Wesleyan has initiated a $3 million lawsuit against its terminated CIO, Thomas Kannam, who stands accused of submitting questionable expense reports and using university resources to engage in a series of outside ventures.
"To a large extent, this story highlights a common aberration in our nation's financial system, of which Wesleyan is just an example," observed editor Kip McDaniel. "Even when alleged misconduct is practiced in plain sight, investors don't want to look too closely at the sausage-making if the individual in question is making money for us."
Paula Vasan, co-writer of the article, added, "Although the case has yet to be decided, it appears to us that neither Wesleyan nor Mr. Kannam is blameless. The evidence suggests that Wesleyan may have looked the other way, so long as it was convenient to do so."
ai5000 describes how Kannam signed a contract in 2005 agreeing not to participate in "distracting" outside business opportunities, and soon thereafter appeared to accelerate his entrepreneurial ventures. The university's lawsuit contends that Kannam expensed family trips to the university and used university staff for external ventures. Two years later, Wesleyan noticed Kannam's "extracurricular activities" and asked him to sign a "more robust" conflict-of-interest document. His wife's response to this request: "Oucheroo." Nevertheless, ai5000 reports that
this document was "impressively vague." Ultimately, under Kannam's supervision, the endowment lost 24% in 2008, well beyond the NACUBO average of -19%.
"One of the sad aspects of this case is that the trustees and administrators of the endowment are involved in doing good and likely assume that anyone who works for them has the same mindset," McDaniel commented. "Unfortunately, laissez-faire environments don't always bring out the best in people, regardless of the larger institution's admirable intentions."
A quarterly online publication, ai5000 focuses on the 5,000 largest pools of capital in the world, across pension plans, sovereign wealth funds, endowments, foundations, insurance funds and other leading institutional investors. ai5000 is edited by Charles Ruffel, founder of Asset International and PLANSPONSOR, PLANADVISER and Global Custodian.
Asset International is a privately-held publisher and information provider to global pension funds, asset managers, financial advisers, banking service providers, and other financial institutions in the private and public sector. Asset International produces and distributes print and digital publications, conferences, research and data resources via its industry-leading brands PLANSPONSOR, PLANADVISER and Global Custodian. The company was acquired in January 2009 by Austin Ventures and has offices in New York, London and Stamford, CT.