Sir Anerood Jugnauth, is moving ruthlessly to take over private-sector institutions opposed to his crony politics, and has ordered his secret police to harass prominent members of minorities such as Muslims..

by Pranay Gupte

A complicated political and financial scandal is unfolding in the Indian Ocean state of Mauritius, which Prime Minister Narendra Modi recently visited and praised. He hailed the Hindu-majority country of 1.29 million as a “role model of democracy and accountability”.

Mr. Modi’s characterization of Mauritius being a “role model of democracy and accountability” may have been misplaced. It has certainly taken a body blow since his visit in mid March.

It would be impolitic to say that Mauritius had already been moving toward an intolerant dictatorship by the time the Indian prime minister landed. But the fact remains that – at the very least – the current Mauritian prime minister, Sir Anerood Jugnauth, is moving ruthlessly to take over private-sector institutions opposed to his crony politics, and has ordered his secret police to harass prominent members of minorities such as Muslims.

One such Muslim is Dawood A. Rawat, chairman of the British American Group (BAI), whose ancestors came to Mauritius as traders from Gujarat nearly 200 years ago. Mr. Rawat developed BAI into a formidable economic entity, employing nearly 5,000 men and women at his banks, insurance companies, automobile dealerships, department stores, and other enterprises.

Born in Mauritius but trained in France, Britain and the United States, Mr. Rawat is widely known for his integrity and honesty, and was recently honored by France with its highest civilian award, Legion d'honneur.

But he may have erred in deeply befriending Sir Anerood’s predecessor and political foe, Navinchandra Ramgoolam, often entertaining him in tony restaurants in Europe, by his own admission. This friendship did not go unnoticed by the opponents of both men, particularly because Mr. Rawat – the father of three married daughters, and a grandfather -- has a well-authenticated reputation for probity and monogamy.

Mr. Ramgoolam – son of the country’s founding father, Sir Seewoosagur Ramgoolam – has long had a different reputation. He was known for his wandering eye, his easy manners, and the political favoritism that he conferred on his business patrons from the Franco and wealthy Hindu communities.

He lost a bitterly contested election in December 2014. In a country where the personal lives of politicians aren’t necessarily scrutinized with any degree of shock, the married Mr. Ramgoolam openly took on a mistress, Nandanee Soornack, who gave him progeny that the Mrs. Veena Ramgoolam couldn’t. Veena gamely accompanied her husband to official functions, while Nandanee went with Mr. Ramgoolam to casinos and clubs around the world.

As their affair accelerated, Ms. Soornack began engaging in lucrative business in Mauritius, including obtaining a share in the duty-free sector, and opening accounts in Mr. Rawat’s bank. She’s now reported to be in Italy (there’s a warrant for her arrest in Mauritius), while Mr. and Mrs. Ramgoolam are forbidden from leaving Mauritius. (Mr. Ramgoolam was arrested some weeks ago, and then released after his supporters agitated.)

Meanwhile, Mr. Rawat, a heart patient, is being treated in London. Along with Dr. Prathap Chandra Reddy, founder of India's Apollo Hospitals, Mr. Rawat created the highly regarded Apollo-Bramwell Medical Centre in Mauritius, which attracts patients from all over the world and which has created opportunities for “medical tourism” in a country known mainly for its picture-postcard beaches, craggy mountains and sugarcane fields.

Scarcely had Prime Minister Modi left Mauritian shores last month, Sir Anerood’s government, alleging unspecified improprieties at Mr. Rawat’s British American Group, seized its many of its assets including Bremer Bank and various insurance and other companies.

Because Mr. Rawat and Dr. Ramgoolam – he’s a London-trained physician and a lawyer – are longtime friends, Mr. Rawat and his family are being hounded by Sir Anerood’s security forces, and by Mauritian media aligned with the prime minister. (Among the newspapers in Mauritius is one that’s long known for being supported by Indian intelligence agencies; its editor once worked for Mr. Rawat.)

What makes all this a scandal of relevance to anyone beyond those living in Mauritius – perhaps until now best known for the dodo bird that became extinct in the late 17th century?

This scandal is truly international because Mauritius is the global capital of money laundering. Consider this: The gross domestic product (GDP) of Mauritius was $12 billion in 2014. Of this amount, the country sends $10 billion annually to India alone in foreign direct investment (FDI). (Singapore, which has a far bigger economy than Mauritius, sends $2 billion in FDI – and none of it is in havala money.)

How is it possible for Mauritius to transmit so much money each year to India? That’s because “havala” money – or illegal currency – is re-routed from India through Mauritius (and other countries) back to India. The Mauritius FDI represents nearly 40 percent of what India gets annually by way of FDI.

Sir Anerood’s government has now revoked the license for Mr. Rawat’s Bramer Banking Corp., a lender based in Port Louis; trading was suspended by Mauritius’s stock exchange shortly thereafter. The Bank of Mauritius pulled Bramer’s license “in the public interest,” according to a government statement. And while no one has accused Bremer of money laundering, the government has rather loudly generated a whispering campaign.

The central bank pulled Bramer’s license “following strong evidence that BBCL is engaged in a Ponzi scheme which exceeds 25 billion rupees” ($690 million), Prime Minister Anerood Jugnauth told reporters in Port Louis, the capital, on Friday.

He said that a special desk would be set up in the Bank of Mauritius to give Bramer clients information on their deposits, and that an investigation was underway into what he called an “unprecedented financial scandal.”

The central bank told Bramer about a “number of significant deficiencies” that it found during an on-site examination between Jan. 22 and Feb. 20, it said in the statement. Bramer had “large withdrawals of deposits” that affected its liquidity and capital, the regulator said, according to news reports.

According to news reports, the government also said that after Bramer’s license was revoked, the Financial Services Commission of Mauritius appointed Andre Bonieux and Mushtaq Oosman of PricewaterhouseCoopers LLP as conservators of BAI Co., an insurance company also owned by British American Investment. These men were appointed “to safeguard the interests of policyholders,” the FSC said in a statement on its website, according to Bloomberg.

The scandal has a geopolitical angle to it, too. Mr. Modi didn’t visit Mauritius just because he felt like girding up his dhoti and strolling along the sands. He knows that the Chinese have long eyed Mauritius as a strategic base in this part of the southern Indian Ocean. Little wonder that the Indian prime minister pledged a $500 million credit line for Sir Anerood’s government.

There’s also a troubling cultural element to this “scandal.” It’s no secret in Mauritius that the Hindu majority perceives Muslims as being more prosperous. Muslims have traditionally been hard working as shopkeepers, professionals and traders. (Mr. Rawat employs a diversity of Mauritians, and not only Muslims.)

Muslims also receive short shrift from Francos, descendants of the French and Dutch who originally settled in Mauritius. Very few Muslims are employed on the vast sugar cane estates, which are mostly owned by Francos.

But Mauritian Muslims are not the radicalized kind. No fiery sermons emanate from mullahs about an Islamic Caliphate during Friday prayers. If Mauritius indeed offers itself up as a role model – to quote Mr. Modi – it is as a nation where, until now, various ethnic groupings lived without rancor.

That may change, and it may change soon.