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Credit Suisse itself has paid far less of a price, which perhaps explains why Lescaudron’s former clients seem to be not so much angry with the banker as they are with the bank itself. Kurbatova and several of Lescaudron’s other clients, including Bidzina Ivanishvili, the multi-billionaire former prime minister of Georgia, whose lawyers say he has lost several hundred million dollars, and Vitaly Malkin, a former Russian senator who co-founded Rossiyskiy Kredit Bank with Ivanishvili in the early 1990s, and whose lawyers also say he has suffered huge losses, say they have gotten neither recompense nor explanation — let alone an apology — from Credit Suisse. They also claim that they have been unable to obtain documents they want, which they argue will help shed light on what happened. “Credit Suisse did damage to my business, my family, my view of the world overall,” says Kurbatova today. “I have never been treated and lied to like this.”

Malkin says he trusted Credit Suisse as he believed it to be the world’s best bank. “Credit Suisse should obviously be held responsible for my tremendous losses and severe damages,” Malkin says. “This financial scandal is the case of Credit Suisse, certainly not only the case of Patrice Lescaudron.”

Charlie Wigan, a personal representative for Ivanishvili, pointed out that this was not “a sophisticated fraud.” He added, “You would think, ‘this is Credit Suisse.’ And yet, this went on for nine years. How could the bank miss it?”

As a result, “the battle has started,” says Kurbatova. She and other clients — who refer to themselves as “CS Victims”— have gotten so desperate that they even booked a full page ad in the Financial Times. It began, “Since the discovery of the fraud, Credit Suisse has worked against our clients’ efforts to understand how the crimes were perpetrated and what happened to their assets.” They followed that up with a July 2 press release entitled, “CS Victims say Credit Suisse Refuses to Return Funds Stolen in $1 Billion Fraud.” (The former clients now claim they lost more than was taken into account in the criminal case; the calculations behind the number are unclear.)

It all raises a bigger question. In the years since the financial crisis, big banks, including Credit Suisse, increasingly have touted their expertise in wealth management. Collecting fees from the world’s rich people is a much safer business than concocting and trading strange and exotic derivatives that no one, including the bankers, understand. Or so the thinking goes. But what if the banks are no better at managing the risks associated with managing money than they were at managing the risks associated with subprime mortgages?

Credit Suisse maintains that it was as much Lescaudron’s victim as his former clients were. “The Criminal Court in Geneva confirmed in its verdict of February 9th, 2018 that the former relationship manager had violated internal rules and Swiss law, engaged in criminal acts to deceive the bank’s control system, concealed his deceptions from colleagues and was not supported by anyone internally in his criminal acts,” says a spokesperson. “Credit Suisse follows a zero tolerance approach regarding misconduct by its employees.”

An unconventional background

Patrice Lescaudron, who turns 56 on July 23rd, certainly wasn’t your typical Credit Suisse banker any more than he was your typical fraudster. In an interview he did with the police after he was arrested, in which he seems to alternate between bravado and terror, he told them that after completing school at France’s Ecole de Management de Lyon, he initially worked as an auditor, but then spent the next decade or so working mainly in pharmaceutical and luxury good businesses, partly in Russia. (Russian is one of the languages in which he is fluent.) In 2004, he joined Credit Suisse’s Russia Department — “right at the bottom of the ladder,” as he put it, according to an English translation of that interview. “When I arrived at Crédit Suisse, I did not know anything about private banking,” he added. (At his trial, Lescaudron did note that he had been interested in the stock market since he was 20.)

But in mid-2006 the senior manager left, and Lescaudron was handed the two biggest clients of the Russia department — Ivanishvili and Malkin. His job, he told the police, was just to prevent them from leaving Credit Suisse.

That he did, later telling the police that he “immediately had good rapport,” with his new clients. Despite his lack of formal training, Lescaudron rose quickly. “I immediately imagined that this was a very experienced person,” Malkin testified at his trial. “He also gave me the impression of being an honest and intelligent person.” In his interview with police, Lescaudron said, “You can say what you want about my abilities, but I have a solid understanding of the financial markets.” He added, “I was quite creative.”

Eventually, Lescaudron managed about $2.5 billion, according to FINMA, the Swiss financial market supervisory authority. “If I may say so, we used the term ‘star’ regarding him,” his former supervisor, Basile Samarine, who was in charge of the Russia and Eastern Europe desk, said at his trial. “At Crédit Suisse, I believe I made 150 million in profit for the bank over 11 years,” Lescaudron told the police.

But for his clients, the profits were something of an illusion. While the trial transcript shows an extraordinarily complicated, convoluted and yes, even creative, series of events, one trigger for the fraud, according to a source familiar with events, was an investment in a European developer of shopping centers called Meinl European Land, which was created by Austria’s Meinl Bank. The investment was pushed by Credit Suisse itself, according to trial testimony and Lescaudron’s interview. But shares plunged after suspicions of untoward financial dealings broke into the open in the spring of 2009. (In early 2015, the Vienna public prosecutor’s officer announced charges related to Meinl Land; on its website, Meinl Bank said of the case surrounding Meinl Land that it had “operated within the bounds of applicable law at all times.”) Lescaudron’s clients lost tens of millions of dollars.

For this mistake, he blamed the bank, at least initially. “Take note that when the Meinl shares started to fall, I even received emails from Zurich telling me to make my clients buy even more shares,” Lescaudron told the police. “Once again, I think that with this recommendation, the bank could have carried out deeper checks.” (A person familiar with events says that the fall in Meinl’s share price came with the financial crisis of 2008.)

Instead of confessing the losses to his clients, Lescaudron tried to hide them by trading with Ivanishvili’s money, and using the resulting gains to paper over losses in all his clients’ accounts. At his trial, he said that he still didn’t understand why he was so afraid to confess the mistake. “I have had to confront extremely difficult situations, in any case infinitely more difficult than telling [his clients] that I had lost money on the investments,” he said. “I cannot explain why I was not courageous enough.”

Then, in early 2009, Ivanishvili, who believed there was a market rally coming after the financial crisis, wanted to sell $600 million of bonds and buy equities. According to Lescaudron’s trial testimony and his interview with the detectives, he instructed Credit Suisse’s Singapore desk to execute the order — but the desk didn’t do it, because they thought bonds were still a better bet. As a result, Ivanishvili missed out on some $50 million of gains. Lescaudron panicked. Once again, rather than confess to his client what had happened, he tried to cover up the mistake, sometimes by engaging in unauthorized transactions. “I never forged a signature,” he said at his trial. “So I must have done this false instruction by copying and pasting the signature, probably.”

A source familiar with events says that Lescaudron actually succeeded in making back the losses. He’d studied financial history, including the crisis in Russia in 1998, and came to believe that when monetary authorities had easy money policies, the market would rebound. He also made a heavy bet on oil stocks, because he believed the post-crisis plunge in oil prices was unsustainable.

The second phase of the fraud

If this is true, perhaps it made Lescaudron feel invincible. Because then came phase two of his fraud, which essentially involved collecting illicit management fees for himself on various investments he had structured, none of which Credit Suisse would have approved. For instance, Lescaudron also put millions of Kurbatova’s money into an investment called Lyxor, which essentially made investments in other hedge funds. One of those funds was Hudson River Russia Fund, which was run by a New York-based man named Elliot Daniloff.

In effect, Lescaudron doubled down by also investing Kurbatova’s money directly into Hudson, according to legal filings. She says she had no idea this was happening. According to filings, over one-third of the funds in Lyxor came from Lescaudron’s clients. All of the money was eventually lost. (Daniloff did not return two calls requesting comment.)

Kurbatova says that not only did she have no idea about the double bet on Hudson, but she also believed that the products had been vetted and approved by Credit Suisse. Wigan also says he doesn’t understand how Lescaudron was able to invest his clients’ money in this manner without anyone noticing. “We thought they [Credit Suisse] knew how to do this properly,” he says. (A person familiar with events says that clients were able to choose third-party investments, and did so in this case.)

‘I then understood that I would not be reimbursed’

The end came in the fall of 2015. Lescaudron had invested millions of dollars of his clients’ money in a California-based pharmaceutical company called Raptor. His clients, at least some of whom claim they did not authorize anything more than initial purchases, ended up owning over one-third of the company.

In the fall of 2015, Raptor’s stock fell almost 40%, and another client, Zurab Lysov, a Russian oil and gas executive, was asked to send additional funds in order to cover a margin call on his account. He said he was stunned, because his account statements had said he had the money. But the account statements were being falsified by Lescaudron, Lysov’s lawyer alleges, and a huge quantity of Raptor securities had been bought fraudulently, using hidden sub-accounts. “It was a disaster,” Lysov told the Geneva court. “But until the last moment, I thought that the bank would reimburse me. For three months, from October to December 2015, they repeated to me that I had to calm down, that I was an honest man, they told me not to worry, that I was going to be reimbursed. They then cut off all communication and asked me to speak to their lawyers. I then understood that I would not be reimbursed.” (A year later, Horizon Pharmaceuticals bought Raptor for $800 million, but the clients’ stock had been sold by that point.)

All of the clients’ cases have their own complexities, but neither Kurbatova nor Ivanishvili dispute the essence of what happened between them, which is that Lescaudron took money from Ivanishvili and used it to mask losses in Kurbatova's account. Their fight is not with each other, but rather with Credit Suisse. “Ms. Kurbatova and Mr. Ivanishvili are completely aligned in their belief that Credit Suisse owes answers to all the victims of this massive fraud,” says Wigan.

When Lescaudron was asked at his trial to explain what he’d done, he said, “When you see the results, you notice a number of alarming things and substantial enrichment…I made many errors, and I made poor choices in an almost systematic manner…It is a spiral, and to get myself out of one situation, I went into another situation.” He later added, “Was pride [not wanting to acknowledge losses] part of it? I can concede this even if I don’t think it was as simple as that.”

While Lescaudron did buy himself some toys with his illegitimate profits, money doesn’t appear to be the only explanation. A source familiar with events says that he earned millions in salary and bonuses at Credit Suisse — more than enough to afford a Ferrari without resorting to fraud.

At least Lescaudron has made an attempt at an explanation. Clients say that to their shock, Credit Suisse itself has not. “I never had doubts regarding the activity of the Credit Suisse bank until 2015,” Malkin testified at Lescaudron’s trial. “It would not have entered my mind. To me, that bank was ‘God.’”

‘No fault for the bank’

Credit Suisse hired PriceWaterHouse Coopers to do an internal investigation — but the former clients complain that the bank has refused to make that full report available to clients, or allowed them to question PriceWaterhouseCoopers. “They say they found no fault for the bank, and that Lescaudron was a lone wolf — but they won’t share those results with us,” says Wigan. Even more, when Credit Suisse filed its initial criminal complaint against Lescaudron, the bank moved to keep its former clients out of the case, thus ensuring that they wouldn’t have access to discovery, the former clients say. (A person familiar with events says that everything relevant has been filed with the criminal court, and former clients have access to that docket.)

Another source familiar with events says that since much of what Lescaudron did was attempt to hide legitimate losses, most clients didn’t lose money that actually belonged to them. This person argues that even Ivanishvili isn’t actually out the $140 million the court calls “damages,” since he didn’t know the money Lescaudron took even existed. The executive summary of the PricewaterhouseCoopers report appears to offer some corroboration for this view; PWC says that Lysov and another client actually benefited from trading done via the creation of additional accounts, and in any event, the idea that “clients were unaware of activity cannot be substantiated by the facts.”

Whether money was lost or not can quickly devolve into a philosophical argument: If losses were hidden from you, should they be real? If you didn’t know you had profits, are they yours?

But what’s indisputable is that Lescaudron was able to carry out his schemes for years. And some of the answers to the obvious questions were not reassuring. “I do not know how I managed to pass these controls which were, furthermore, strengthened from year to year,” Lescaudron told the police. During the trial, Credit Suisse director Andrin Schnydrig, when asked whether Lescaudron could have acted alone, said, “I don’t know how he did it.” When pushed on how Credit Suisse’s monitoring mechanisms had worked, he said, “Evidently we can always improve the control systems, which was what the bank did over the years. There is no perfect system, there will always be frauds.”

When Lescaudron’s former supervisor, Basile Samarine, was asked how tens of millions of dollars could have been transferred between client accounts without the bank noticing, he answered, “I can’t explain it. There are internal audits that detected nothing. I don't understand how that could happen.”

There is some evidence that Credit Suisse’s system of controls were not all they were cracked up to be. In the fall of 2018, FINMA announced that it had found deficiencies in CS’s anti money-laundering processes, as well as the bank’s “lack of control of a successful client relationship manager,” whom press reports later identified as Lescaudron. Despite the fact that Lescaudron had “breached the bank’s compliance regulations repeatedly and on record over a number of years,” Credit Suisse did not discipline him for those breaches, noted FINMA. “Instead Credit Suisse continued to compensate Mr. Lescaudron.” Instead, the bank “rewarded him with high payments and positive employee assessments,” FINMA wrote.

Says Credit Suisse, “FINMA has not imposed any fine on Credit Suisse, not ordered any disgorgement of profits nor any limitation of business activities.” The bank also says that as part of a restructuring begun in 2015, it has improved its compliance efforts, by among other things hiring over 800 additional compliance specialists. One source familiar with events argues that the misadventure with Lescaudron was part of the “old days,” and says that practices have improved dramatically since then. One would hope so. In 2015, Credit Suisse sold its U.S. private bank — but has continued to emphasize the importance of its global wealth management business. Indeed, in the years since the financial crisis, the bank’s turnaround plan has hinged on a focus on wealth management outside the U.S., while it has pared back the investment banking business.

But the bank’s former clients argue that they are being sacrificed so the bank doesn’t have to own up to its past mistakes. “For them to admit their internal processes and their risk management have failed would be a huge reputational hit,” Wigan says. “In my opinion, they found out their system of checks and balances is totally flawed and they do not want the world to know that.”

And so, in addition to the newspaper ad — the main purpose of which seems to be shaming Credit Suisse — former clients have filed a variety of legal motions in the United States, Europe, Singapore, and Bermuda, seeking to wrest documents from the bank and find out more details of what happened to their money. Earlier this year, Campa gave prosecutors copies of allegedly faked bank statements on Credit Suisse’s letterhead that his team only recently found amid the enormous trove of documents that came from the bank. “How is it that the bank, after more than two years, did not turn these up in its own internal investigation?” Campa asks. “And how could Lescaudron have done this without the help of other bank employees who would have had access to the internal technology and accounting services of the bank?”

At this point, few people, other than Patrice Lescaudron, know the answer. Lescaudron has always said that he did not have help inside Credit Suisse. It’s still possible he did have help, which is obviously problematic. And maybe he really didn’t — which is problematic in a different way. While the specifics of this case may matter only to the very wealthy, the safety and resiliency of the systems and processes that the world’s biggest banks use matter to all of us.

Correction: An earlier of this article incorrectly reported that Elliot Daniloff ran Lyxor. The error has been corrected.

Bethany McLean is a contributing editor at Vanity Fair and bestselling author. Her latest book, “Saudi America: The Truth About Fracking and How It’s Changing the World,” came out in September 2018.

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