Brian Hutchinson
The private banker who helped alleged fraudster Arthur Porter pursue offshore business activities and brought him into the Swiss-controlled bank where illegal kickbacks from a massive Quebec construction fraud were allegedly wired, has emerged from the shadows.
In an exclusive interview with the National Post, Hermann-Josef Hermanns said it was his impression that the company alleged to have received the illegal payments may have been established by Dr. Porter, Canada’s former spy watchdog, with the intention of it being his “personal holding company.”
Mr. Hermanns also recalled Dr. Porter as a “party animal” and an inveterate storyteller who “bamboozled” everyone he dealt with, “from the top, basically Ottawa [on] down.”
“He told people different stories, so nobody knew what was going on, overall,” says Mr. Hermanns, a German-born Canadian who served as executive vice-president in charge of private banking at the Nassau, Bahamas subsidiary of Geneva-based Compagnie Bancaire Helvétique SA (CBH). That is, until controversy around Dr. Porter and the bank erupted this year.
Mr. Hermanns says his job was bringing new business to CBH, and that Dr. Porter — with his connections to powerful politicians and his myriad business interests — seemed a good prospect. “He had so many different hats and excellent references from everybody,” Mr. Hermanns said this week, in his first full-length interview since his name first emerged in links to the Porter scandal.
The pair met on a flight to the Caribbean six years ago. Dr. Porter was already director general of the McGill University Health Centre (MUHC) in Montreal, and he sat on the boards of Air Canada and other companies.
He was about to be named by Prime Minister Stephen Harper to the Security Intelligence Review Committee (SIRC), which examines the activities of Canada’s spy service, CSIS. Dr. Porter would eventually rise to become SIRC’s chairman.
The two men became close associates, and Dr. Porter became a CBH client. But their relationship soured this year when Dr. Porter was charged with a number of criminal offences related to $22.5-million worth of illicit payments. Former executives at scandal-plagued SNC-Lavalin Group Inc., the Montreal-based engineering giant, allegedly made the kickbacks to a company registered at CBH in Nassau.
Authorities in Quebec allege the money was used to secure a $1.3-billion contract to build and maintain a new hospital for MUHC. Dr. Porter led the committee that awarded the lucrative contract to SNC-Lavalin and its consortium partners, in 2010. He has said he did nothing wrong and that the selection process was clean.
The company alleged to have received the millions in payments is Sierra Asset Management Inc., which reportedly had just one director — a Bahamian resident named Jeremy Morris. He is also charged in the alleged kickback scheme.
But Mr. Hermanns suggests it was Dr. Porter who established Sierra Asset Management. “I guess it was supposed to be a personal holding company,” he said. He said he was not involved in day-to-day account management, but it wouldn’t be uncommon for his former bank to register such an entity while keeping private its “beneficial ownership,” he added — meaning someone who benefits from a company as an owner, but is not named as one.
But CBH’s compliance officers would have scrutinized Sierra Asset Management’s ownership and all financial transactions it made through the bank, he says.
“Compliance looks at everything,” says Mr. Hermanns, who once worked for the Royal Bank of Canada. His role at CBH was only to “go out and look for new business. I was never involved in accepting any business, declining any business, or with compliance.”
None of CBH’s employees or executives have been accused of any wrongdoing, and Mr. Hermanns says he knew nothing of Dr. Porter’s allegedly illegal activities, until charges of fraud, conspiracy to commit fraud, fraud toward the government, breach of trust, participating in secret commissions and laundering proceeds of crime were laid against Dr. Porter in Canada. Dr. Porter and his wife Pamela were arrested in May on an international warrant.
Ms. Porter was extradited to Canada three weeks ago. Dr. Porter is fighting extradition and remains locked up in an overcrowded Panamanian prison.
The scandal cost Mr Hermanns his job. In March, days after Dr. Porter was charged, Mr. Hermanns left CBH. “We agreed mutually to part ways,” he says of his departure, explaining that a confidentiality agreement he signed with the bank prevents him from describing the specific terms.