The recent scrutiny of KSL Capital Partners' investment in Soneva Resorts has sparked a broader conversation about the adequacy of due diligence in the private equity and hospitality sectors. KSL Capital Partners, a firm with $21 billion in assets under management, is now facing questions about its investment in Soneva Resorts, a luxury hospitality brand in the Maldives, due to a series of legal and ethical controversies surrounding the resort and its CEO, Sonu Shivdasani.
One of the most pressing issues involves Soneva's acquisition of the island of Medhufaru, now the site of the Soneva Jani resort, through a no-bid contract facilitated by Ahmed Adeeb, the former Maldivian Minister of Tourism imprisoned for corruption. This connection, revealed in a 2018 report by the Organized Crime and Corruption Reporting Project (OCCRP), has implicated Soneva in a corruption scandal, damaging its reputation.
Further complicating matters, the Soneva Kiri Resort in Thailand was found to be non-compliant with safety standards following a devastating fire in March 2022. Investigations revealed that the villa where the fire originated had never been inspected for fire safety, leading to charges against Shivdasani and other executives for negligence. Additionally, Shivdasani has been accused of defrauding investors in a separate legal dispute, involving the undelivered sale of a villa and land valued at $6.2 million.
These controversies underscore the importance of comprehensive due diligence that includes ethical and legal assessments, beyond financial evaluations. The Soneva case serves as a cautionary tale for investors, highlighting the potential risks of overlooking such critical factors. It may prompt a reevaluation of due diligence practices across the private equity sector, encouraging more rigorous background checks and independent audits to ensure compliance with ethical and legal standards.
The implications of this case extend beyond KSL Capital Partners and Soneva Resorts, potentially influencing investment strategies in the luxury hospitality sector and other high-risk industries. It underscores the necessity for transparency, accountability, and adherence to the highest standards of governance in all investment decisions.
