Previously we posted:
Summary of what happened
|Who is the takeover target?||Sulzer the Swiss engineering group
|Which banks are involved?||ZKB - Zürcher Kantonalbank - Switzerland’s biggest public sector bank - owned by the Canton of Zurich, Neue Zürcher Bank NZB, Deutsche Bank|
|Which investors are involved?||Victor Vekselbert (Russian), Ronny Pecik with his firm called Victory (Austrian firm)|
|Which bankers are accused of wrongdoing?||general manager (Generaldirektor) - Investment Banking - Hans Fischer;Chief Operating Officer - COO Hans Vögeli,|
- ‘Ich nahm davon Kenntnis und behielt die Optionen. Da ich von vielen Schweizer Firmen Aktien oder Optionen besitze, gab es für mich keinen Grund, auf den Kauf von Sulzer-Optionen zu verzichten. Auch nicht in jener Phase im letzten Herbst, als ich der ZKB verbot, bei einem Angriff auf unsere Kundin Sulzer mitzumachen.’
In short this states that he did invest and continues to invest in many Swiss firms and even though he gave the order not to speculate against Sulzer for ZKB’s investment division, he felt this did not apply to his investing in these options on his own behalft.
What is worse is that a high level executive of ZKB refutes the above statement pointing out that Voegeli himself gave the order to invest in Sulzer options to his Vontobel investment banker. In turn, Voegeli wanted to profit from the assumed increase in the price of Sulzer shares due to the takeover that he himself also expected to go ahead.
Voegli has been quoted in the Swiss press stating that this option trade did not raise questions about trust in his leadership at ZKB. But banking circles do not agree and feel that morally he was outright wrong to do so.
ACTIONS SPEAK LOUDER THAN WORDS
ZKB’s CEO must have felt that ethically it was okay to invest against his client’s interest. How can one continue trusting such a banker? Moreover, how can it be that a banker feels having done nothing wrong. In fact, was his moral framework out of balance right from when he started as CEO at ZKB coming from Vontobel, or did it get out of focus during his holding the CEO position instead?
Chronological summary of what happened
|When did ZKB do what||2006-09-26 - top management has a meeting and states that because ZKB is Sulzer’s ‘house bank,’ takeover ambitions by investors cannot be supported by ZKB In fact the CEO Hans Vögeli is quoted as having said: ‘Sulzer darf nicht Gegenstand einer feindlichen Uebernahme werden. Punkt.’ (Sulzer cannot become the target of a hostile takeover battle. Full stop.)|
|What happened thereafter?||2006-11-07 - top management meeting held, 2006-09-26 decision confirmed again. 2006-11-17 - the trading department asks to transfer the 5% registered shares of Sulzer the bank is holding to another party.|
|Failure of internal controls||2006-11-07 - the above request submitted to the CEO by ZKB’s trading department headed by Hans Fischer is denied by Hans Vögeli in writing referring to bank policy….|
|So what did the ZKB traders do? Break internal rules, circumvent controls…||During November, several trades were executed against the above decision by the CEO. Unfortunately, no internal control mechanism triggered any kind of alarm. Apparently, only Hans Fischer, the manager directly responsible for the division knows about these trades.|
|Saga continues||2006-12 - about 4% of Sulzer’s registered shares are being transfered from ZKB to a third party ’sicherungshalber zu Eigentum an eine Drittpartei’ the shares|
|People start being let go||2007-04-27 - investment banking boss Hans Fischer informs the press about his stepping down.2007-05-07 - COO Hans Vögeli goes public stating that he takes full responsibility for the ‘Sulzer case.’ He will retire by the end of May 2007.|
It is strange that ZKB still permits its employees to purchase and sell stocks, bonds, options and derivative instruments using an account they have with another bank. This was the case for Mr. Voegeli who has an account with Vontobel, his former employer before he became ZKB CEO. In fact, nearly every Swiss bank requires that employees trade in equity markets only, if an in-house account is being used to assure that compliance requirements can be strictly enforced. Until now, this is not true for ZKB, the state owned bank of the Canton of Zurich.
Also of interest:
We will follow up with the ZKB case especially since the ZKB Bankrat elections (elections for something similar as a corporate board) was held today, Monday, 2007-06-25.
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