Suicide in Switzerland

On the placid blue waters of Lake Geneva, which are normally graced by white sailboats and sleek cruisers, last week floated an ugly sight: the body of an apparent suicide. The corpse was a shocking reminder that Switzerland's banking industry, long famed as a citadel of honesty and stability, is being shaken by scandals.

The man in the lake was Charles Bouchard, former manager of Banque Leclerc, a small, discreet Geneva financial institution that Swiss authorities had ordered closed pending an investigation into losses of $12 million or more in real estate ventures. Only a few days earlier, Bertrand de Muralt, a Leclerc partner and reserve Swiss army major, had shot himself with his revolver. Robert Leclerc, for whom the bank is named, suffered a heart attack.

Huge Losses. Leclerc is the 28th Swiss bank to go broke since 1970. Yet its problems are relatively insignificant compared with the scandal that is still building around one of Switzerland's Big Three banks, the Credit Suisse (assets: $17 billion). For the past month, the Swiss banking community has reeled from one disclosure after another implicating executives of Credit Suisse's Chiasso branch in illegal manipulation that resulted in huge losses. Credit Suisse concedes that the sum could reach $100 million. Some outside sources put the potential losses as high as $400 million.

The affair in Chiasso, a Swiss town on the Italian border, is a result of Switzerland's historic role as a haven for foreign money. For years, wealthy Italians had been lugging suitcases crammed with lire for deposit in Swiss banks; Credit Suisse in Chiasso was a prime recipient. In 1975 the Swiss government became alarmed by the foreign-currency inflows that were forcing up the Swiss franc to unrealistic levels, harming Swiss exports. To discourage foreign depositors, the government slapped a 10% "negative interest" charge on large accounts held by non-Swiss.

That move impeded the inflow of foreign funds, but only for a short while. Clever Swiss bankers soon devised a new technique whereby foreigners could continue to channel funds into Switzerland without incurring the interest penalties. The bankers simply accepted the deposits in fiduciary accounts. Under Switzerland's strict secrecy laws, the depositor would remain nameless, and the bankers would handle the funds in their own manner for the benefit of the depositor. Or so it was supposed to work.

Blanket Amnesty. According to a cantonal prosecutor's preliminary findings, the Chiasso branch managers saw a chance for a bit of highly private enterprise. Instead of placing the funds in the bank as deposits or in easily salable stocks, they invested the funds in ventures that they set up especially for that purpose. A door connected their offices with those of lawyers who were involved in some of the transactions. From Chiasso, an estimated $880 million was funneled to a Liechtenstein-based holding company called Texon-Finanzanstalt. In turn, that company invested the money in three Italian undertakings: a winemaker, a resort near Venice and a plastics manufacturer.

However, the investments did not flourish as the Chiasso bankers hoped they would. Then, in late 1976, the Italian government, which hoped to lure home lire, offered a blanket amnesty to all Italians who would bring back their money. Result: withdrawals were so large that Credit Suisse's branch in Chiasso was forced to turn for help to the home office in Zurich. The head office's investigation led to police involvement. Three Chiasso bankers, including Branch Manager Ernst Kuhrmeier, have been arrested on charges of criminal mismanagement.

As a gesture of solidarity, the other members of the Big Three, the Swiss Bank Corporation and Union Bank of Switzerland, offered Credit Suisse a $ 1.2 billion line of Credit. Credit Suisse refused the offer, explaining that it could easily absorb the Chiasso loss, and indeed that seems true. But the Chiasso affair and the other failures are raising severe questions about the efficiency, as well as the ethics of Swiss banking. Even some Swiss financiers are charging that Swiss bankers are vastly overrated and that only the constantly climbing Swiss franc makes them appear proficient. "Swiss banking relies on an old-boy network," says a Geneva banker. "That is why there are people in positions of responsibility here who could never get a job in a bank in Germany, Belgium or The Netherlands."

This file is automatically generated by a robot program, so viewer discretion is required.