Swiss bank Hentsch buys itself back from Madoff-linked alternatives manager. Geneva-based private bank Banque Benedict Hentsch has undone its merger with Fairfield Greenwich Group, New York-based alternatives manager with ties to Bernard L. Madoff Investment Securities (BLMIS), a New York-based asset manager at the heart of a multi-billion-dollar fraud scandal.

BLMIS' guiding light Bernard Madoff is supposed to have swindled his clients out anywhere between $50 billion and $75 billion -- the tally keeps growing. It now appears that Madoff was running an elaborate pyramid scheme rather than an investment firm. He is due to face charges in a U.S. federal court this week.

Fairfield says that about half of its $14.1 billion in assets under management was allocated to Madoff-run investments in early November 2008.

On second thought

Hentsch and Fairfield joined forces three months ago. The idea was to give Hentsch clients access to Fairfield Greenwich's fund platform while Fairfield clients got access to Banque Benedict Hentsch's wealth-management services, the firms said when they merged. Banque Benedict Hentsch Fairfield (BBHF) was the first-ever tie in between a U.S. alternatives manager and a Swiss private bank.

Hentsch's founding shareholders "have concluded an agreement with [Fairfield] whereby they have repurchased the total capital of the bank [from Fairfield]," and so "have terminated their partnership with [Fairfield]," Hentsch says in a 15 December statement. "Thus the bank regains its complete independence as well as its name Banque Bénédict Hentsch & Cie."

The Swiss bank says it has determined that its clients' exposure to Madoff comes to around $52 million, which is less than 5% of its total assets under management.

Hentsch adds that it is "carefully following the development" of the Madoff case "in order to undertake any further steps, particularly legal, judged necessary."

Shocked and appalled

On 12 December, Fairfield posted a notice on its website in which it vows "to take all necessary steps to protect" those of its investors with exposure to Madoff.

"We have worked with Madoff for nearly 20 years, investing alongside our clients," says Fairfield founding partner Jeffrey Tucker . "We had no indication that we and many other firms and private investors were the victims of such a highly sophisticated, massive fraudulent scheme."

Adds Tucker: "It is our intention to aggressively pursue the recovery of all assets related to [Madoff]" and "we are committed to the operation of our continuing funds."

Tucker, Walter Noel and Andrés Piedrahita founded Fairfield Greenwich in 1983. It markets internally managed hedge funds and a selection of non-proprietary alternatives, principally to non-U.S. private banks, institutions, financial intermediaries and high-net-worth individuals.

Benedict Hentsch co-founded the bank that bears his name in 2004. Before that he was at Lombard Odier Darier Hentsch, a firm founded by his ancestor Henri Hentsch in 1796.

BBHF had more than 150 employees in Geneva and Lugano in Switzerland and in Greenwich, Conn., New York and Miami in the U.S., and in Bermuda, Brazil, the U.K., Spain, Singapore and China. -FWR

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