In Finma’s eyes: the cases against former CS boss Thomas Gottstein

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As a major bank, Credit Suisse is history. With the help of the federal government, it was sold to its arch-rival UBS, which bought it almost for free. But the ghosts of the old Credit Suisse are far from resting. This is ensured by a long list of contaminated sites. Take the Greensill debacle, for example.

Investors are still expecting around 2.5 billion francs from investment vehicles lost in the bankruptcy turmoil surrounding Australian financier Lex Greensill. When the collapse occurred in March 2021 and Credit Suisse had to close the funds, 10 billion francs in client assets were frozen. Meanwhile, three-quarters of client funds were paid off. Access to the remaining 2.5 billion CHF proves to be a tough nut to crack. CS has several lawsuits over the years.

Shortly after the March crash, financial market regulator Finma filed a lawsuit against the bank, which resulted in harsh condemnation two years later. The official found that Credit Suisse “serious breaches of its regulatory obligations”. At the same time, Finma announced that it would initiate enforcement proceedings against the bank’s “four former directors”.

According to research by SonntagsBlick and online financial tool Tippinpoint, proceedings are ongoing against Thomas Gottstein, the bank’s former CEO, who resigned at the end of July 2022. This has been confirmed by several people familiar with the matter. Gottstein cites a telephone inquiry to his communications consultant, who declined to comment.

A enforcement procedure is the most stringent tool a financial market supervisor can use against individuals or institutions. In the worst case, those affected are threatened with a professional ban, institutes could lose their banking licenses. One of the best-known enforcement proceedings was against former Raiffeisen banker Pierin Vincenz. But it is also possible for nothing to happen.

The power struggle between Gottstein and Khan

To understand how this could happen, it is necessary to delve into the history of the origins of these financial structures. In 2015, Tidjane Thiam became CEO of CS. A power struggle soon broke out between Thomas Gottstein, then head of the Swiss division, and Iqbal Khan, head of international wealth management. Wealth management for professional investors like pension funds, both wanted control over wealth management.

Khan won the deal and now he needed to find a department head. When the first candidate didn’t work – Thiam vetoed former GAM CEO David Solo – Kahn boarded a plane and brought Eric Varvel, an investment banker and veteran CS specialist from New York (USA), to Zurich. Together with Michel Degen, head of Swiss wealth management, he developed the notorious supply chain funds in a matter of months.

As it turned out later, the funds had several serious design flaws. The loans on which the funds relied – these were securitized supplier receivables – were only randomly checked by CS’ asset management. Second mistake: These loans were insured against default. However, the beneficiary was not Credit Suisse, but a company from the Greensill network.

CS pension fund had concerns

The funds were launched in early 2017 and marketed aggressively. When Khan left CS in the summer of 2019, his fortune had grown to $8.2 billion. Shares of the fund were bought by professional investors, but the majority remained in custody accounts of wealthy private clients and some remained in wealth management jurisdiction. The funds were not generally well received. Interestingly, the Credit Suisse pension fund did not buy them.

When Philipp Wehle replaced Iqbal Khan on July 1, 2019, the fund’s client assets were $8.2 billion. After that, growth continued and another billion was added by November. As “SonntagsZeitung” writes, these investments were probably made under Khan. The media is talking about a “failure” by today’s UBS top executive.

Early on there were doubts about the funds. When the Swiss fund company GAM, which also offers Greensill funds, got into trouble, Finma started asking Credit Suisse at the end of 2018. It was about highly problematic investments in three companies financed by CS funds. These companies – GFG of Indian steel magnate Sanjeev Gupta, US coal mine Bluestone and US startup Katerra – were paid for supplies that were not real or that may or may not happen in the future. Total financial bullshit.

Finma’s Secret

Finma remains silent on whether she filed a lawsuit against Thomas Gottstein and why she did. It remains his secret why he targeted the CEO of Credit Suisse, who was CEO at a time when Finma’s problems with his funds were already known – shit was done, so to speak. Gottstein replaced Thiam in February 2020 and served as firefighting for the 12 months leading up to the closing of the funds.

Why Finma didn’t file a lawsuit against one of the key figures in setting up the fund, as well as why she didn’t question Khan as a source of information, remains Finma’s secret. Khan is currently one of the key executives of UBS and head of Global Wealth Management. Responsible for $3500 billion in client assets.

*Journalist Beat Schmid writes about finances in Sunday’s Blick newspaper. Tippinpoint.ch is the publisher of the online media.

Source :Blick