Kuwait’s sovereign wealth fund fights legal battle against sacked leaders

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The London branch of the Kuwait Investment Authority has launched a High Court case against former executives over an alleged conspiracy to grant illegal pay increases.

The case is part of a larger dispute between the $ 600 billion sovereign wealth fund and a number of former employees, which began during a period of upheaval after Saleh Al-Ateeqi, a former McKinsey associate who formerly worked for Tony Blair, was appointed Chairman of the Kuwait Investment Bureau in April 2018.

More than 30 of the approximately 100 KIO employees have left the organization since the start of 2018, according to people familiar with the matter.

The KIO, which opened an office in London in 1953, is the world’s oldest sovereign wealth fund; KIA was established in 1982 as the parent company of KIO.

Respected in the City of London for its conservative and successful investment strategies, the KIO was also known for its low staff turnover rate, with many employees remaining for a decade or more.

Legal proceedings in London were initiated after the dismissal of two executives in January for alleged serious misconduct. Simon Hard, head of fixed income since 2007 and, most recently, acting chairman of KIO, and Prashant Vithlani, head of equities, former interim chairman and 22 year old KIO veteran, were fired on the same day.

Saleh Al-Ateeqi © Hugo Hu / AP

Prior to his dismissal, Mr Hard, 62, had filed a lawsuit against the KIO, alleging prejudice of whistleblowing, victimization and age discrimination. Caroline Taylor, head of human resources, who had been at KIO since 2008, was fired two months later for alleged misconduct. Prior to her dismissal, Ms Taylor also brought an action against the KIO in the labor court for allegations of whistleblowing, harassment, victimization, discrimination and unequal pay. The allegations are disputed.

Mr Hard and Ms Taylor are accused in the High Court case. They deny wrongdoing.

At the heart of the matter is an alleged plot to grant illegal wage and bonus increases, to the detriment of the KIO.

The KIO seeks damages for breach of contract, conspiracy to cause loss by illegal means and inducement to breach of contract. He claims losses and damages of £ 440,000, with alleged additional damages to be claimed once quantified.

“KIO alleged that I had helped two interim presidents [Mr Hard and Mr Vithlani] illegally altering bonus figures and salary reviews, ”Taylor told the FT, adding that she denies the allegations.

Mr Vithlani declined to comment beyond saying he denies any wrongdoing.

The KIO, which is part of the country’s diplomatic mission in the UK, is calling for state immunity from the labor court, which, if successful, would confirm that the KIO is outside the jurisdiction of the court.

At the same time, the KIO is pursuing proceedings in the High Court against Mr Hard and Ms Taylor, seeking judgments falling within the jurisdiction of that court.

Judge Sykes Frixou, a law firm acting for Mr Hard, said important questions were at stake regarding alleged contractual and statutory obligations to UK citizens. “The case raises questions of significant public interest in terms of the extent to which foreign-controlled entities can avail themselves of diplomatic privileges,” the law firm said.

The High Court is due to hear a disputed request from Mr Hard on Monday to stay the proceedings pending the outcome of the labor court proceedings.

A labor court hearing on KIO state immunity is tentatively scheduled for September and various preliminary procedural issues have been contested.

The developments led to a question being raised in the Kuwaiti parliament. A response to the legislators of the Gulf country is being prepared, according to a person close to the sovereign wealth fund.

The KIO, which is effectively an internal fund manager, does not disclose its assets or its investment record. However, people familiar with the portfolio claim that the KIO invests a large minority of KIA’s $ 600 billion in assets. The London branch invests directly in fixed income, equities and alternatives, including infrastructure and real estate.

KIO’s Wren House subsidiary has investments in Thames Water, London City Airport and associated UK ports.

The KIO declined to provide a comment for publication.

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