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At World’s Biggest Wealth Fund, Top Hire Slammed by Watchdog

CEO Selection at World’s Biggest Wealth Fund Slammed by Watchdog

(Bloomberg) --

The watchdog overseeing Norway’s $1 trillion wealth fund has delivered a scathing critique of the recruitment process of its next chief executive.

Nicolai Tangen, the London-based hedge fund manager picked to run the world’s biggest sovereign investor, faces a growing controversy in Norway due to his personal wealth and his firm’s use of tax havens.

On Monday, Norges Bank’s Supervisory Council said Tangen’s selection raised serious questions around conflicts of interest and demanded that the central bank, which manages the fund and handled Tangen’s recruitment, guarantee that a number of issues be fixed before he starts as CEO in September.

“It’s unfortunate that this wasn’t clarified before the appointment,” the council said in a letter to Norges Bank’s Executive Board.

It’s the latest twist in an affair that’s exposed embarrassing shortcomings in a country otherwise associated with the highest standards of transparency and discretion.

Last month, examples of Tangen’s extreme wealth and his ties to Norway’s elite were splashed across a local tabloid, prompting union leaders and some politicians to ask whether he’s the right man to watch over an entire nation’s savings.

One of the key sticking points in the case is Tangen’s personal wealth, and how he intends to handle it as CEO of Norway’s sovereign fund.

The council, which is appointed by parliament, called it “very unfortunate” that Tangen and Norges Bank had created the impression that he would cut all ties to his private investment firm, AKO Capital LLP, when he will in fact keep a controlling stake. Even if profits relating to the stake go to his charity during his tenure at Norway’s fund, Tangen will still have a vested interest in AKO’s development, the council said.

Personal Investments

Norges Bank must now establish a clause guarding against conflicts of interest, and force Tangen to be fully transparent on the assets he owns, estimated at about 700 million pounds ($862 million). The council also criticized the bank’s failure to clarify AKO’s use of tax havens, and the extent to which the use of such havens is compatible with the required transparency around Tangen’s investments. Some AKO companies are based in the Cayman Islands and Jersey.

It’s also unclear whether AKO will manage Tangen’s assets free of charge, and how the arrangement would be regulated by the wealth fund’s internal rules, the council said.

The council went on to question Norges Bank’s decision to leave Tangen’s name off the official list of candidates, and said the bank hadn’t followed its own guidelines on transparency. The bank has already acknowledged Tangen’s candidacy should have been made public.

A ‘Screw-Up’

Questions around the new CEO’s hiring process emerged soon after Tangen’s appointment was announced on March 26. But the affair took on a whole different life in Norway after revelations last month that he’d spent $3 million on a luxury event in the U.S. in November, attended by several prominent Norwegian public figures, including the fund’s outgoing CEO Yngve Slyngstad.

Slyngstad, who accepted a luxury flight back to Oslo that was paid for by Tangen, has since said he “really screwed up.” Even though Norges Bank cleared Slyngstad of formally breaching the bank’s ethical guidelines, it said he shouldn’t have agreed to the flight. The Supervisory Council also rebuked Norges Bank for failing to set clear compliance rules.

“For the sake of clarity for all employees, the Executive Board should have addressed more clearly whether this was in breach of Norges Bank’s ethical rules,” the council said.

Governor’s Reply

Norges Bank Governor Oystein Olsen said he had taken note of the watchdog’s comments and would take them into account in Tangen’s contract. The written terms of the new CEO’s job will be discussed at a board meeting on May 27, and be made public.

Olsen said that “work is in progress to ensure that necessary distance is established” between the fund, Tangen’s AKO firms and his personal wealth.

“Nicolai Tangen will make the necessary arrangements,” he said on Monday. “Even though it might have negative tax consequences for him.”

©2020 Bloomberg L.P.