Saturday, May 9, 2009
There’s more than 250 years separating Baron Benjamin de Rothschild from Bernard L. Madoff.
This isn’t an insignificant issue in Geneva where at least eight banks had about 10 billion Swiss francs ($8.8 billion) with Madoff, who pleaded guilty in March to masterminding a $65 billion Ponzi scheme. Investors are preparing lawsuits against firms that gave their cash to the New York con man. Five Aurelia Finance SA fund managers, who invested with Madoff, were charged last month by a Geneva magistrate for mismanaging client assets.
“Madoff has become a filter for everyone’s perception of whether banks were doing their job,” said Leslie Gaines-Ross, chief reputation strategist at the Weber Shandwick consulting firm in New York and author of “Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation,” (John Wiley & Sons Inc., 2008). “Rothschild is one of the few that is still admired and holds true to its reputation.”
Baron Benjamin, head of the Geneva arm of the Rothschild family that financed the Suez Canal and Wellington’s victory at Waterloo, is betting that heritage will help his firm grow. Rothschild had no investments with Madoff.
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Rothschild and Madoff are “poles apart,” said Cedric Tille, a professor at the Graduate Institute in Geneva and a former economist for the Federal Reserve Bank of New York. “Many private banks in Geneva have enough tradition to sell themselves as cool heads who don’t fall for the latest fad.”
‘Look for Safety’
Banque Privee Edmond de Rothschild Group received 1.7 billion francs of new assets in the first quarter. Pictet & Cie. and Mirabaud & Cie., two Geneva-based banks that trace their roots back to the 19th century, also attracted clients after avoiding Madoff, who’s in a Manhattan jail awaiting sentencing on charges that carry a maximum prison term of 150 years.
Officials at Pictet and Mirabaud declined to disclose first-quarter inflows. Pictet, founded a decade before Napoleon’s final defeat in 1815, attracted 17 billion francs of assets last year, three times more than Rothschild.
Geneva’s 140 banks and 700 independent wealth managers employ more than 34,000 people and have about 10 percent of the world’s private assets held outside investors’ home countries.
Rothschild depends on its record of preserving customers’ savings to set itself apart, said Werner Rutsch, co-author of “Swiss Banking — Where Next?” (Neue Zuercher Zeitung, 2008).
“In difficult times, people look for safety and personalities,” Rutsch said.