A Genevan Financier hunts down embezzled millions – The story of Jean-François de Clermont-Tonnerre
This is a repost/translation of the Swiss Newspaper article Jean-Francois Clermont Tonnerre / Tribune de Genève reporting an update on the Hottinger Fraud :
A Genevan financier spends five years hunting down embezzled millions
Jean-François de Clermont-Tonnerre has fought to clear his name after the downfall of Hottinger & Partners.
In 2013, revelations about the misappropriations of Fabien Gaglio, a wealth manager at Hottinger & Partners, owned by Swiss bank Hottinger, shook the Genevan financial centre. Just five years after the Madoff affair, clients of the con man, who believed they had entrusted their wealth to a genius asset manager, discovered the deception. Behind the promise for profitability was a fraudulent financial arrangement which consisted notably in paying clients’ investments with funds procured by newcomers and supporting it all with acts of fraud on trusted clients.
Jean-François de Clermont-Tonnerre, who was Fabien Gaglio’s partner, was unsuspecting until he received a phone call which triggered a saga worthy of a novel. In early 2013, a Californian client sent in a bank statement asking for clarifications on certain items managed by H CTG, the Luxembourgian subsidiary of Hottinger & Partners. Fabien Gaglio being absent that day, an employee compared the statement with the information held by the financial establishment. Nothing matched, yet the difference was massive. Jean-François de Clermont-Tonnerre sounded the alarm and asked his teams to check for further anomalies. The task turned out to be gigantic as Hottinger & Partners managed 600 million Swiss francs in assets. In a matter of days, Hottinger & Partners employees discovered that other clients had also received falsified statements. Fabien Gaglio vanished at once. Later that week, Jean-François de Clermont-Tonnerre filed a criminal complaint to the Swiss authorities.
“The verification work was so important that I commissioned Deloitte Forensics to urgently send us a team of experts to comb through everything”, says Jean-François de Clermont-Tonnerre. Five years after the scandal was revealed, the Genevan consents to talking publicly about the case. Despite being the instigator of the complaint filed in Luxembourg, location of the head office of H CTG (the entity that manages development of the private client management business in Europe), the situation nearly turned against him by tarnishing his reputation. These doubts as to his probity were unbearable for this descendant of a family of aristocrats who have resided in Geneva since the 18th century and who, with his wife, is involved in many charity actions.
“I should not have been so trusting”
After turning himself in to the police, Fabien Gaglio tried to implicate Jean-François de Clermont-Tonnerre by claiming that he had also falsified documents. At the start of the following year, the Luxembourgian justice cleared his name. He was found not guilty of fraud or of personal enrichment. By meticulously following all the money transactions, the investigators discovered that the 900,000 Swiss francs that Fabien Gaglio had paid to Jean-François de Clermont-Tonnerre corresponded to early treasury and credit card repayments. The proceedings initiated in Switzerland are not over, but fraud is definitively excluded.
Yet, the interested party admits his share of responsibility. “I was a director. I have my share of responsibility. There was a lack of vigilance. I should not have been so trusting. I have learned a lot”, confides the financier who has spent these past years tracking the embezzled money and understanding how Fabien Gaglio managed to steal from so many clients over such a long period of time. This detective work brought him to meet each of the wronged clients and to accept his responsibilities. As of today, he has managed to locate approximately 10 million Swiss francs and has bought Hottinger & Partners as soon as the scandal became public. As for the bank, which was already weakened by family rivalries and a lack of capital, the impact of the Gaglio affair on its sister entity, Hottinger & Partners, was the “coup de grace” leading to the FINMA refusing any new acquisition proposals. While some of the wronged customers have been able to recover a small part of their capital, others are waiting for the Swiss justice to recognise and make up for their loss. But after living the good life and having served a prison sentence, Fabien Gaglio is apparently now ruined. This insolvability further increases the feeling of frustration of some of his victims.
Today, after five years spent tracking the embezzled money, Jean-François de Clermont-Tonnerre is determined to set the record straight. The Fabien Gaglio affair fed the craziest rumours about possible large-scale money laundering circuits, with the shady asset manager depicted as the cog of a more sophisticated system. While the enquiry has shown that the fraud began whilst he was working at Rothschild, nothing has been found to substantiate this hypothesis. The Deloitte report demonstrated a sophisticated system, but one controlled by just one man and founded on the systematic faking of client statements. Caught up in a spiral, Fabien Gaglio went up in flames. “He lived like a pasha”, denounced the lawyers of the civil parties during the trial, which took place in Luxembourg. “It’s true that he spent a lot of money. But he told us he had a personal fortune”, explains Jean-François de Clermont-Tonnerre. According to the Deloitte report, the schemes of Fabien Gaglio, spread out between 2005 and 2013, ended in a loss of 42 million Swiss francs for Hottinger & Partners, and not 100 million as was cited at the start of the affair. This last figure includes the frauds committed outside the scope of the company when the asset manager worked for a hedge fund held by Morgan Stanley in London and then for the Rothschild Bank. The fraud grew when the asset manager transferred his client portfolio to Hottinger & Partners.