Cue populist rage!!
Unless you’re a particularly keen watchdog of the administration, you probably paid little attention to the departure of former Vice President of Investments and Chief Investment Officer Thomas Kannam back in October, via a vaguely worded all-campus email stating that he had “left Wesleyan University to pursue other opportunities.”
As it turns out, Kannam is now being pursued by the University in a $3 million lawsuit, for civil theft, fraud, statutory forgery, breach of fiduciary duty, breach of contract, and unjust enrichment, among other charges.
There’s been no public announcement of this, but according to a late scoop by the Argus,the University filed its suit in the Middletown Superior Court on November 24. Kannam’s employment was terminated on October 13th, presumably soon after his misconduct was brought to light. The basic details of the suit are available here on the State of Connecticut’s Civil Inquiry website – Kannam is listed at the top of a list of about twenty other defendants.
Kannam oversaw a period of steady growth of the Wesleyan endowment, which peaked above $700 million in 2007, but dropped significantly after the stock market bust in 2008. He was the second-best paid employee on campus, with a $460,000 paycheck in 2007, but clearly that wasn’t enough.
According to the Argus, Kannam violated his contract with the University by spending more of his time on “personal entrepreneurial ventures” than his duties at Wesleyan, which involved presiding over investments and the growth of the University’s endowment. The University’s complaint states that Kannam had been improperly profiting from his position since 2001, by exploiting his privileged access to Wesleyan’s financial information with several outside investment ventures, including the Cross Border Capital Advisors (CBCA) and the Belstar Group.
He is also accused of sitting on several corporate boards without letting the University President know of his involvement with them, as his contract required him to do. Among the corporate boards he sat on were his father’s company, Advance[d] Device Technology Inc., which supplies infrared devices to the United States military, and Vietnam Capital Partners – sure to further enrage anyone (SEWI, SDS) who supported the University’s divestment from weapons contractors like Raytheon two years ago.
Despite receiving healthcare benefits and pension from the Belstar Group, and being named their “critical endowment asset” because of the secret financial information he was able to leak to them, Kannam apparently still took business trips on their behalf at the University’s expense. The University also accuses Kannam of fraudulently and routinely using Wesleyan funds for personal expenses, such as golfing outings, international travel, and a trip to the 2008 Super Bowl (!!), among other things.
Kannam allegedly used non-financial University resources for his personal ventures as well, by offering to have staff at the Wesleyan Investment Office handle Belstar projects, and using the services of Wesleyan’s Quantitative Analysis Center (QAC) for Belstar without paying any fees.
According to the University, Kannam was perfectly aware of the conflicts of interest and tried to hide them, especially in the wake of the post-Enron-scandal Sarbanes-Oxley Act, which set higher standards for oversight by corporate boards. He was also worried that he’d have to “lay low” after the arrival of new president Michael Roth in 2007, whose oversight would presumably not be as conducive to fraud and theft as former president Doug Bennet’s was.
The Investment Office was in North College when Kannam first started working at Wes, but the University claims that he lobbied to have his office moved into its current location at 74 Wyllys Avenue, which Kannam called “The Taj” and used mainly to conduct his personal non-Wesleyan business away from the prying eyes of colleagues.
The University released some of Kannam’s email correspondences from his personal work computer at “The Taj”, which include these somewhat implicating statements:
“Through my portfolio at Wesleyan, I have a window on some very interesting stock ideas… If possible I’d like to cherry-pick the best and capitalize on them. Would it be possible to feed Mike’s [Zaninovich] hedge fund and get paid some incentive on the performance of our ideas? Might be the fastest way to some real dough.”
– to Ralph Gill, his CBCA associate
“Another board seat ($=equity)…Whoo, whoo, whoo, whoooooo! They’re adding up.”
– to his wife.
“We need to handle this discreetly at Wesleyan since there’s major turnover on our Board now and the new members that are joining take their fiduciary duty seriously in the Sarbanes-Oxley environment.”
– to a CBCA associate in 2005
Kannam’s attorney denies all the allegations in the complaint, but from the evidence provided so far, it looks like he’s got his work cut out for him.
So there you have it, Wesleyan’s very own brush with white-collar crime, a symptom of our nation’s economic crisis writ small. Nothing like a financial scandal to start off the new year! Definitely more details to come, this will obviously be a huge case in coming months.
Thanks to Ezra Silk ’10 and Rob Wohl ’11 of the Argus for unearthing this – get all the sordid details over there.
Argus: University Sues Former Investment Officer Kannam for $3 Million
Connecticut Civil Inquiry: Wesleyan University v. Kannam, Thomas et al