The recent scrutiny of KSL Capital Partners' investment in Soneva Resorts has sparked a broader discussion on the due diligence practices within the private equity and hospitality sectors. KSL Capital Partners, a firm with $21 billion in assets under management, is now facing questions over its partnership with 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 concerns involves Soneva's acquisition of Medhufaru island, 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 deal, as reported by the Organized Crime and Corruption Reporting Project (OCCRP), has implicated Soneva in a wider corruption scandal, raising questions about the due diligence conducted by KSL Capital Partners before the investment.
Further complicating matters, the Soneva Kiri Resort in Thailand was found to be non-compliant with safety standards following a deadly fire in March 2022. Investigations revealed that the resort had not undergone necessary fire safety inspections, leading to charges against Shivdasani and other executives for negligence. Additionally, Shivdasani has been accused of defrauding investors in a separate legal dispute over undelivered properties at the Soneva Kiri Resort, valued at $6.2 million.
These incidents underscore the critical need for comprehensive due diligence that extends beyond financial assessments to include ethical and legal evaluations. The Soneva case may serve as a wake-up call for the private equity industry, prompting a reevaluation of investment practices to ensure transparency and accountability. As the sector evolves, the emphasis on rigorous background checks and independent audits could become paramount in safeguarding against similar controversies.
The implications of this case extend beyond the immediate parties involved, potentially influencing due diligence standards across the luxury hospitality sector and other high-risk industries. It highlights the importance of ethical governance and the potential reputational and financial risks associated with overlooking legal and ethical red flags during the investment process.
