By GEOFF SENESCALL
HERALD EXCLUSIVE
Police are investigating a Government Superannuation Fund employee who pocketed about $1 million through murky foreign exchange dealings.
Financial sources claimed yesterday that the employee had used inside information from the Government fund - which invests the pension savings of MPs, judges, police, the military and other civil
servants - for personal profit.
The case comes to light in the same week the Securities Commission found that former Fletcher Challenge chairman Kerry Hoggard broke insider trading rules by buying shares in that company before a big announcement.
The super fund employee apparently made gains by buying the dollar low and cashing in on information that the fund was about to buy bonds which would push the currency higher.
The profits were made at the expense of several banks, which lost money.
A banker said last night that there were no laws governing such insider trading. It was up to the policies of individual organisations.
The office of Finance Minister Michael Cullen, which has ultimate responsibility for the fund, knew nothing about the case.
However, a spokeswoman for the Ministry of Economic Development confirmed last night that an employee of the fund had been dismissed.
"Because it has involved a disciplinary process, I really am quite limited [in what I can say].
"Also, I would have to say that the incident is actually subject to a police investigation."
The spokeswoman stressed that no public funds had been lost, but would not give any further information.
Given the sensitive nature of the incident, details about how the employee profited are sketchy.
However, the Herald understands that the incident happened about three weeks ago and involved the broking firm Ord Minnett and at least one bank, WestpacTrust.
The employee apparently took out an option contract with Ord Minnett betting on an upward movement in the New Zealand dollar.
WestpacTrust, unaware of who the Ord Minnett client was, took up a counter-position on the option.
Within minutes, the dollar shot up, Westpac got caught and the employee made a profit.
Feeling something was fishy, the bank is understood to have complained to Ord Minnett, which passed the query on.
The Government Superannuation Fund has $3.4 billion of investments in low-risk New Zealand-based assets.
Insider trading - a Herald series
