July 19, 2013 6:49 pm

First Person: ‘I repaid my clients’ fraud losses out of my own pocket’

Banker Fabrizio Cerina sold virtually everything he owned: ‘You have to be accountable’
Fabrizio Cerina©Greg Funnell

I bought my first bank in 1980 or 1981. I had this dream because my grandfather had owned a bank and lost it in the Depression. My father gave me a little money; an Italian local bank whose managing director I had met years before at a convention lent me most of the rest. I was only 20 when we’d met, so I guess he took an interest in me.

He gave me a lot of advice. He saw me go to America for school; he saw me go to work at Lehman Brothers. In 1981 he lent me 1.7m Swiss Francs, I think it was, to buy 34 per cent of Banque de Participations et de Placements. I locked myself away there because there was a lot to repair. Eventually I sold the 34 per cent and bought Attel, a finance company, and turned it into an investment bank.

I didn’t sleep much then; we were turning a bank around. Building relationships with other banks and with clients takes a long time. It takes a minute to make a phone call but getting that personal mobile phone number takes a decade.

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One morning in 1991 I went in very early and my number two was already there, which was unusual. I sensed trouble. He said, I have to show you something. Some prices from an American broker were going into the system whose values were 50 per cent higher than the real market prices. I remember feeling cold shivers.

We discovered that the head of private banking, who was managing client assets, had bought securities in various Nasdaq companies whose prices had collapsed. To hide the losses he got this American broker, who later was also arrested with him, to send him fake prices by telex. We had over 1,000 clients and he screwed up 163 of them. The losses came to $46m. These clients were people I’d known for years.

I had three options. One was to jump from the window. Another was to run away. The third was to accept a kind of Swiss Chapter 11 called concordato moratorio, where you can pay less than 20 per cent. My lawyers were saying, “Put up $10m and we’ll use $7m to pay off the creditors.” The rest would have gone to lawyers, advisers and accountants.

I flew to London to speak to one of the banks that was a victim of the fraud and I remember hoping that the plane would crash. It would have been a liberation for me. Instead I came back and announced that I would pay everybody back out of my own money. All $46m plus $800,000 in interest. I went against my lawyers’ advice; they said I didn’t need to do it. Plus the clients could still sue me through the civil courts. That didn’t happen, thank God.

I still have the list of things that I sold. I owned a painting by Michele Marieschi, a Venetian vedutista. I sold it. I sold my boat. I called my butler, Antonio, and said, “Antonio, there’s no more money, I’m sorry, you have to go.” He told me, “No, I’m staying. You don’t have to pay me. In six months you’ll be stronger than before.”

At first the press treated me almost like a criminal, but when I started reimbursing everyone, they depicted me as a hero. Both were exaggerations, I thought.

I spun Crédit des Alpes out of Attel and started again. Now I’m group chairman of Crédit des Alpes, and in 2009 I advised Vivendi on its $4.1bn acquisition of GVT. Looking back, I decided to reimburse my clients because of my father. He taught me that if you want to be in a business that implies a special degree of trust from customers, you cannot be motivated purely by self-interest; you have to be accountable. These are the old ways of investment banking.

I don’t want to come across as someone who is trying to teach morality. But for me it was more about building a relationship, building an enterprise. That takes 10 to 20 years. The system today puts too much pressure on young bankers to deliver immediate profits and that is wrong. It leads to disasters big and small every day.

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