The Office of the Attorney General of Switzerland (OAG) has filed an indictment against a former employee of the treasury of the canton of St. Gallen and of the pension fund of the canton of St. Gallen.

The defendant has been charged with having brought about damage to the assets of his former employer and of the fund manager through managing pension fund assets unlawfully and in violation of his duties as well as with obtaining an unlawful advantage for himself. The OAG is seeking a sentence of four years for the defendant.

The OAG has charged the former public official, a Swiss citizen, with multiple counts of misconduct in public office (Art. 314 Swiss Criminal Code), multiple counts of criminal mismanagement (Art. 158 (1) (1 and 3) Swiss Criminal Code), alternatively multiple violations of the Law on occupational pension schemes (Art. 76 al 6 + 7 LPP), one count of aggravated taking advantage of insider information as well as multiple counts of attempts of taking advantage of insider information (Art. 154 (1) (a) in conjunction with (2) Financial Market Infrastructure Act [FinMIA] / Art. 40 (1) (a) in conjunction with (2) Financial Institutions Act [FinIA][1]) and multiple counts of money laundering (Art. 305bis (1) Swiss Criminal Code).

The defendant worked for the treasury of the canton of St. Gallen from 2003 to 2014, and for the pension fund of the canton of St. Gallen from 2014 to 2018. In both positions he acted as portfolio manager, managing second pillar pension fund moneys of canton of St. Gallen employees, and implementing, on the basis of an established investment concept and existing investment guidelines and on his own authority, the investment strategy of the fund managed by him.

His position allowed him to make decisions both about building or reducing stock positions at his sole discretion and without consulting with other departments, as well as about how the parameters of the transactions in question, such as their date and volume, were to be set.

According to the indictment, the defendant unlawfully and in violation of his duties coordinated his personal stock transactions with those he carried out in his position as a public official. To illustrate: Applying the practice of “front running” he opened personal stock positions a few days before or on the day that stock orders were placed for the funds managed by him.

The funds' orders then caused stock prices to change, which in turn enabled the defendant in many cases to sell his personal positions at a profit. He followed this coordinated trading approach using the same stocks in each case with the intention of taking advantage of confidential information for his personal gain and hence achieving an unlawful pecuniary advantage.

Through hundreds of transactions relevant to the criminal charge, the defendant gleaned profits to the tune of CHF 3,116m, which he would have had to disclose to both his former employer and the fund manager and which both his former employer and the fund manager would have been entitled to.

The money laundering charge results from the fact that by failing to declare the assets he had obtained unlawfully and in violation of his duties to the tax authorities as well as by making numerous cash withdrawals, the defendant has made it more difficult for the law enforcement agencies to confiscate, seize and collect these sums.

Share Story: