Kuwait sovereign wealth fund fights court battle with fired executives

The Kuwait Investment Authority’s London arm has launched High Court proceedings against former executives over an alleged conspiracy to award unlawful pay increases.

The case is part of a broader dispute between the $600bn sovereign wealth fund and a number of former employees, which began during a period of upheaval after Saleh Al-Ateeqi, a former McKinsey partner who once worked for Tony Blair, was appointed president of the Kuwait Investment Office in April 2018.

More than 30 out of the KIO’s roughly 100 employees have left the organisation 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; the KIA was established in 1982 as the KIO’s parent firm.

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

The court proceedings in London were brought after two executives were fired in January for alleged gross misconduct. Simon Hard, head of fixed income since 2007 and, latterly, acting KIO president, and Prashant Vithlani, head of equities, formerly acting president and a 22-year veteran at the KIO, were fired on the same day.

Saleh Al-Ateeqi © Hugo Hu/AP

Before his dismissal, Mr Hard, 62, had begun an employment tribunal case against the KIO, alleging whistleblowing detriment, victimisation and age discrimination. Caroline Taylor, head of human resources, who had been at the KIO since 2008, was fired two months later for alleged misconduct. Before she was fired Ms Taylor also brought proceedings against the KIO in the employment tribunal over allegations of whistleblowing detriment, harassment, victimisation, discrimination and unequal pay. The allegations are contested.

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

At the heart of the case is an alleged conspiracy to award unlawful increases in salaries and bonuses, to the detriment of the KIO.

The KIO is seeking damages for alleged breach of contract, conspiracy to cause loss by unlawful means and inducement of breach of contract. It is claiming losses and damages of £440,000, with additional alleged damages to be sought once they are quantified.

“It was alleged by KIO that I had helped two acting presidents [Mr Hard and Mr Vithlani] unlawfully amend bonus figures and salary reviews,” Ms 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 to the UK, is claiming state immunity in the employment tribunal, which if it succeeds would confirm that the KIO is outside the jurisdiction of the tribunal.

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

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

The High Court on Monday is due to hear a contested application by Mr Hard to stay the proceedings pending the outcome of proceedings before the employment tribunal.

A hearing in the employment tribunal on the KIO’s state immunity is provisionally scheduled for September and various preliminary, procedural issues have been contested.

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

The KIO, which is effectively an in-house fund manager, does not disclose its assets or investment record. However, people with knowledge of the portfolio say the KIO invests a large minority of the KIA’s $600bn asset base. The London arm invests directly in fixed income, equities, and alternatives, including infrastructure and real estate.

The KIO’s Wren House subsidiary has investments in Thames Water, London City Airport and Associated British Ports.

The KIO declined to provide a comment for publication.