Morning Coffee: Credit Suisse's biggest scapegoat proclaims her new job. The banker who lost $50m over social media drama

It’s hard to think of a line on your resume which could be more alarming to potential employers than “former Chief Compliance Officer at Credit Suisse”.  Except perhaps “former Chief Risk Officer at Credit Suisse”.  So congratulations to Lara Warner, who has both of these ornaments prominently displayed on her LinkedIn page, but who has nonetheless just taken on a new role on the Industry and Regulatory Advisory Board of Starling Trust, a risk management consultancy. Obviously, this has provoked some quite sharp remarks from people who lost money or jobs in the 2023 collapse of CS, but Laura's new job isn't entirely unreasonable.

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There’s a famous story that every trading floor junior is told at some point during their apprenticeship. It’s apocryphally attributed to more or less every star hedge fund manager, but was actually first told by Thomas J Watson of IBM.  In the banking version of the story, a young trader has to confess to having made a mistake and lost a huge amount of money, and tremblingly asks “so am I fired?”.  Then the big boss replies “Why would I fire you? I’ve just spent five million dollars on your education.”

On the same basis, Lara Warner has also seen things that very few other people in the world have first-hand experience of, and which nobody is likely to pay the tuition fees to learn.  Starling is a data science company that tries to bridge the gap between quantitative information in a bank’s systems and the “hidden” systems and cultural factors that tend to be behind the really big risk events.  And if the Swiss regulator’s report into Credit Suisse is correct, the culture that produced the Archegos and Greensill scandals was already fundamentally flawed, even before its CEO was forced out for hiring private investigators to spy on a former colleague.

This means it's probably unfair for Warner to carry quite so much of the stigma that correctly attaches to Credit Suisse’s compliance and risk management reputation.  The period between her firing over the Archegos affair in 2021 and the final collapse in 2023 was one of almost constant blame exercises and buck passing.  Yes, her decisions as CCO/CRO look pretty bad in retrospect – the senior risk management team had 40% turnover, reporting lines were apparently unclear and too much emphasis was put on technology rather than human beings.  But hindsight is 20/20, a lot of the criticism appears to have been made by people who were passed over for promotion in favour of her. A terrible culture is never the fault of just one person.

In any case, even if all of CS’ problems could be laid at Lara Warner’s door, there’s still Thomas Watson’s point to deal with.  Having been present and involved when all the mistakes were made, she not only has a better knowledge of how a risk culture can get screwed up, but a much more personal and visceral understanding of the consequences of doing so.  If she’s got advice to give, it’s probably worth listening to.

Elsewhere, one of the main ways in which people today psychologically process the experience of being dumped is to write passive-aggressive little social media posts describing all their ex’s flaws.  But when it’s an ex-employer rather than a former romantic partner that you’re dragging, things can get expensive as well as messy.

According to filings in a lawsuit brought by Erick Goralski, the former head of client strategies at Stone Ridge Asset Management, there was a messy breakup between him and the fund’s principal, Ross Stevens.  As part of his severance, Stone Ridge agreed to formally keep him as a “special adviser” for a period, with bonuses under a schedule that could have seen him getting as much as $50m over a period of years.

Then … well, it’s quite hard to understand what happened next, but the money definitely stopped flowing. Goralski made a number of LinkedIn posts, which didn’t mention Stone Ridge by name, but which made it pretty clear that he had a lot of problems with them and with Stevens.  These have now also ended up in court filings. Stone Ridge claims the posts breach a non-disclosure agreement and form grounds to claw back everything they’ve already paid.

Many lessons to be learned here, but perhaps the most important relates to a conversation during the break-up.  Rick Stevens apparently said, “I don’t care what is on the paper, I am going to pay you this money”. This is always extremely bad advice; when it comes to money, you should care very much what is on the paper.

Meanwhile …

Bill Niccols, the new Starbucks CEO, has negotiated a remote-working deal that would put most banks to shame – he won’t be going to Seattle but will work out of a private office in Newport Beach (possibly, although not probably, the same one that Janus set up for Bill Gross). (FT)

Jamie Dimon supports the “Buffett Rule”, a proposal that anyone earning more than $1m should have an absolute minimum tax rate of 30%. (PBS)

It’s “envelope time” in the Southern Hemisphere, which is traditionally accompanied by extremely aggressive poaching in the notoriously competitive Australian market. Barrenjoey employees are apparently going to be first to get their numbers. (AFR)

British fans will have to wait a little longer than HBO subscribers for the next series of “Industry”, which is coming to BBC iPlayer in the autumn (Daily Mail)

The actual use cases for AI in finance seem a bit more prosaic than the promises of super stockpicking robots or analysts that never need to sleep.  Schroders, for example, is just using it to get documents translated into other languages more quickly. (Financial News)

What would be a good equivalent of “Tiger Cubs” for the growing community of hedge funds started up by alumni of Elliott Management?  Ellie-ments? (Business Insider)

Students have discovered that questions for the American Maths Competitions, which students take to differentiate themselves for hedge funds like Citadel, are available online hours in advance. (WSJ) 

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