A Black Swan event in Swiss banking

(31.1.2012 - smz) Last March we drove by car from Hannover to Berlin on a grey and rainy Saturday. Then my mobile phone rang and a friend called who was in trouble. His story would appear on page one of the most popular Sunday newspaper in Switzerland. And the story was bad. He had been caught by the police while travelling on behalf of his clients in the U.S.

Since he was a banker any publicity was damaging his high-profile client relationships, be they in Europe or in the U.S. Half-jokingly I said that many people were desperately seeking to be on the title of the Sunday paper, how did he do it? It turned out that his story with the U.S. authorities was really bad and that a journalist whom I knew had found out about it.

I remembered that back in 2009 the chairman of this bank had published a piece called "Farewell America!" Since I had a number of podcasts on my iPod, I spent the bigger part of the trip to Berlin searching, finding and listening to the MP3 version of a decisive appeal to refrain from banking relationships with American clients, American shares and non-resident American clients. It became obvious that the bank had been doing the opposite and my friend was part of the picture. 

Upon arrival in Berlin, I spent the better part of a visit at my brother and his familiy on the phone advising my friend on how to behave, like not answering his mobile phone immediately. I asked him to work out hard, to try and get some sleep and spend Sunday with his kids. We continued our own trip to Munich and I spent a good part of my Sunday trying to retrieve an online version of the article (the Sunday paper wasn't officially available online from abroad).

The journalist knew surprisingly much. He had fairly abbreviated my friend's last name but there was a dark element in his article where his conclusions of the arrest in the U.S. were differing from what I had been told. Over the next days we were in close contact and discussed options. My friend was fired and had been offered a generous severance package, then the bank's PR advisor kicked in and reached that the story was dead and out of the press within a week.

Back in Zurich I suggested to my friend that he should save his reputation by going public. If he wanted to be a businessman in the future he couldn't live with an image of someone who had been arrested, had a shady, ongoing international investigation and had to leave his job. I suggested to meet the investigative journalist with me and to be proactive. He could even have told his version of the story on Youtube, only to name one of his options. But of course that seemed incredibly aggressive and out of proportion at that point in time. The story was dead - why add fuel to the dying flames?

But the story wasn't dead. Almost one year later the U.S. authorities striked back. Last week the asset stripping of the bank was announced. The chairman, my friend's boss, is defeated. He is left with the task to unwind a large number of toxic U.S.-related bank accounts. The grounding of Switzerland's oldest privat bank and the grounding of it's most prominent private banker reminds us all of the grounding of Swissair in 2001 (Swiss Airlines is now owned by Lufthansa and prospering again). What started with a Q&A session  on a U.S. airport exploded and will change Swiss banking forever.

Now I wonder: if my friend had taken my counter-intuitive advice one year ago, would that have changed the course of events? My strategy was to save his reputation by telling as much of the truth as possible from the beginning and with that making him a useless cooperating witness for the U.S. People in PR crises always hope for the best case scenario to happen. And they act as if the best case would actually occur. I think you must act in PR as if the worst case would happen, the unlikely case. If your lawyers are against it, you chose the wrong lawyers. Tell them to read the 'Black Swan' by Nassim Taleb. Why not listen to it's podcast on a long car ride these months? There is a free podcast on iTunes called "Living with Black Swans", an interview with Nassim Taleb at Wharton University.