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Credit Suisse Starts Investigation After Former Star Is Shadowed

Credit Suisse moved to contain an escalating crisis surrounding a former top private banker.

Credit Suisse Starts Investigation After Former Star Is Shadowed
A Credit Suisse logo hangs in the entrance to Credit Suisse Group AG’s headquarters in Zurich, Switzerland. (Photographer: Stefan Wermuth/Bloomberg)  

(Bloomberg) -- Why was Iqbal Khan followed?

Credit Suisse Group AG moved Monday to contain the corporate espionage drama gripping Zurich financial circles. It said the board of directors had begun an inquiry into the surveillance and attempt to grab the mobile phone of its former top private banker, who had defected to UBS Group AG.

The “truth will emerge,” Chairman Urs Rohner and Chief Executive Officer Tidjane Thiam said in an internal memo seen by Bloomberg and confirmed by the Swiss bank. Those conducting the probe will report directly to Rohner, according to a separate statement.

Switzerland is a country of order, and its bankers have a centuries long history of discretion. The Khan affair -- which ended in a physical confrontation on the street and a minor tempest of publicity -- defies its reputation for quiet professionalism. That holds especially true for a wealth manager that is supposed to protect the fortunes of its clients.

The revelation that the bank spied on an employee on leave between jobs risks blowing up into one of the bigger -- or at least more unusual -- scandals to hit Credit Suisse. It also shatters a period of relative calm during which Thiam’s three-year overhaul of the country’s second-largest bank had begun to bear fruit.

Credit Suisse Starts Investigation After Former Star Is Shadowed

The made-in-Zurich drama spilled into the open over the weekend amid reports that Khan had been followed by private investigators just weeks after exiting the company abruptly following a rift with Thiam. Khan, a rising star in the key wealth-management business, had been seen as a potential successor to the CEO, but tensions had mounted in recent months as his name was linked to a number of high-profile positions.

Stung when he left for its biggest rival, Credit Suisse decided to keep tabs on Khan before he joined UBS in October to prevent him from poaching private bankers, according to people familiar with the matter.

Then, just days after farewell drinks attended by Thiam and former colleagues on the bank’s executive committee, Khan was followed by unidentified men while driving his car with his wife. After noticing that he was being followed, Khan took pictures of his pursuers, culminating in a confrontation in downtown Zurich when the men tried to take his mobile phone, according to people briefed on the events.

The SonntagsBlick newspaper reported that the bank’s head of security had authorized Khan’s surveillance; a spokesman for Credit Suisse on Sunday declined to comment on the report.

The Zurich prosecutor’s office has said it launched criminal proceedings in response to a complaint from Khan. The prosecutor declined further comment, citing ongoing investigations. Efforts to reach police after business hours Monday were unsuccessful.

In its internal memo, Credit Suisse said media coverage of the incidents contained inaccuracies and “sensationalized both facts and events.”

The bank declined to comment beyond the statement on what might be inaccurate or the target of the investigation. A spokesman for Khan also declined to comment.

Khan joined the bank in his late 30s after a rapid ascent through the ranks of Ernst & Young’s Zurich-based assurance division, where he audited UBS. He joined Credit Suisse in 2013 and was promoted by Thiam to head the bank’s international wealth-management unit when it was created. But the relationship soured in the months before his exit, according to people with knowledge of the matter.

It’s not the first time that controversy has swirled around a Swiss bank move. Andrea Orcel, a star dealmaker in Europe who took over UBS’s investment bank in 2012, left last year to become CEO of Banco Santander SA. That job offer was later rescinded in a dispute over pay and $50 million of deferred compensation from UBS -- and he still risks losing some of that money if he joins a banking rival.

In their internal memo, Thiam and Rohner resorted to corporate-speak to inspire employees to carry on amid the crisis: “We encourage you to continue to build on our strong momentum and to keep delivering excellence for clients,” they wrote.

To contact the reporters on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net;Jan-Henrik Förster in London at jforster20@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, ;Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Stephen Merelman, David Scheer

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