When Wesleyan University announced in a campus-wide e-mail in November that its chief investment officer had left to "pursue other opportunities," it was logical to wonder if Thomas Kannam had, like a coach of a losing sports team, been a fall guy for a brutal endowment season. And when word leaked recently that the Connecticut liberal arts college had sued Kannam in November, it seemed as if the institution might be trying to hold him responsible for its losses.
The truth is far stranger. As laid out in Wesleyan's court filings, a partial copy of which Inside Higher Ed received, the university accuses Kannam of enriching himself through the use of his position at Wesleyan, focusing on outside "entrepreneurial ventures" while largely ignoring his job. A panoply of collaborators (including his wife) are charged with helping the former vice president of investments.
The charges against Kannam -- which were first reported by The Wesleyan Argus, the college's student newspaper -- include theft, fraud, forgery, theft of trade secrets, and breaches of duty and contract; his co-defendants, which include several companies and investment firms, are accused of unjust enrichment and tortious interference, among other things.
Wesleyan officials declined to comment on the pending litigation, and a lawyer for Kannam, Stephen J. Fitzgerald, said his client denied all of the university's charges.
There are many, as Wesleyan lays it out in its filing for a "pre-judgment remedy" -- which would force Kannam to set aside $3 million as, essentially, a down payment on the verdict the university expects to win.
Kannam was hired as Wesleyan's director of investments in 1998, and he was credited throughout the early part of this decade with helping to boost significantly the value of the university's endowment. But according to a cache of e-mails that Wesleyan officials present, in exacting detail, as having been written by Kannam, the fo
rmer investment guru allegedly began as early as 2001 to engage in a series of outside ventures designed, as one e-mail put it, "discreetly make millions through ... entrepreneurial ventures while simultaneously managing the Wesleyan portfolio."
In 2001, Kannam allegedly formed a hedge fund vehicle known as Cross Border Capital, with one outside associate, Ralph Gill. In an e-mail to Gill, Kannam allegedly suggested that they pair up with the hedge fund run by another associate, Michael Zaninovich. "Through my portfolio at Wesleyan, I have a window on some very interesting stock ideas," Kannam allegedly wrote. "If possible, I'd like to cherry-pick the best and capitalize on them. Would it be possible to set up an arrangement whereby we feed ideas to Mike's hedge fund and get paid some incentive on the performance of our ideas? Might be the fastest way to make some real dough." (Zaninovich, like others named in the complaint, could not be reached for comment.)
Wesleyan alleges that as Kannam "absconded with confidential and proprietary information" from his job there to build that fund, he expanded his outside activity in 2006 when he teamed up with Belstar Group, a collection of investment funds. According to Wesleyan, he became its director of investment, one of numerous positions he allegedly failed to disclose to Wesleyan, and received not only compensation but a pension plan, corporate credit card and office. Wesleyan also says that he repeatedly charged to Wesleyan expenses rung up for his work on behalf of Belstar, including a weeklong trip to Asia with Daniel Yun, who is also charged in the complaint.
The complaint alleges that Kannam also became affiliated with a third entity, Vietnam Capital Partners, on whose board he served. The Wesleyan complaint alleges that Kannam "began to promote its fund to investment officers at other educational institutions, who had no idea of Kannam's personal involvement." Inside Higher Ed was unable to ascertain if any other colleges invested in Vietnam Capital Partners as a result of Kannam's efforts.
Kannam also served as director of business development at Advanced Device Technology, Inc., a company founded by his father, Wesleyan alleges.
Wesleyan's complaint alleges that Kannam went out of his way to hide his various affiliations and outside work. The university says that he pushed to move the investment office out of a central administration building to a more obscure location, which he dubbed the "Taj."
He allegedly signed many documents for Cross Border Capital under the name "H.L. McCutcheon," his wife's name, and wrote an e-mail in 2005 in which he told Gill that their partnership needed to be handled "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," referring to the 2002 corporate responsibility law.
Wesleyan alleges that Kannam blurred the lines between his day job and his external activities, making "a significant portion" of calls from his office line about his "personal entrepreneurial ventures" and "a majority" of his e-mail messages from both his university account and another used from his office computer for matters unrelated to university business.
A status conference in the lawsuit is scheduled for Feb. 1.