mr Qubaisi illegally used confidential information to authorise trading by Falcon Private Bank in UniCredit’s shares — for an alleged gain of about €21m — when Ipic’s Aabar division was preparing to take a 5 per cent stake in Italy’s largest bank by assets in 2010.

“The order to buy the [UniCredit] shares and sell them came from his bank, at a moment in which the news was still quietly secret and had not been disclosed to the market,” said one of the people. Falcon is another unit of Ipic.

The alleged trading was uncovered as part of the global investigation into the 1MDB scandal, which involves an alleged plot to steal billions of dollars from the Malaysian sovereign wealth fund.

Ipic, which in January merged with Mubadala, another Abu Dhabi sovereign fund, declined to comment. Mr Qubaisi’s lawyer and UniCredit also declined to comment. 

Zurich-based Falcon is facing criminal proceedings by the Swiss attorney-general’s office relating to 1MDB.

Prosecutors in Milan have also requested information from UniCredit, which one person said has been “collaborating” with authorities.

The Swiss attorney-general’s office said it “received and executed a request for mutual legal assistance from Italy in this context”.

The investigation into insider trading in UniCredit shares is the latest in a string of controversies involving Mr Qubaisi, once a close associate of Sheikh Mansour bin Zayed Al Nahyan, owner of Manchester City football club.

He is in jail in the capital of the United Arab Emirates while Abu Dhabi authorities investigate his alleged involvement in the 1MDB scandal.

The US Department of Justice has alleged he received $473m of money diverted as part of a conspiracy to misappropriate $1.37bn from two Ipic-guaranteed bonds issued by 1MDB in 2012 worth $3.5bn.

The insider trading probe regarding Mr Qubaisi, previously a central actor in the emirate’s overseas investment strategy, casts a further shadow over his role at Ipic.

In 2015, it emerged that a private company belonging to Mr Qubaisi took a lease in a Madrid building that later became the headquarters of Spanish energy company Cepsa, a subsidiary of Ipic. 

The fresh allegations around Mr Qubaisi come as US bank Wells Fargo launched a legal fightback against a move by the DoJ to seize a Manhattan hotel as part of a 1MDB-related $1bn asset freeze.

US prosecutors moved in July to freeze a list of trophy assets including the Park Lane Hotel, Van Gogh paintings and the rights to profit from the film The Wolf of Wall Street as part of their 1MDB anti-money laundering probe.

The hotel, where rooms typically go for $500 a night, is owned by a vehicle known as Symphony, as well as by Abu Dhabi’s Mubadala fund.

The DoJ alleges that Jho Low, a Malaysian businessman at the heart of the scandal, diverted $200m of 1MDB funds to buy a controlling stake in Symphony, which went on to buy the hotel for $650m in 2013 from the estate of the Helmsley family. 

Wells Fargo argues in its legal challenge to the forfeiture, filed in a Los Angeles court last week, that it is still owed $267m from a mortgage taken out by Symphony and asked the court to block the DoJ’s planned seizure of the hotel as it would impact the bank’s “interests as lender and lienholder”. 

Wells Fargo denied any knowledge about what the DoJ alleges was the true source of Symphony’s funds. Wells Fargo declined to comment, while the DoJ did not respond to requests seeking comment.

The challenge by Wells Fargo follows a similar move against the DoJ’s asset freeze by Riza Aziz, stepson of the Malaysian prime minister, Najib Razak, and co-founder of the Hollywood studio behind the Wolf of Wall Street.

In January, a court victory in New Zealand paved the way for Mr Low and his family to contest the asset seizure.

Mr Low and Mr Najib, the Malaysian prime minister who is also the former chairman of 1MDB’s advisory board, have previously denied wrongdoing.

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