Riderless horses clattered across a frozen lake in the Alpine resort of St. Moritz, kicking the snow in the faces of men on skis being dragged behind them.
In February last year, weeks before public events across Switzerland were canceled due to the coronavirus, Credit Suisse flew its most cherished customers to White Turf – a more than 100-year-old equestrian event, whose uniquely dangerous ‘skijoring’ race had left the Swiss bank. sponsored for decades.
While the seven intrepid skijorers risked their lives in the Grand Prix Credit Suisse, it was one of the onlookers who posed the biggest threat to the bank: British steel magnate Sanjeev Gupta.
Today, Gupta’s sprawling conglomerate GFG Alliance is reeling after the collapse of its largest backer Greensill Capital. The metal group is also under investigation by the UK’s Serious Fraud Office. It denies any wrongdoing.
Credit Suisse was known to have indirect exposure to Gupta through Greensill, which packaged loans in notes acquired by the Swiss bank’s funds. When Greensill collapsed in March, Credit Suisse was faced with the fact that much of its debt may be bad, including loans to GFG.
However, what has not been widely known until now is that Credit Suisse also has an important direct relationship with Gupta.
A string of former executives of the Swiss lender revealed to the Financial Times how private bankers and global leadership courted the metal magnate, offering him VIP treatment that went well beyond the trip to St. Moritz. .
Credit Suisse forged a deep relationship with the Indian-born industrialist, ignoring warnings from concerned corporate clients and its own bankers.
The revelation that Credit Suisse has handed Gupta everything from a mortgage on a trophy mansion to a private audience with the then chief executive will further infuriate its clients, who are suffering potentially billions of dollars in losses.
Some of those clients are expected to sue Credit Suisse for flaws in the way the funds were managed. And the Greensill troubles come as the bank reels from another risk management scandal over its work with Archegos, the collapsed family office.
“The decision to finance entrepreneurs like [Gupta] was the wrong decision at all costs,” said a former Australian bank chief, citing dissatisfaction with loans to Gupta as the reason for his resignation. The banker added: “It was a lot of capital that went into a very risky situation.”
Credit Suisse and GFG declined to comment.
Five Star Treatment
After years of courting Sanjeev Gupta, Credit Suisse filed for divorce in late March and petitioned courts in the UK and Australia to make some of its core businesses insolvent.
With $1.2 billion to recover on behalf of irate customers, the Swiss bank has other tools at its disposal. Some of Gupta’s Greensill debt facilities benefited from personal guarantees, according to people familiar with the terms, allowing creditors to pursue the so-called “man of steel” himself.
To that end, Credit Suisse recently hired private investigators from Kroll to track down Gupta’s assets around the world, according to three people familiar with the case.
While Gupta spent half a decade in a corporate shopping spree to build a 35,000-employee metal conglomerate, he also amassed a personal collection of trophy items. Flashy purchases ranged from a private plane and helicopter with matching vanity tailboards to a large £42 million London mansion – owned by his wife.
Credit Suisse doesn’t need Kroll’s services to inquire about another of Gupta’s luxury homes: a 19th-century sandstone mansion overlooking Sydney Harbour.
“Credit Suisse has provided the mortgage. They were proud of it,” said the former CEO. “It was an important strategy to go after super prime mortgages in Australia.”
Helping Gupta buy the A$35 million (US$27 million) house, which is owned by a trust overseen by an Australian stockbroker friend, was just part of the service Credit Suisse provided as its private wealth manager. .
The Swiss bank also managed the fortune of Lex Greensill, the 44-year-old Australian founder of Greensill Capital, who was a paper billionaire before his eponymous financial firm collapsed.
Managing the wealth of controversial businessmen was all part of Credit Suisse’s plan. Helman Sitohang, the longtime boss of the Asia-Pacific bank, built a franchise for the region’s richest businessman, taking some reputational risks.
“We position ourselves as the bank for the entrepreneurs,” Sitohang said in February, days before Greensill Capital imploded. “In Asia, that positioning suited us very well.”
Gupta and Greensill even shared the same private banker at Credit Suisse: Shane Galligan, one of Sitohang’s biggest rainmakers, who had made it his mission to manage money for Australia’s wealthiest tycoons.
“If you look at the strategy in Asia in terms of supporting ultra-high-net-worth clients, no one is bigger in private banking than him,” said a second former Credit Suisse banker. “He covers the billionaires. That was his thing.”
Galligan made sure Gupta got the full five-star Swiss banking experience. In addition to inviting the steel magnate to the Alpine horse racing event, in 2019 he brokered a coveted meeting with then-CEO of the bank, Tidjane Thiam.
Former Credit Suisse bankers said Galligan and Sitohang were instrumental in brushing aside concerns about the bank’s growing entanglements with Gupta and Greensill. A person close to the bank said that Sitohang was not close to Gupta or Greensill.
Another former executive recalled an internal conversation in 2020 between Galligan, Lara Warner — chief risk and compliance officer until she left after the Greensill and Archegos fiascos — and a handful of other bankers to discuss the growing dangers surrounding his business with Greensill.
“There was no sensitivity or appreciation for the risk dimension,” he said. “The tone was pure: ‘We want to bank this entrepreneurial customer.’”
Credit Suisse said Sitohang and Galligan declined to comment.
Flight to Zurich
In February 2020, the same month that Credit Suisse welcomed Gupta to St. Moritz, UK banking regulators contacted the SFO with concerns about the opaque conglomerate of metals to finance.
The Swiss bank then received a sharp warning. In July 2020, commodity trader Trafigura warned Credit Suisse that the bank’s supply chain financing funds appeared to contain a suspicious invoice from Gupta’s business empire. The warning came when the bank was in the middle of a internal assessment of the funds, fueled by FT reporting on their unusual relationship with Greensill’s shareholder SoftBank.
And yet not only did the Greensill-affiliated funds continue to lend to Gupta, Credit Suisse also considered offering its own balance sheet to the steel magnate.
In October 2020, Gupta unveiled a plan to seize control of one of Germany’s oldest – and most symbolic – industrial enterprises: the more than 200-year-old Thyssenkrupp steelmaking facility.
When the steel magnate revealed the daring offer, he did not yet have committed debt financing, but he did have letters of support from two well-known financial institutions: Greensill and Credit Suisse.
Supporting Thyssenkrupp’s offer was not a one-off. Another former senior executive said Credit Suisse’s investment banking division was “all-over” GFG, lured by the potential fees for a seemingly endless string of deals, after also winning a mandate for its InfraBuild’s long-acclaimed listing. company in Australia.
However, the compensation never came. Both deals collapsed earlier this year when Greensill began to unravel and threatened to take GFG with them.
Greensill’s fate was sealed on the last weekend of February, when Credit Suisse made the decision to… freeze the $10 billion range of supply chain finance funds after discovering that a major insurance contract underlying the invoice billing engine had expired.
The Friday before that fateful decision, Gupta flew to Zurich with his loyal lieutenant Jay Hambro, scion of a British banking dynasty. Twelve months after enjoying Credit Suisse’s hospitality at White Turf, the steel baron entered the Swiss moneylender’s palatial headquarters on Paradeplatz for a very different reception.
Gupta and Hambro have lobbied the bank not to pull the plug on the money, according to people familiar with the discussions.
This time, however, Credit Suisse was unwilling to accommodate its once valued customer.
Additional reporting by Owen Walker and Stephen Morris