Way back in 2000, Credit Suisse executives met with Madoff and his cronies at Fairfield Greenwich. The result: a warning to clients to get the Hell out of there.
Credit Suisse Group AG, whose clients lost almost $1 billion in Bernard Madoff’s alleged swindle, urged customers more than eight years ago to withdraw cash from his firm because the bank couldn’t determine how he made money, said three people familiar with the matter.
Oswald Gruebel, who headed the private-banking unit of Switzerland’s No. 2 lender at the time, made the recommendation after meeting Madoff in New York in June 2000, the people said, speaking anonymously because the details were private. Credit Suisse customers proceeded to redeem about $250 million from Madoff-run funds, half the total held by the bank’s clients, the people said…
Gruebel, 65, and two other Credit Suisse executives at the meeting with Madoff raised concern about his use of a little- known auditor who had just one client, two of the people said. The bank also worried about why Madoff served as the custodian of his clients’ assets, they said.
Madoff wouldn’t tell Gruebel how much money he managed, saying only that he had 12 people working with him to manage the strategy, along with six senior traders, the people said. Madoff said he didn’t charge clients fees to manage their money, earning a profit instead on trading commissions that equaled as much as 3 per cent of assets.
Of course, not everyoe got out of Madoff’s scam. Despite the warnings, quite a few clients were apparently too attracted to the incredibly steady returns. So maybe they let greed overcome their caution.
Or perhaps the bankers handling their accounts told them to ignore what the executives were saying. Bloomberg also mentions that Gruebel’s warnings pissed off Credit Suisse bankers because they were getting kickbacks from Fairfield Greenwich, among others, for putting clients into Madoff funds. These kickbacks, called “retrocessions,” are described as some sort of rebate to the bankers from funds like Fairfield. If you allow bankers to get paid by funds for directing clients to invest, you can’t exactly claim your bankers aren’t responsible for clients investing in those funds.