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Swiss Regulator Opens Enforcement Case Against Credit Suisse In Hollywood Blockbuster-Style Spy Scandal

A Hollywood blockbuster-style spying scandal at a large Switzerland-based bank has drawn the attention of FINMA, the country’s top financial regulator. An investigation and potential enforcement action is in the works against Credit Suisse, a large global investment bank, concerning allegations that the company and top executives may have participated in a corporate espionage scandal.

The Swiss regulator announced that it “opened enforcement proceedings against the bank, in which it will pursue indications of violations of supervisory law in the context of the bank’s observation and security activities and in particular the question of how these activities were documented and controlled.” 

Here’s the wild story behind the Credit Suisse spy scandal.

Iqbal Khan was the former head of Credit Suisse’s highly successful wealth management division. He was said to have bristled under the management of his CEO Tidjane Thiam. Khan supposedly told confidants that, even though he was rumored to be the successor of Thiam, he didn’t receive the appreciation and compensation that he deserved.

It was reported that Thiam and Khan were on bad terms in and out of the office, as the two were residential neighbors. Animosity and tensions brewed between the men. Things escalated when Thiam complained about disruptive renovations at Khan’s home. In response, Thiam allegedly planted trees on his property blocking Khan’s clear view of Lake Zurich. Tempers simmered and when the two met at a party, they had to be separated by others to avoid a physical altercation. 

Khan decided to pursue other employment options and joined Credit Suisse’s cross-town rival, UBS, another major Swiss bank. While on garden leave (European countries usually require departing executives to delay starting a new job for a long time period—sometimes months—unlike the two weeks’ notice provided in the United States. This time was spent tending to their gardens, hence the expression), Khan was reportedly followed by investigators hired by Credit Suisse. He complained that men, employed by a private security company, chased after him and his wife through the streets of Zurich. Khan and his wife confronted the stalkers and reported the matter to Credit Suisse. 

Thiam denied any knowledge of this action. His protestations appeared weak, as the former head of human resources, Peter Goerke, reported that he too had been followed. 

It was later determined that the private investigators were hired by Thiam’s close confidant, COO Pierre-Olivier Bouée. An investigation conducted by an external law firm cleared Thiam of involvement in the Khan spying episode. However, Bouée was fired over this matter. Tragically, a private investigator—who allegedly helped Bouée with the espionage plan—killed himself.

Thiam’s innocence was questioned as he maintained a 20-plus year relationship with Bouée. They worked closely together for nearly two decades at the preeminent management consulting firm, McKinsey, in Paris. Then, Bouée followed Thiam to British insurer Aviv. Afterward, the gentlemen both joined Prudential before landing together at Credit Suisse.

Thiam—the first black CEO of a major European bank—resigned after he lost the confidence of the bank’s board of directors, in the wake of a scandal. Some people, including David Herro, a portfolio manager at Harris Associates with a large stake in Credit Suisse, raised the issue of racial prejudice, which may have played a part in Thiam’s ouster. Herro said, “To be very frank, it seems like envy from competitors or perhaps something else given that Mr. Thiam looks a little bit different than the typical Swiss banker. Either one of these two rationales behind these attacks against him, to me, are extremely distasteful.”  

Other reasons were raised for the board pushing out Thiam. The share price of the bank’s stock had drastically dropped under his tenure. His lack of any contrition or concern over the espionage and accompanying suicide rattled the board, chairman and employees. The obvious close relationship with Bouée and the second case of spying seemed to leave Credit Suisse with little-to-no options. 

Credit Suisse said it “will continue to fully cooperate with Finma and is determined to support the effort to ensure a complete and expeditious conclusion of the review of this episode and incorporate lessons learned.” 

It will be interesting to see the final results of the regulator’s investigations and actions.

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