Since late July, Switzerland's solid corporate pension system is looking somewhat shaken. The reason is an alleged insider trading scam at a Swiss bank called Swissfirst which has now touched at least seven Pensionskassen (PKs). And the schemes do not include obscure names but none other than Publica, a federal employee scheme with CHF30bn (€19bn) in assets.

Switzerland's Neue Zürcher Zeitung (NZZ) first reported on the alleged scam on July 30. According to the NZZ, five PKs, including the Siemens and Roche schemes, dumped huge shareholdings in Swissfirst in early September 2005, just before the bank announced a merger with another bank called Bellevue. As the Swissfirst share surged following the merger's announcement, the NZZ calculated that the five schemes, together with two other insurers, sacrificed a gain of CHF20m.

At the same time, the newspaper claimed that the bank merger made Thomas Matter, Swissfirst's chief executive, CHF50m richer. The implication was that Matter may have persuaded the schemes to sell their big shareholdings in Swissfirst so that he and possibly others could profit from the merger. Indeed, it was later found out that the five schemes originally named by the NZZ as well as two that were named later - Publica and the Pensionskasse for Swissfirst - sold at least half if not all their shares in the bank right before the deal.

Matter has vehemently denied that either he, with the help of the PKs, engineered an insider trading scam. He insists that he did not reveal any information about the planned merger to the schemes, adding that if he had, then he would have indeed been guilty of insider trading.

Unfortunately for Matter and Swissfirst, the denial has not resolved the question of why the seven PKs dumped their shares in the bank right before the merger. Publica, for example, sold 68,100 shares on September 7 when Swissfirst was trading at CHF57.5. When the merger was announced on September 12, Swissfirst jumped to CHF73.5, meaning that Publica sacrificed a potential gain of CHF1m.

Publica denies that the transaction had anything to do with the bank merger, adding that if it had known about it would have held onto to its shareholding. But given Matter's statement how could it have known about it?

Another central question is why so many Swiss pension funds held shares in Swissfirst. Although the bank, which specialises in asset management (€11bn in assets) was not a poor investment, its share was not, according to the NZZ, a performer before the merger with Bellevue.

Part of the answer may lie in some of the more sensational Swiss news reports after the original NZZ story. The tabloid daily Blick has suggested that the head of investments at Rieter Pensionskasse, one of the seven embroiled in the alleged scandal, may have become a recent multi-millionaire due in part to his links with Matter. The scheme, which serves Swiss industrial firm Rieter, has denied any wrongdoing in the Swissfirst affair, while Jürg Maurer, its head of investments, has not commented.

Since Matter's denial of insider trading, Swissfirst has put out a bitter press release saying that the "false media campaign" has damaged its reputation, which is why it has hired an investment bank to look into a possible sale. The NZZ interprets this to mean that Matter and the owners of Bellevue want to get out of the mess quick. Matter himself still owns 17.1% of Swissfirst and could make another nice profit with the bank's shares currently trading at around CHF80.

Swiss regulators and the public prosecutor's office in Zurich have launched a full investigation of the events. Yet Ulrich Grete, president of Switzerland's Social Security Fund, believes that the seven Pensionskassen are already guilty of something.

In a shockingly frank interview with Blick, Grete said the Swissfirst affair was not surprising considering the incompetence of supervisory boards for Swiss Pensionskassen. "There are too many bunglers on these boards who don't have a clue about the subject matter," he said.

Grete urged the government to require that that only experts sit on supervisory boards of PKs. He added that regulation of the schemes could be vastly improved if they numbered just 1,000 instead of 8,000 currently.

Grete's attack of the corporate governance at Swiss PKs drew an angry response from ASIP, the schemes' main lobby in Zurich.