Spy scandal at Credit Suisse

The bank’s reputation has suffered a major blow

A farce worthy of a James Bond film has rocked Switzerland’s second-largest bank. Clients and shareholders are appalled. Alex Rankine reports.

If you want to have a great career, then don’t “buy a house next door to your boss”, says Philippe Escande in Le Monde. A banal dispute between neighbours about trees has snowballed into an espionage scandal that has rocked the usually staid Swiss banking world.

The trouble began when Iqbal Khan, head of wealth management at Credit Suisse, moved in next door to chief executive Tidjane Thiam in the upmarket village of Herrliberg on the shores of Lake Zurich. Thiam’s strategy has centred on growing the bank’s wealth-management arm. That initially made for warm relations with Khan, who increased profits at the division by roughly 80%, notes Stephen Morris in the Financial Times. Thiam dubbed Khan a “star” and repeatedly promoted him. Yet things changed after Khan “bought, knocked down and redeveloped the house immediately next to his boss”. That meant two years of noisy construction work, including weekends.

The neighbourly dispute created a “toxic” workplace environment. Hoping for a rapprochement, in January Thiam invited Khan and his wife to a cocktail party, say Rupert Neate and Julia Kollewe in The Guardian. Yet the peace offering quickly turned sour. The pair “reportedly had a heated argument about a row of trees Thiam had planted on his property that partially blocked Khan’s view of the lake”. With the duo barely on speaking terms, Khan decided to jump ship for rival UBS. But then the affair took an extraordinary “James Bond-style turn”.

The banker who knew too much

An internal investigation at Credit Suisse this week found that chief operating officer Pierre-Olivier Bouée hired Investigo, a private detective firm, to tail Khan. Bouée was apparently concerned the Khan was planning to poach staff and clients for UBS. Matters came to a dramatic head last month. “Mr Khan alleges a group of three men chased him and his wife through the streets of Zurich by car and on foot, which culminated in a physical confrontation behind the Swiss National Bank,” writes Morris. Investigo says that only one detective was present and that “Mr Khan chased him”. Bouée has resigned over the scandal, and the investigation has cleared CEO Tidjane Thiam of wrongdoing. In a further murky twist early this week, a contractor involved in the surveillance of Khan reportedly committed suicide.

The whole incident is a huge embarrassment for a firm whose “wealthy account holders” expect “discretion and confidentiality”, notes Elisa Martinuzzi for Bloomberg. It also raises serious questions about how the bank is run. Why was someone in Bouée’s position able to authorise such a high-risk operation without clueing in top management? Shares in Credit Suisse are down by almost 50% since Thiam took over. Revelations about the “dark side of global finance” will not help the bank’s efforts to dig itself out of that hole.