Six-year sentence for BVK pension fund fraud

BVK fund, set up in 1926, has about 90,000 members Keystone

The former head of asset management at Switzerland’s largest pension fund, BVK, has been found guilty by Zurich District Court of multiple counts of corruption, money laundering and breach of confidentiality.

The court handed down a six-year prison sentence to the 57-year-old who accepted bribes of up to SFr1.7 million ($1.8 million) while employed by the employee pension fund of the canton of Zurich.

In the course of the bribe-taking, the man displayed “extreme criminal energy”, operating in a highly sophisticated way, the judge said.

The offender, who was ordered to pay back SFr500,000 to the canton as well as the proceeds of the sale of his holiday home in the south of France, has already spent six months behind bars awaiting trial.  

Deemed a significant flight risk, the man was detained in court to begin serving his sentence.

One of the five co-accused who was charged with offering bribes and gifts in return for asset management contracts was acquitted on the grounds that the offences occurred too long ago.

Two others received sentences of two and a half years each, with 18 months suspended, while the final two accused received shorter suspended sentences.

Cantonal prosecutor Robert Braun said the sentences were in line with expectations and “sent a clear signal against corruption”. The convicted men have ten days to appeal the verdicts.

Management failures

There were other flaws in the administration of the pension fund as detailed in a report released last month by the Zurich canton parliamentary investigating committee.

The report found that the annual and long-term investment strategies pursued by BVK lacked a solid basis, and that the directors did not have the knowledge needed to make the decisions, yet failed to create a committee to provide knowledgeable support for strategic planning.

It specifically criticised the current finance director and three previous finance directors.

The committee estimated that bad decisions and overly high costs paid to external contractors cost BVK somewhere between several hundred million and one and a half billion francs.

The report charged that the Zurich cantonal government, in managing its employees’ pension fund, failed to take appropriate measures to bolster the fund in spite of signs in 2002 that it was undercapitalised. In 2008, the pension fund’s coverage ratio dropped to 81 per cent and it has not risen above 90 per cent since.