Mystery in Chile
Suit alleges Credit Suisse employee collaborated with former AEB employees to take private-bank clients
May 26, 2008
American Express Bank is suing Credit Suisse, alleging the Swiss banking giant orchestrated a scheme to steal clients in a Chile office.
The alleged activity is being heard in the US Southern District of Florida's court. Chilean banking laws dictate that a representative office of a foreign bank does not form a legal entity that is different from its main office. The alleged misconduct occurred in Chile, but was booked through AEB's office in Miami.
American Express Bank was a subsidiary of American Express Co. AEB agreed to be acquired by Standard Chartered in September 2007, and the deal closed on February 29, 2008.
AEB's suit focuses on Cristian Echeverria, who was the head of private banking and relationship manager in AEB's Chile office. The suit alleges Daniel Rosenkranz, 47, a Swiss national and resident, spent roughly 10 days in the AEB office in December 2007 without AEB's knowledge or permission. Echeverria told AEB employees that Rosenkranz was a compliance officer with the firm, but the suit alleges he was actually an employee of Credit Suisse.
During his stay in the office, Rosenkranz allegedly used portable flash drives and printers to collect information about clients. He also telephoned clients to schedule appointments with them to obtain signatures for new accounts with Credit Suisse. Court documents show that AEB clients were being falsely told that Standard Chartered did not engage in private banking, and after its acquisition of AEB there would not be services for AEB clients in Chile.
A surveillance videotape of AEB's Chile office shows Rosenkranz, and others working with him, taking away several boxes and bags of documents from the AEB office through a back exit of the firm's office, according to AEB's suit. The suit also contends that two AEB employees found Rosenkranz's papers in the conference room when he left for a lunch break and many of these papers had the Credit Suisse logo. "Among the papers were AEB's trade secrets and confidential, proprietary, and private AEB customer information," according to court documents.
In mid-March 2008, the lawsuit states, Echeverria met with AEB representatives in Miami to discuss the acquisition. Asked about his "commitment to stay with AEB ... Echeverria was evasive in his responses," according to court documents.
Weeks later, in April, Echeverria and AEB employee Jorge Salame, as well as others who worked with them, were terminated. A day after they were fired, Salame and Echeverria began working in a new office in Chile and started their campaign to bring AEB clients to Credit Suisse. In April, AEB was getting orders from clients requesting transfers of their accounts and assets to other institutions, primarily Credit Suisse. Some of the orders came directly via fax from Echeverria and Salame's new company offices while others were made by the clients themselves, according to court documents.
"As of May 9, AEB's assets under management from its Chile office which were transferred or in the process of being transferred, through Echeverria's new business, totaled approximately $127 million and represented over 80 clients, or almost one-fourth the total business of AEB's Chile office," the lawsuit states.
AEB filed its suit against Credit Suisse on May 13.
James Beasley, partner at West Palm Beach, Fla.-based Beasley Hauser Kramer Leonard & Galardi, who is handling the case for AEB, and an AEB spokeswoman declined to comment. A Credit Suisse spokesman says "We strongly oppose the broad allegations made by AEB and will defend our rights vigorously."
AEB filed an injunction to stop the outflow and solicitation of clients that is allegedly occurring. A judge granted AEB a 10-day injunction.
Last week, Credit Suisse filed a motion to dismiss the case on jurisdictional grounds. Credit Suisse argues that all of the alleged misconduct took place in Chile, where Florida law does not apply, and the case should be dismissed in favor of a Chilean or Swiss court.
Additionally, Credit Suisse says that Chilean law doesn't provide trade secret protection for the type of data described in the complaint and even if Florida law was upheld it doesn't prohibit AEB's terminated employees from competing for business of customers.
Christopher Stief, partner and chair of Fisher & Phillips employee defection and trade secrets practice group, who is not involved with the case, says, if what is alleged is true, "then this is very extreme." This kind of behavior is not seen often, especially with two firms of this caliber, he says.
Stief says AEB may try and seek monetary damages, but it may be difficult to quantify exactly what the damages are worth.
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