Credit Suisse and Cut and Pasted Client Signatures

It is tough to believe that any banker, following the Wells Fargo debacle, would fool around with customer signatures. Nonetheless, Credit Suisse private banker, Patrice Lescaudron, admitted cutting and pasting his client’s signature to make unauthorized, high-risk stock transaction.stock bets. The client was Bidzina Ivanishvili, and Credit Suisse was ordered to pay the client $555 million. Mr. Ivanishvili sued the bank for breach of contract and fiduciary duty. However, Credit Suisse’s defense was, “Hey, we got hoodwinked too by the guy.”

However, Mr. Ivanishvili, who had invested $1 billion with the bank over a ten-year period, was able to establish that Mr. Lescaudron repeatedly broke bank rules. Managers turned a blind eye to the antics because Mr. Lescaudron brought in $25 million in annual revenue to Credit Suisse. Unfortunately, he brought very little revenue to Mr. Ivanishvili. The court awarded him the money he would have made had Mr. Lescaudron just opted for medium-risk investments — the $555 million.

The best part of the story is that Credit Suisse is appealing. Mr. Ivanishvili is shocked, shocked that Credit Suisse is still refusing to pay. Mr. Ivanishvili should have checked on Credit Suisse. The bank recently set aside additional funds for legal fees as it cleans up other messes. Julie Steinberg, “Credit Suisse Warns of Dent to Earnings From Legal Costs,” Wall Street Journal, January 26, 2022, p. B11. $545 million there. $500 million here. Pretty quick you have a billion invested in fighting legal woes or repaying clients. And this dear bank has been hauled in before Congress to explain hy it ordered clients to destroy documents about their investments at the bank. Russian oligarchs are involved in this one because there are questions about the bank’s compliance with financials sanctions on Russia. Margot Kidder, “Credit Suisse Probed Over Compliance with Sanctions,” Wall Street Journal, March 29, 2022, p. A7. After the Archegos losses of $5.5 billion, Credit Suisse lost two chief compliance officers just four months apart. The new one barely got her feet wet before she was out the door. Dylan Tokar, “Compliance Head Quits Swiss Bank,” Wall Street Journal, July 13, 2021, p. B9.

A tip for the new chief compliance officer: Pay attention to the enforcement processes and sanction. And never let even top private bankers off the hook. Mr. Lescaudron was a push-the-envelope kind of guy and had a history of having breaches of bank rules ignored, glossed over, or lightly addressed. Employees don’t wake up one day and start forging their clients’ signatures. They take a descending path into illegality with tiny steps that are, well, ignored, glossed over, or lightly addressed. And, like Mr. Lescaudron, they are ignored. He was sentenced to five yers. He was released from prison in 2019 and killed himself in 2020. We worry about the small things because they ripen into BIG things, often tragic things.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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