In 2002, a French Stock Exchange Regulatory Authority (Commission des Operations de Bourse – COB) investigation revealed alleged manipulations in an open-ended collective investment scheme, aka SICAV, an acronym in French for “Societe d’Investissement A Capital Variable”, translated as “investment company with variable capital”, which was managed by Financiere Rembrandt, founded by Cyril Vernes – nephew of the late Jean-Marc Vernes.
Further, the COB came across curious movements of funds between France and Luxembourg, amounting to billions of francs. The technique used consisted in renting a “delocalized screen”, which according to one investigator “allowed one to place orders from a Parisian computer as if they were in Luxembourg”. In addition to this tax evasion, there was a large amount of traffic on security bonds issued by the French State, which most agreed to be an extremely complex financial manipulation.
In a decision dated 12th February 2002, the Securities and Exchange Commission (COB) inflicted a lifetime ban on Cyril Vernes, Chairman of Financiere Rembrandt at that time, from exercising financial management activities and services for third-parties. Through a decision dated 28th December 2005, the French Council of State (Conseil d’Etat), acting in its proceedings, dismissed the appeal brought by Cyril Vernes against the decision to impose such sanctions.
This ban was confirmed by a judgment identified as Vernes v. France no. 30183/06 of 20th January 2011 (final on 20 April 2011), by the European Court of Human Rights (ECHR), which was seized of this procedure, but found that there had been a three-fold violation of Article 6 § 1 of the Convention.
According to the ECHR, these violations resulted from the impossibility for Mr Vernes to request public hearings before the COB, his inability to know the identity of the persons composing the formation of the COB who had imposed the sanction, and of the presence of the government commissioner in the deliberations of the formation of the judgment which pronounced itself on his appeal to the Council of State.
Further appeals to the Council of State did not change the original decision made by the COB since the irregularities identified by the ECHR concerned procedural rights rather than substantive rights and the finding of violations.
So, until any future favorable decisions to his favor and while being banned for financial fraud, Cyril Vernes is not permitted to exercise financial management activities or services for third-parties in France and probably anywhere else in Europe, but…
CYRIL VERNES STILL OWNS AND RUNS A BANK, BASED IN THE BAHAMAS
Welcome to Lyford International Bank and Trust…
The new bank, Lyford International Bank & Trust (formally Hottinger Bank and Trust Limited), of which Cyril Vernes is now the chairman, is based in Nassau, Bahamas. In this venture, Cyril Vernes is associated with another well-known figure in Swiss private banking sector and businessman, Frederic Hottinger, as well as with a few others including Elo Rozencwajg, Heather L. Thomson and James Weir stated as board members.
As for the activities of the bank, the Lyford International Bank & Trust Web site states the following:
“Lyford International Bank and Trust, formerly the Hottinger Bank, was established in 1996, and resides and operates entirely under the regulatory and legal framework of The Bahamas. Situated in the lovely Lyford Cay area of Nassau, we continue the tradition of bespoke private banking, holding true to the renowned service-principals of our ancestry – excellence, privacy, and courtesy. We weigh our financial management success and expertise in centuries and draw on a heritage and reputation derived from two distinguished Swiss banking families, Vernes and Hottinger.“
The other Swiss banking family
It is interesting here to note that Frederic Hottinger was previously associated with a now bankrupt Swiss bank, Hottinger & Cie. In 2012 the FINMA ordered the Swiss bank to be closed due to insufficient funds. According to press reports at that time, Hottinger & Cie lost an estimated total of over 24 Million Swiss Francs is two distinct frauds:
The first fraud concerned Lugano, of which 51% was owned by late Henri Hottinger, Frederic Hottinger ’s father. This issue ended up giving a certain Mr Z. prison term in Italy. Mr Z. was suspected to have used 10 million Euros from funds of a foundation in charge of the maintenance of churches in Italy to build supermarkets which resulted in significant losses. The investigators also found traces to the Neapolitan underground behind Mr Z.
The second fraud would have cost the Hottinger & Cie bank an estimate of 5 million Swiss francs, namely the embezzlement of customer funds committed by an active manager at Hottinger & Partners in Geneva.
In the end, there was an estimated total loss of 24 million Swiss francs for Hottinger & Cie.
The Swiss bank Hottinger & Cie collapsed as a result of a triple effect. First, its operating costs were too high. In Zurich, the bank rented a six-story building, while it occupied only one and a half floors. Secondly, it employed 55 as staff, which is a large number in relation to the mass of funds it had under management. Indeed, the mass of funds under management had dropped from 4 to 1.5 billion Swiss francs over the latter 5 years of the bank’s existence. Thirdly, the impact of the two proceedings which already had cost the bank 5 million Swiss francs and would have still cost 10 million more at the end of the procedures if it was to continue. This would be in addition to the cost of attorneys’ fees and the arbitration.
To wind this story up, the Lyford International Bank & Trust Web site states: “We weigh our financial management success and expertise in centuries and draw on a heritage and reputation derived from two distinguished Swiss banking families, Vernes and Hottinger”. What financial management success and expertise are they talking about?
Related articles :
French Council of State appeal case (30th April, 2014 – french)
European Court of Human Rights – Application n° 30183/06
LES ECHOS: La COB sanctionne la Financiere Rembrandt (french)
LIBERATION: La COB au coeur d’un pataques financier (french)
Bhamas Leaks – LYFORD INTERNATIONAL BANK AND TRUST LTD.
FINMA Web site: Bank Hottinger & Cie AG
Finma launches bankruptcy proceedings against Bank Hottinger
Révélations sur la faillite de la banque Hottinger (french)
Illustration image & photo: Lyford Bank Web site
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