Kuwait Wealth Fund Commits to London as It Sues Ex-Managers

Written by
Fiona MacDonald
Written by

Fiona MacDonald

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(Bloomberg) -- Kuwait Investment Office, the international arm of one of the world's largest sovereign wealth funds, is sticking with its base in London despite a legal dispute with former managers at its U.K. office over accusations of inflated bonuses.

In comments ahead of a hearing at the employment tribunal on Wednesday, Kuwait Investment Authority said it continues to view London as a major global financial hub and was confident it will recover public funds at the center of a legal dispute in the High Court.

“We have no plans to relocate our global operation to another city,” the KIA said in a statement to Bloomberg. “We place our trust and confidence in the U.K courts to return the public funds, and to honor the reputation of our colleagues who call Kuwait Investment Office their home.”

The fund alleges that three former employees at its London office were part of a conspiracy in 2018 to award themselves unauthorized salary and bonus increases. Inquiries by Kuwait's State Audit Bureau into the alleged compensation irregularities started in January 2019 and the KIA filed a claim early last year for more than 1 million pounds ($1.4 million) in damages. All three employees have denied the allegations.

The KIA said it was compelled to file the case under Kuwait's Public Funds Protection Law, which requires that funds allegedly misappropriated be recovered through “all legal measures, in any jurisdiction.” The former employees have the option to pay the amounts owed and have failed to do so.

The three employees filed a separate lawsuit at the employment tribunal, whose hearing will focus on disclosure of KIO documents. The KIA described the claims as “retaliatory in nature.” The fund has also asserted diplomatic immunity to avoid handing over “sensitive” documents from its records.

The dispute won't affect the future hiring of British nationals in a workplace where employees from various backgrounds “help grow the assets of Kuwait's Future Generations Fund together with their Kuwaiti colleagues,” it said.

The KIA manages the OPEC member's General Reserve Fund -- the government's main source of budget financing -- as well as its Future Generations Fund, an estimated $600 billion vehicle designed as a buffer for a time after oil. It's the world's oldest sovereign fund and has stakes in ports, airports and power distribution systems around the world.

Started in 1953 as a Bank of England account dedicated to receiving oil money, the fund's high-profile investments include a stake in Daimler AG. It also holds a 5.2% passive stake in BlackRock Inc.