Credit Suisse Left Relationship Manager to His Own Devices

Credit Suisse Geneva

Credit Suisse Geneva

The losses of a Georgian oligarch are quickly developing into an embarrassment for his bank, Switzerland's Credit Suisse. Accusations leveled at the bank by the oligarch's client adviser have now emerged.

The arrest of a client adviser at the end of January brought the affaire to the public knowledge, but the Credit Suisse (CS) employee spilt the beans to several private detectives as early as December.

«Le Temps», a Swiss daily, published the account of the arrested banker with details about the case, which has the potential to develop into a full-blown storm for Switzerland's second-biggest bank. In his statement, the CS employee claims his bosses left him hanging out to dry.

Not Amused

The story's focal point is a man called Bidzina Ivanishvili, a former prime minister of Georgia turned rich thanks to his business interests in raw materials and banking. Ivanishvili reputedly invested one billion Swiss francs with CS – an amount that has shrunk significantly since because asset allocation decisions by the client adviser turned sour.

The talk is of a loss to the tune of 100 million francs.

Unsurprisingly, Ivanishvili was not amused about his losses and pressed charges, demanding the bank to make amends. The damages may turn out to be substantial. At the presentation of the annual results earlier this month, CS Chief Executive Tidjane Thiam said the provisions taken for risks arising through legal claims had also increased because of the case of one customer. He refused to give more detail – CS doesn't comment on the case from Geneva.

Case for the Psychiatrist

Not commenting didn't prevent the account of the bank's client adviser to emerge though. The report in «Le Temps» makes for desperate reading. According to his statement, the banker was overwhelmed by what had happened and has in the meantime been put in a closed psychiatric ward.

The man is in his mid-50s and originates from neighboring France. He joined CS in 2005 and became one of the top advisers taking care of the super rich Eastern European clientele. Less so because of his banking knowledge, but more because he had become an expert of the Russian mentality and language while working as a manager at Yves Rocher, the French cosmetics company.

Real Estate Shares

His lack of banking experience may have contributed to his downfall. In 2007, he invested some of his clients' assets in real estate shares, which dramatically lost in value in the financial crisis. According to the arrested banker, he turned to his superiors and informed them about the problem. They are said to have told him not to let his clients know as long as they weren't unduly concerned and to deal with the problem himself.

He wasn't able to. He didn't inform the clients and tried to recover the losses, making speculative allocations and moving assets from one portfolio to the next – including the one belonging to Ivanishvili.

At first, he succeeded with this strategy. But increasingly, he lost lost the plot as the deals became more speculative and finally, he fell ill.

The Bubble Burst

Last autumn, the bubble burst. One of the positions the banker had invested in plunged and left a gaping hole in the portfolios he couldn't fill anymore. The clients are said to have been left in the dark, prompting a storm of anger.

The central question in this case: is it possible that the client adviser kept his employer ignorant of his manipulations? The lawyers of the clients, among them two Russians, claim that this was impossible. The two are about to file charges against the bank, according to «Le Temps».

Case for the Lawyers

CS has become active as well. The bank mandated Schellenberg Wittmer law firm to investigate the case internally and lawyers at Homburger have been asked to handle the relations with the arrested banker.

That's for starters it would seem.


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