Credit Suisse COO resigns over spying scandal
Credit Suisse Group AG exonerated Chief Executive Officer Tidjane Thiam as one of his key allies took the fall for a corporate spying scandal that shook Zurich's financial elite and tainted the bank’s reputation.
Chief Operating Officer Pierre-Olivier Bouee, the CEO's chief lieutenant at three companies for more than 10 years, stepped down after ordering detectives to shadow former wealth-management head Iqbal Khan to ensure he didn't poach clients and brokers for his new post at UBS Group AG. The bank said that he acted alone, informing neither Thiam nor the board of his intentions.
While Chairman Urs Rohner said that Thiam still enjoys the backing of the bank’s board, the scandal risks isolating the CEO after he allowed a personal dispute to escalate into a scandal that damaged the reputation of Credit Suisse and Swiss banking. Rohner personally negotiated Khan's exit and took control of the investigation, while Thiam has lost a trusted ally.
Events took on an even more dramatic turn just before the bank's announcement, when it emerged that a contractor hired to recruit the investigative agency took his own life. The man -- known only as T -- died last Tuesday, according to Thomas Fingerhurth, a lawyer for detective agency Investigo. Zurich prosecutors and police are now conducting further investigations to "clarify the circumstances surrounding the death."
The bank said its investigation also didn't find any evidence that Khan had attempted to poach employees. Homburger, the law firm charged with investigating the case, didn’t look into the private falling out of Thiam and Khan and said some correspondence had been deleted.
Rohner struck a contrite tone at a press conference in Zurich on Tuesday, apologizing to Khan and his family, the bank’s own employees and expressing "regret" at the contractor's death. At the same time, he deflected questions as to whether he should take any personal responsibility for an action that Credit Suisse said was "wrong and disproportional and has resulted in severe reputational damage to the bank".
"Whilst it is understandable that companies hire third parties to monitor employees, especially when acting in a highly competitive market and there has been a breakdown in the relationship, it is unacceptable to infringe on the private lives of individuals," said Bambos Tsiattalou, a criminal defence lawyer at Stokoe Partnership. "Those with knowledge of activities of this nature should be held accountable for any wrongdoing exposed."
Bouee’s resignation sees Thiam lose a close confidant whose career has closely followed that of his own. They both moved to Prudential Plc in 2008 from Aviva Plc, where they worked together for about four years. Bouee started his career in the French Treasury before he moved to McKinsey & Co. in 2000, where Thiam also worked.
"The COO said that he alone, in order to protect the interests of the bank, decided to initiate the observation of Iqbal Khan," the bank said. The investigation "didn't identify any indication that the CEO had approved the observation".
Bouee was named his chief of staff at Credit Suisse in 2015 and later became chief operating officer, responsible for global operations, IT and security. As such, any official surveillance fell under his purview. The bank said today it also accepted the resignation with immediate effect of the head of global security services.
James B. Walker, who currently holds senior roles in the bank's finance organisation, will be appointed as Chief Operating Officer and member of the executive Board with immediate effect.
The scandal also reveals the dearth of potential candidates who could ultimately take on the CEO role after Khan's departure. UBS had been galvanized into a search for executives who could potentially succeed Sergio Ermotti earlier this year after the loss of top bankers including Andrea Orcel and Juerg Zeltner.
While it's common for banks to try to prevent staff who leave from poaching colleagues, the spying case has shaken Switzerland's reputation for quiet professionalism and raised questions about who ordered the surveillance and who knew about it. A top law firm, Homburger, was commissioned by Credit Suisse to undertake the investigation.
Thiam is being spared responsibility for the drama after coming under criticism when it emerged that he and Khan had a falling out. The two men are neighbours in the upscale neighborhood of Herrliberg outside Zurich, and Khan had enjoyed a rapid rise through the ranks of Credit Suisse, promoted by Thiam to lead a key unit.
But their relations soured this year and their rift had been an open secret inside Credit Suisse for months. In January, the two had an argument during a party at Thiam's house, people familiar with the situation have said. Their dispute escalated, mixing the personal and the professional. The two reportedly tussled over issues related to their adjoining villas in an upscale neighborhood of Zurich to Khan's career prospects after a corporate reorganization that saw two colleagues elevated. By July, he had decided to leave the bank and the following month agreed to join UBS.
One of the bank's top investors defended Thiam against criticism, including from former Credit Suisse CEO Oswald Gruebel, warning that his ouster would hurt the bank.
"We are fully supportive of CS's management actions taking any legal steps necessary to protect the company and think it would be damaging to CS and its stakeholders to lose any member of senior management over this issue," David Herro, deputy chairman of Chicago-based Harris Associates, said before the decision.
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