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Paul Lamontagne, new managing director of FinDev Canada poses for a portrait in Montreal on Friday, February 23, 2018. Mr. Lamontagne is a former Canadian telecom and banking executive who relocated in the mid-2000s to South Africa, where he set up Africa-focused investment funds.

Ryan Remiorz/The Canadian Press

When the federal government chose Paul Lamontagne to lead an innovative new poverty-fighting finance institution with $300-million in seed capital, the entrepreneur predicted that the world “will definitely be watching.”

In the nearly two years since then, the development bank he heads has announced $123-million in investments, and loans in Africa and Latin America.

But in South Africa, an official inquiry has instead been looking more closely at one of Mr. Lamontagne’s former companies, asking questions about a stock-market deal he helped promote that, if approved by regulators, could have led to losses for a government pension fund.

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Branded as FinDev Canada, the Canadian development bank is a key instrument in Ottawa’s evolving strategy for combating poverty in the developing world. It seeks to use commercial investment to supplement Canada’s traditional foreign aid. In a major foreign-policy speech last August, Prime Minister Justin Trudeau cited FinDev as an example of his government’s new “tools for the modern era.”

The institution, a wholly owned subsidiary of Export Development Canada, the federal government’s export bank, was launched in the 2017 budget of Finance Minister Bill Morneau, who promised that the fund would “expand Canada’s ability to make an impact where it is needed the most.”

Mr. Lamontagne is a former Canadian telecom and banking executive who relocated in the mid-2000s to South Africa, where he set up Africa-focused investment funds.

Shortly before joining FinDev, he had been deeply involved in promoting Sagarmatha Technologies, a money-losing company that tried to persuade South Africa’s state investment fund to support a stock-market listing at a valuation that many analysts deemed to be grossly inflated.

His official biography on the FinDev website contains no mention of Sagarmatha. Nor was Sagarmatha mentioned in the news release when he was appointed as managing director of FinDev in February, 2018. The announcement said he was most recently the manager of a Canadian private equity fund in Africa.

At the time of his FinDev appointment, he was chairman of Sagarmatha, a conglomeration of online businesses and media interests, which was in the midst of an attempted stock listing that would later attract the scrutiny of an official inquiry. He had also served as Sagarmatha’s chief executive officer for two months in late 2017 as it launched its bid for a public listing.

Asked about the omission on the FinDev website, a spokeswoman for the EDC subsidiary noted that Sagarmatha is mentioned on his LinkedIn page. “It is a common practice by executives and professionals alike to curate their biography and résumé to reflect the experiences that are more relevant to their current role,” said the spokeswoman, Angela Rodriguez.

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For about six months, until July, 2018, Mr. Lamontagne remained chairman of Sagarmatha for an officially listed fee of about $3,400 a month, even after beginning his work at FinDev. He signed Sagarmatha’s prelisting statement in March, 2018, assigning it a value of the equivalent of about $4.35 a share – a valuation that would later be sharply challenged by witnesses at the inquiry.

Mr. Lamontagne was not accused of any wrongdoing by witnesses at the inquiry and his conduct was not impugned. Critics, however, have questioned his role in promoting Sagarmatha’s planned listing.

South African President Cyril Ramaphosa received the inquiry’s report in mid-December and is expected to release it publicly in January.

Sagarmatha, which took its name from the Nepali word for Mount Everest, was part of the business empire of a high-profile South African entrepreneur and media tycoon, Iqbal Surve. His companies have benefited heavily from investments and loans from the state-run Public Investment Corporation (PIC), which invests the pension assets of South Africa’s government employees, and which later became the subject of the official inquiry.

Mr. Surve is one of South Africa’s most controversial businessmen. He has often described himself as the former physician of Nelson Mandela. Investigations by local journalists have challenged that claim, finding no evidence to support it. He also claimed to be the “mind coach” of South Africa’s national soccer team and a personal friend of the late pop star Michael Jackson – claims that have also been widely questioned in the South African media.

South Africa's President Cyril Ramaphosa greets the media prior to the BRICS summit in Brasilia, Brazil November 14, 2019. Mr. Ramaphosa received the inquiry’s report in mid-December and is expected to release it publicly in January.

POOL/The Associated Press

What is indisputable, however, is that Mr. Surve has been a strong supporter of South Africa’s ruling party, the African National Congress. He has donated money to the ANC, and his newspapers were vocal supporters of Jacob Zuma before the president’s resignation last year.

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In 2013, Mr. Surve received a loan from the PIC and an investment from Chinese state television to help him acquire control of one of South Africa’s biggest newspaper chains, Independent Media. Since then, his newspapers have routinely showcased his personal and financial interests, publishing an estimated 350 photos of him over a five-year period.

But by late 2017, the newspapers were losing money and Mr. Surve faced a looming deadline to begin repaying the PIC loan. His response was an attempt to raise about $825-million for Sagarmatha on the stock market. He would then sell his stake in the newspaper chain to Sagarmatha, allowing the chain’s debts to be repaid.

Sagarmatha, led by Mr. Lamontagne, began an energetic campaign to court the PIC as the main investor in its stock plan. But many analysts disagreed with its lofty estimate of its value. Sagarmatha said its assets had a net value of about $40-million, and these would be swamped by the negative valuation of the loss-making newspaper chain that would be absorbed into the company under its announced plan.

In a series of articles beginning in October, 2017, the same month when Mr. Lamontagne joined Sagarmatha as its top executive, Mr. Surve’s newspapers heavily promoted Sagarmatha and compared it to an African version of Amazon or Uber.

One article in the Surve newspaper chain, a week after the Canadian entrepreneur’s appointment as chief executive officer, said Mr. Lamontagne was an “investor guru” and “visionary leader” who would help the company become a world-class technology platform. In the article, Mr. Lamontagne predicted that Sagarmatha would have a “global audience reach” of “more than one billion people” by 2020.

In an interview posted on YouTube around the same time, Mr. Lamontagne voiced his enthusiasm for Sagarmatha, describing the company as “the Africa Facebook, the Africa Bloomberg.”

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A few weeks later on Nov. 14, 2017, Mr. Surve invited the PIC’s CEO, Dan Matjila, to a meeting in Cape Town, at which Mr. Lamontagne delivered a detailed presentation on Sagarmatha and the plan to list it on the Johannesburg Stock Exchange.

Meanwhile, another of Mr. Surve’s companies, Ayo Technology Solutions, followed the same strategy and sought the PIC’s support for a similar stock-market listing. In an agreement signed by Mr. Matjila in December, 2017, the PIC agreed to invest 4.3-billion South African rand (about $390-million) in buying Ayo’s shares at a valuation of 43 rand ($3.90) a share.

Shortly after that agreement, Ayo listed on the Johannesburg exchange. But its share price soon collapsed. Its shares today have lost about 85 per cent of their original value, sparking fears that the government pension fund will suffer a significant loss on the investment. Earlier this year, the PIC launched a court action to try to recover its investment in Ayo, while the government pension fund has written off about $96-million in loans to Mr. Surve’s companies.

Victor Seanie, an equity analyst at the PIC who led the due diligence on both Ayo and Sagarmatha, testified at the PIC inquiry that Ayo’s listing price was “excessive” and that the purchase of Ayo shares at 43 rand was a bad investment. But the transaction was a “foregone conclusion” because the PIC’s chief executive, Mr. Matjila, was a close friend of Mr. Surve, he said. Their friendship was “the genesis and primary driver” of the PIC investment in Ayo, he said.

Former officials of Ayo testified at the inquiry that Mr. Surve put pressure on them to inflate Ayo’s financial numbers. Other testimony showed that the government pension fund, the main source of PIC’s funds, had been kept in the dark about the Ayo deal.

Abel Sithole, principal executive officer at the Government Employees Pension Fund, testified to the inquiry in July, 2019, that PIC had never informed the pension fund that it planned to invest in Ayo, even though the investment was above the threshold for transactions needing the pension fund’s approval.

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In early 2018, Sagarmatha pushed hard for the PIC’s investment in its own planned listing. Analysts at the PIC later testified that they found it odd for two of Mr. Surve’s companies to seek public listings within a few weeks of each other.

Sagarmatha sought a total investment of three-billion rand from the PIC, but Mr. Seanie recommended that the PIC pay a maximum of 7.06 rand a share – less than one-fifth of the price that Sagarmatha was seeking. In his testimony to the inquiry, Mr. Seanie said that he had a “very negative view of Sagarmatha” at the time.

Export Development Canada's head office in Ottawa is shown on Thursday, Feb. 14, 2019.

Justin Tang/The Globe and Mail

Another senior PIC official, Lebogang Molebatsi, testified that Mr. Matjila overruled his staff and pushed for approval of the Sagarmatha deal.

In the prelisting statement in late March, 2018, signed by Mr. Lamontagne, the company set its share price at 39.6 rand (about $4.35) a share, based on a valuation provided by a California-based company, Redwood Valuation Partners. But in its report, Redwood says its valuation was partly based on long-term forecasts and assumptions provided by Sagarmatha’s management. It said it had not independently verified or audited this information, and could not express any opinion about its accuracy.

In April, 2018, Sagarmatha’s attempted listing was blocked at the last minute by the Johannesburg Stock Exchange because the company had failed to file its financial statements with a regulatory agency as required.

Mr. Matjila and Mr. Surve have both denied that the PIC’s investment in Ayo, and its near investment in Sagarmatha, were connected to their personal friendship.

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“Yes, there was a continuous engagement with Dr. Surve,” Mr. Matjila testified. “And the reason for this was not because of friendship per se, but because I and my colleagues were worried that the PIC was being increasingly exposed to high risk and I needed to be closely involved with the major players.”

Last year, after Mr. Ramaphosa replaced Mr. Zuma as the South African President, the government launched a major overhaul of the PIC, and Mr. Matjila was forced to leave. After an internal audit of the Ayo transaction, the PIC suspended Mr. Seanie and another manager for their role in the Ayo deal. It said there had been “a blatant flouting of governance and approval processes” when the PIC invested in Ayo.

Mr. Lamontagne, in an interview with The Globe and Mail, said he could not comment on the witnesses at the PIC inquiry who questioned Sagarmatha’s valuation.

“I just don’t have the time to go through testimony of something that took place in South Africa and give you any intelligent comment," he said. "Maybe I should have been following the news more in South Africa, but I have limited time for myself, my family and the business here. I did not follow the inquiry and I have no sense of what was said.”

Mr. Lamontagne said he was invited to join Sagarmatha after getting to know Mr. Surve through the Cape Town branches of organizations such as the World Economic Forum. He said he was “excited” at Sagarmatha’s declared plan to build the largest tech platform in Africa. “I thought, what a wonderful project, and something I could contribute my expertise to.”

On the valuation issue, he noted that Sagarmatha had obtained the opinion from Redwood to support its valuation of about $4.35 a share, but would not comment further. “I wonder why anyone would spend any time discussing Sagarmatha Technologies since the IPO didn’t take place.”

Nor would he comment on the collapse of Ayo’s share price, saying he was not following South African news.

Asked if he regretted any of his comments promoting Sagarmatha in 2017 and 2018, he said: “There are clear rules on what you can say and not say on valuation, prior and during an offering process. And as I served as a director of the company and spoke publicly, it was always in line with what could be said and not be said, with the exchange rules.”

He said he was merely making “aspirational” comments when he compared Sagarmatha to global tech giants. “When I talked about the potential of an African technology company being able to achieve the heights of other global majors, it’s really aspirational, the belief that it can be done in Africa.”

In recent months, the situation for Mr. Surve has gone from bad to worse. BDO South Africa, the auditor of Sagarmatha’s financial statements at the time of its attempted listing, announced in October that it will cease working for Mr. Surve’s companies. In that same month, Mr. Surve’s offices in Cape Town were raided by members of South Africa’s Financial Sector Conduct Authority, as part of an investigation into possible manipulation of Ayo’s share price.

In November, the PIC went to court to seek the liquidation of Sekunjalo Independent Media, a company controlled by Mr. Surve’s family that owns 55 per cent of the newspaper chain. It said the company had failed to repay a debt of 609-million rand, most of which was due to be repaid in 2018. The company is fighting the liquidation bid, calling it “frivolous.”

At the inquiry into the PIC this year, Mr. Surve repeatedly used Mr. Lamontagne (and Mr. Trudeau) to defend his Sagarmatha plan. He said Mr. Lamontagne, after negotiating with the PIC on the Sagarmatha listing, was later appointed by Mr. Trudeau as the head of the development bank. “That’s the calibre of the kind of leadership Sagarmatha had,” he told the inquiry in his testimony in April.

But critics have questioned why Mr. Lamontagne was willing to promote the Sagarmatha stock listing.

“If he had done even a small amount of research, he should have heard the alarm bells ringing,” said Ann Crotty, a South African financial journalist who investigated Sagarmatha’s attempted stock-market listing in 2018.

“He gave credence to Sagarmatha and Surve, and he helped to keep the spin going,” she told The Globe in an interview. “He needs to explain his lapse in judgment.”

Alide Dasnois, co-author of Paper Tiger, a recent book on Mr. Surve’s media empire, said it is “very hard to understand” why Mr. Lamontagne and other directors agreed to associate themselves with the company at a time when South African media were describing it as a collection of insolvent and money-losing assets.

“If financial journalists could see right through the claims in Sagarmatha’s prelisting statement, why couldn’t they?” she asked in an e-mail to The Globe in response to questions. “Was it cronyism or ineptitude, or both?”

Ms. Dasnois was the editor of Cape Times, a newspaper in the Surve media empire, until she was fired in 2013 during a dispute over the newspaper’s coverage of alleged wrongdoing by a fishing company controlled by Mr. Surve.

Mr. Surve and his companies have repeatedly denied any wrongdoing in the Sagarmatha or Ayo affairs. In his testimony to the PIC inquiry, he blamed his media rivals, claiming they had sabotaged the Sagarmatha listing.

He still clings stubbornly to his claims of two years ago. If he had been allowed to list Sagarmatha on the Johannesburg stock exchange, he told the inquiry, it would have soon listed in New York and would have become a multibillion-dollar company, soaring to the heights of an Uber or Amazon.

Mr. Lamontagne, meanwhile, has ambitions of his own for FinDev.

“Three hundred million in capital is only the beginning,” he said. “I think you’re going to see this portfolio grow in multiples of that in the coming years.”

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