SWITZERLAND - A Zurich court has handed down its first verdict relating to a corruption scandal surrounding public pension fund BVK.

Thomas Leupin, former chief executive and partner at DL Investment Partners, was found guilty of embezzling the pension fund and sentenced to 20 months in prison, which he has already served in detention awaiting trial.

Leupin must pay CHF3.95m (€3.3m) in compensation to the BVK, as well as cover the costs of the trial.

In a statement, Zurich’s financial department, which is responsible for the BVK until it leaves state control in 2014, met the verdict “with satisfaction”.

It said the ruling was the “first success” in its protracted legal battle to recover some of the funds it lost in the alleged embezzlement and corruption scandal. 

The Zurich court confirmed to IPE that the verdict had been an ‘abgekürztes Verfahren’, or a summary procedure, meaning that Leupin had confessed to “certain points” in order to cut a deal with the public prosecutor.

It also means he cannot appeal the decision.

The public prosecutor found that Leupin had failed to report CHF3m (€2.5m) in kickbacks from investments done for the BVK. 

The trial for former BVK head of asset management Daniel Gloor, who has been charged with multiple counts of bribery, is set for next week. Leupin also faces additional charges related to that case.

In other news, the Swiss pension fund association ASIP has welcomed plans by the Swiss government to exempt pension funds from the agreement on tax transparency signed with the US.

The so-called ‘Foreign Account Tax Compliance Act’ (Fatca) was signed in mid-June between the US and Switzerland.

It obliges all financial institutions outside the US - also known as foreign financial institutions, or FFIs - to report any accounts held for people subject to income tax in the US to prevent tax evasion.

However, Switzerland is now aiming for an amendment excluding Pensionskassen and social insurance companies.

ASIP welcomed the move, arguing that Pensionskassen were “unsuitable” for tax evasion, as their tax exemption was linked to “strict legal provisions”.

Industry representatives from the Swiss second pillar fear that Fatca will lead to a major hike in administration costs and complexity.

The Swiss insurance industry argued that it too should be exempt, given that it is also managing mandatory second-pillar assets.