Apparently this is ‘standard procedure’ in the buttoned-up world of international wealth management…
from Zero Hedge
WSJ this past week exposed the shadowy ‘banker surveillance state’ in a story that centers on the former head of wealth management at Credit Suisse, Iqbal Khan, and a deep-seated beef with CS CEO Tidjane Thiam.
After reportedly getting into an argument with Thiam over purportedly being passed over for promotion, Khan quit the firm, and was swiftly poached by cross-town rival UBS. Apparently fearful that Khan would try and poach staff, Credit Suisse hired private security firm Investigo to monitor Khan and track all of his interactions.
But the plan, apparently ‘standard procedure’ in the buttoned-up world of international wealth management, backfired on Credit Suisse when Khan noticed that he was being followed while driving with his wife in downtown Zurich. The story gets a little murky at this point, but there was some kind of confrontation between Khan and his pursuers. Khan reported the issue to police, resulting in three Investigo employees being arrested.
In response, prosecutors have launched a criminal investigation, and Credit Suisse’s board has started a probe.
Khan’s decision to report the issue to police could bring about the end of Thiam’s four-year tenure as CEO of Credit Suisse – the issue is one of the biggest scandals to rock Thiam in that time.
Those who have called for Thiam’s ouster include Oswald Gruebel, who ran both Credit Suisse and UBS, as Bloomberg reports.
“Such behavior is unworthy of a large Swiss bank,” Gruebel told a Swiss publication.
Of course, this isn’t the first time a bank has gotten caught spying on employees suspected of getting ready to leave the company. The phenomenon of spying is “probably as old as banking itself,” BBG said.
Deutsche Bank, Spain’s BBVA and Barclays have all endured scandals involving botched attempts to gather “corporate intelligence” in recent years. But sometimes, the line between safeguarding intellectual property, and carrying out a vendetta against a formerly trusted associate, can be blurry.
“Surveilling employees who are getting ready to leave the company is a dog-eared page in the playbook,” said Mary Inman, a partner with law firm Constantine Cannon in London who specializes in employee whistleblower cases. “What’s remarkable about the current situation is that it got so heated.”
Even CS investors, who are less than thrilled with the bank’s lagging share price, acknowledged that the situation between Khan and Thiam “is quite a soap opera.”
“It’s quite a soap opera, and a distraction,” said David Herro, international chief investment officer of Chicago-based Harris Associates LP. Harris is Credit Suisse’s biggest shareholder, with a holding of 8.1%
Though here are a few examples of similar scandals at other banks (text courtesy of BBG).
- A decade ago, German prosecutors investigated potential data protection violations at Deutsche Bank after bank officials on several instances hired private eyes to spy on board members, a shareholder and a private individual. The lender fired two executives over the matter.
- In 2014, HSBC Holdings Plc was fined by a Brazilian court for using private investigators to spy on 152 employees on medical leave. The investigators entered some employees’ houses without permission to film and take pictures, attempting to corroborate suspicions among some at the bank that they were fraudulently collecting medical-leave benefits. The court said those actions invaded people’s privacy.
- Spanish bank BBVA is currently investigating reports that bank officials hired a detective agency in 2005 to tap the phones of senior managers, regulators, politicians and journalists as part of a high-stakes power struggle in the executive suite.
The takeaway: Banks spy on their employees all the time. CS just happened to get caught.