Swiss BVK fraud case not due to regulatory oversight – prosecutor
SWITZERLAND - The canton of Zurich's public prosecutor has concluded that a recent fraud case at Swiss public pension fund BVK had not been due to a lack of regulatory oversight.
Instead, it said the fraud - allegedly committed by Daniel Gloor, the BVK's former head of asset management - had been possible due to his "exceptionally influential position" at the scheme.
Gloor has been charged with embezzlement, bribe-taking, breach of confidentiality and money laundering.
In its 46-page indictment, the public prosecutor focuses on Gloor's "exceptionally" influential position, pointing out that he had been the only financial expert at the fund up until 2009.
It claims Gloor made numerous decisions unilaterally, "even in those areas of asset management which he was formally not allowed to decide on his own", such as the awarding of mandates to external asset managers.
It also argues that he had "knowingly and deliberately" breached the BVK's investment regulations.
Simon Heim, legal expert at Towers Watson Switzerland, told IPE that, in principle, Swiss pension funds have been "free in their organisation" - including the setup of their asset management operations - as long as they lie within the legal framework.
He added that the law requires Swiss Pensionskassen to "organise the investment process transparently and to supervise it" - and pointed out the law had stipulated as much even before the implementation of the recent structural reform of corporate governance regulations.
"Even under the 'old law, it would not have been allowed to give a single person such far-reaching responsibilities and powers - especially if the necessary control mechanisms are non-existent or do not work," Heim said.
"Considering the size of the BVK, it seems extremely unlikely Gloor was formally authorised to decide on the appointment of investment managers alone."
In its indictment, the public prosecutor claims that Gloor had pressured the BVK's investment controller Complementa into "glossing over" negative reports - on hedge fund company DL Investment Partners, for example, whose former head and founder has also been charged in connection with the case.
It claims Gloor provided false information in a letter to the canton of Zurich's financial department, particularly with respect to an alleged 'beauty contest' for managers before DL Investment Partners was awarded a mandate.
The prosecutor also points out that the business links between the BVK and DL Investment Partners had led to "strong criticism" from Complementa and employee representatives in the investment committee.
Gloor's trial is set for 11-13 July.