{"id":11382,"date":"2024-11-03T12:53:41","date_gmt":"2024-11-03T12:53:41","guid":{"rendered":"https:\/\/www.ireneeng.com\/?p=11382"},"modified":"2024-11-03T14:19:26","modified_gmt":"2024-11-03T14:19:26","slug":"a-luxury-giant-a-reclusive-heir-and-the-case-of-the-missing-13-billion","status":"publish","type":"post","link":"https:\/\/www.ireneeng.com\/?p=11382","title":{"rendered":"A Luxury Giant, a Reclusive Heir and the Case of the Missing $13 Billion"},"content":{"rendered":"

A Luxury Giant, a Reclusive Heir and the Case of the Missing $13 Billion
\nA member of the Herm\u00e8s<\/a> family says his fortune is gone. Was it the handyman? The consigliere? Someone else?<\/p>\n

Nick Kostov nick.kostov@dowjones.com, Nov. 1, 2024<\/a><\/p>\n

\u00a0FERRET, Switzerland\u2014Nicolas Puech, an heir to the Herm\u00e8s fortune and long considered one of Europe\u2019s richest men, lives much of the year in one of the dozen houses that make up this tiny village in the Swiss Alps.<\/span><\/p>\n

In the winter, it\u2019s not accessible by road, so locals use snowshoes to trek into the nearest town for provisions. Few residents know anything about their reclusive neighbor, who has been reported to be worth roughly $13 billion.<\/p>\n

\u201cI know he\u2019s very rich,\u201d said Jean-Jacques \u00c9leaume, who is in his 70s and moved to the village because his wife\u2019s ashes were scattered there. \u201cHow or why, no idea.\u201d<\/p>\n

Mila Fedele, who owns a small mountain inn in the village where hikers stop for the night on their way around nearby Mont Blanc, said Puech usually came in about once a year for a coffee.<\/p>\n

\u201cI didn\u2019t even know his name,\u201d she said. \u201cNow, of course, I\u2019ve read like everyone else, I\u2019ve seen the name in the newspapers\u2026.\u201d<\/p>\n

Puech, who is 81 years old and doesn\u2019t have any children, is in the newspapers due to a stunning claim he made last year: He said he was out of money. As for his stake in Herm\u00e8s, the luxury giant controlled by his family, he said he didn\u2019t own the shares anymore, and he didn\u2019t know who did.<\/p>\n

It\u2019s a mystery tale that could only unfold among the ultrawealthy, in the opulent settings of Italian palazzos and sprawling chalets in the Alps. At stake are 6 million shares in an iconic luxury brand famed for its colorful silk scarves and Birkin and Kelly handbags cherished by socialites. A massive inheritance that was once earmarked for philanthropy now could be lost forever.<\/p>\n

Puech\u2019s revelation has spawned questions being whispered about from Paris to Geneva. Did his one-time financial adviser, as Puech has contended, sell the shares and take the proceeds? Is Puech claiming they are lost as part of a plan to leave his wealth to a one-time employee without paying inheritance taxes, as the former adviser has claimed? Could Herm\u00e8s archrival Bernard Arnault shed light on the situation, as Puech has requested?<\/p>\n

Eric Freymond, who worked for decades as Puech\u2019s financial adviser, filed a report with Switzerland\u2019s child and adult protection authority in November 2023, alleging that the employee and his partner, who both live with Puech, had come to control the heir\u2019s life to their own financial benefit. To circumvent his estate plan\u2014laid out in a binding contract that is different from a will\u2014Puech was also trying to legally adopt the man, Freymond alleged.<\/p>\n

Eric Freymond and his wife Caroline PHOTO: MAX MONTINGELLI\/SGP\/SHUTTERSTOCK<\/p>\n

Puech, for his part, says Freymond himself pilfered the shares as part of a \u201cgigantic fraud,\u201d which could have started as far back as 25 years ago, when he assisted Bernard Arnault, the owner of Herm\u00e8s rival, LVMH, in his efforts to covertly build a large stake in Herm\u00e8s.<\/p>\n

Even Herm\u00e8s is in the dark. The company\u2019s chief executive told analysts earlier this year that it can\u2019t say for sure whether Puech still owns his shares.<\/p>\n

Complicating the matter is the fact that Puech was issued so-called bearer shares in Herm\u00e8s, a type of stock that does not need to be registered under a specific person or business and where the ultimate owner is unknown to the company. Dividends for bearer shares are typically paid through the financial intermediaries that hold them on behalf of the owner, which can sometimes lead to challenges in tracing ownership. The rest of the Herm\u00e8s family hold \u201cregistered shares\u201d which are issued in their names.<\/p>\n

\u201cOf course at least someone must know where they are,\u201d says Nicolas Borsinger, who runs Puech\u2019s private foundation, to which Puech had planned to leave his fortune until abruptly trying last year to cancel that commitment.<\/p>\n

On a late summer day, horned cows grazed through roadside meadows when a Wall Street Journal reporter visited Puech\u2019s big yellow house, by far the largest in the village. A small sign in the window had the word \u201cPriv\u00e9\u201d\u2014private\u2014scrawled in red marker.<\/p>\n

Before the reporter could knock, Puech emerged from the side of the house, appearing in good health and good spirits. He was friendly, and responded affirmatively when asked if he had a nice summer.<\/p>\n

Asked if he could talk about the mystery surrounding his fortune, Puech said it wasn\u2019t the right moment and climbed into a small white SUV. A trim middle-aged woman who was driving the car interjected that the reporter should contact their lawyer. The two drove off.<\/p>\n

When contacted by the Journal, the lawyer representing Puech, J\u00f6rn-Albert Bostelmann, said he wouldn\u2019t comment in depth on what he called a \u201cmurky affair\u201d and a criminal matter.<\/p>\n

Nicolas Puech\u2019s home in the Swiss Alps PHOTO: NICK KOSTOV\/WSJ<\/p>\n

\u201cMy client has no intention of going into the details,\u201d he said. \u201cHe\u2019s an 81-year-old man who prefers for things to unfold peacefully.\u201d<\/p>\n

A lawyer for Freymond said his client denied wrongdoing and disputes Puech\u2019s version of events. \u201cMy client is tired of having to defend himself against unreal defamatory allegations that have no substance and are not supported by any proof,\u201d he said.<\/p>\n

This account is based on court records as well as interviews with people familiar with the matter.<\/p>\n

The financial adviser is fired<\/p>\n

Puech, pronounced \u201cpwesh,\u201d was born on Jan. 29, 1943, in Neuilly-sur-Seine, France. He is a great-grandson of Thierry Herm\u00e8s, who founded the company in 1837 when he opened a workshop in Paris.<\/p>\n

Over the years, the Herm\u00e8s family split into three branches, one of which was the Puechs. Most of the Puech cousins weren\u2019t involved in the business, enjoying quiet lives funded by increasingly sizable dividends.<\/p>\n

Beginning in the late 1980s, Nicolas Puech spent much of his time at his farm located about an hour from Seville, in the south of Spain. The property, whose name means Four Winds in English, is secluded, and Puech enjoyed spending time among the eucalyptus and cork oaks, surrounded by his horses, pigs, goats, and his Labrador, called Nectar. He didn\u2019t work.<\/p>\n

\u201cHorses are his passion,\u201d said a person who has known him for decades. \u201cArchitecture, interior design, history, travel. I would say he leans more toward the artistic\u2026. He has always been a bit frustrated, I think, growing up in a family where numbers were valued more than art.\u201d<\/p>\n

In 1993, Herm\u00e8s went public, but the family kept a 74% ownership stake. Three years later, Puech inherited around 5% of Herm\u00e8s when his mother died, making him one of the company\u2019s largest individual shareholders. He inherited another 1% stake in the company when his sister died several years later.<\/p>\n

In the absence of a partner or children, Puech set up a foundation and in 2017 named Nicolas Borsinger as chief executive to run it. Puech himself came up with the name, the Isocrates Foundation, in honor of the ancient Athenian orator who promoted the use of rhetoric as a solution to societal problems.<\/p>\n

Borsinger, a quiet Swiss national who had a distinguished career working for the International Committee of the Red Cross, was told he would eventually have billions of dollars to distribute to causes including investigative journalism and other ways to combat misinformation and conspiracy theories.<\/p>\n

A 1920s ad for Herm\u00e8s, top. A Birkin bag, left, and a model with a famous Herm\u00e8s scarf in a 1991 show in Paris.
\nALAMY, ERIC HELGAS FOR WSJ, GAMMA-RAPHO VIA GETTY IMAGES<\/p>\n

Puech attended board meetings, as well as annual staff retreats. In September 2022, they convened at the Tuscan mansion of Puech\u2019s wealth manager, Freymond, who was also a foundation board member.<\/p>\n

Two people who were there said Puech seemed pleasant, engaged and happy.<\/p>\n

Upon returning to his house in Geneva, Freymond found a letter in his mailbox. Puech was firing him, effective immediately.<\/p>\n

Freymond had known Puech since the 1980s and considered him a friend as well as a client. Now Puech was dismissing him without even confronting him in person.<\/p>\n

Then last fall, Borsinger, the head of the foundation, received his own letter.<\/p>\n

In slanted handwriting across the top of the letter, Puech wrote: \u201cAnnulation pacte successoral.\u201d<\/p>\n

Translation: \u201cCancellation inheritance agreement.\u201d<\/p>\n

\u201cI irrevocably declare the cancellation of this agreement in its entirety,\u201d Puech wrote. \u201cNot only because I was mistaken in believing that this agreement, in favor of my\u2026foundation, could protect me and my assets, but also because I intend to make other testamentary arrangements.\u201d<\/p>\n

\u201cWe were shocked,\u201d Borsinger recalls. \u201cTo start with, we didn\u2019t even believe it was possible, and quite often I still can\u2019t believe it.\u201d<\/p>\n

Beneath Puech\u2019s signature, he stated that it had been written in the office of his new lawyer, Bostelmann, and in the presence of Jadil Butrak, a Moroccan national, and Butrak\u2019s partner, Maria Paz.<\/p>\n

Weeks later, Freymond filed a report to the Swiss welfare agency in which he claimed that Puech, or those around him, were taking steps to try to transfer Puech\u2019s fortune to Butrak and Paz. Butrak had been hired by Puech many years earlier as a \u201claborer \/ gardener,\u201d the report said, and Paz had also worked for him. It alleged that Butrak and Paz exerted more and more influence over Puech during the Covid-19 pandemic, when the heir lived in fear of catching the disease.<\/p>\n

\u201cThey have\u2014to everyone\u2019s surprise\u2014managed to make themselves \u2018emotionally\u2019 indispensable to him,\u201d the report stated.<\/p>\n

A section of the report titled \u201cgradual isolation and extravagant spending,\u201d detailed how Butrak and Paz received more than 54 properties from Puech over the years, including homes in Spain, Portugal and Montreux, Switzerland.<\/p>\n

Finally, Freymond claimed that Puech, Butrak, and Paz had submitted an adoption request, so that Puech could legally become Butrak\u2019s father.<\/p>\n

Adopting Butrak would allow Puech to forgo most of the inheritance taxes on his wealth. It also would allow him to cancel giving his Herm\u00e8s shares to his foundation as he had agreed. A bequest to children, even recently adopted ones, was one of the few ways Puech could unilaterally cancel the contract that laid out the original plan to give his holdings to the foundation.<\/p>\n

\u201cThe obvious goal of this approach is to capture the ownership of the Herm\u00e8s shares,\u201d the report stated.<\/p>\n

The lawyer for Puech, Bostelmann, said that Freymond\u2019s allegations were \u201cabsurd\u201d and that gifting dozens of properties would represent only 1% of Puech\u2019s wealth. He said Puech, Butrak, Paz and her two children \u201chave been living in a shared community, domestically, and happily together for around two decades.\u201d<\/p>\n

Does Arnault hold the clue?<\/p>\n

Bernard Arnault, head of LVMH which disclosed its large Herm\u00e8s stake in 2010. PHOTO: CHIP HIRES\/GAMMA-RAPHO VIA GETTY IMAGES<\/p>\n

Many in the Herm\u00e8s family\u2014including Nicolas Puech himself\u2014suspected that clues to his fortune\u2019s whereabouts could lie decades in the past.<\/p>\n

And they suspect one person might have helpful information: Bernard Arnault, the chairman of Herm\u00e8s\u2019s archrival, LVMH.<\/p>\n

In 2001, Arnault was on the hunt for acquisitions, having recently lost out in a battle for Gucci. And in June of that year, an LVMH employee in Geneva reached out to Freymond to ask whether he would be \u201cwilling to assist and partner with LVMH in the goal of acquiring Herm\u00e8s,\u201d according to a lawsuit later filed by Freymond against LVMH and Arnault seeking to get a commission for his efforts. The lawsuit, details of which were first reported by Glitz, an investigative weekly on the luxury sector, was later withdrawn.<\/p>\n

Freymond respected Arnault, seeing him as a genius who was Europe\u2019s answer to entrepreneurs like Bill Gates. He agreed to help by leveraging his relationships with the various Herm\u00e8s heirs to acquire shares in secret, which he was able to do in part because he had so-called \u201cdiscretionary management mandates\u201d on Puech\u2019s accounts and later a number of LVMH-affiliated accounts as well, according to the lawsuit.<\/p>\n

The lawsuit alleged that Puech agreed to the plan, but \u201cwas unaware of the finer details of the trades and did not wish to know them, as long as his portfolio was managed in his best interest.\u201d<\/p>\n

Starting in June 2001, Freymond steadily built the Arnault stake up to just under the disclosure threshold of 5%.<\/p>\n

In September 2006, Freymond met with Arnault at Ch\u00e2teau d\u2019Yquem, LVMH\u2019s wine property in Bordeaux, to talk about how to build the stake even bigger without being detected. Puech joined them for the first time, according to Freymond\u2019s lawsuit.<\/p>\n

Over a series of meetings, they came up with a complex plan to use equity swaps and collateral-backed trades to effectively disguise the transfer of Herm\u00e8s shares into LVMH hands. According to Freymond\u2019s lawsuit, some 13 million Herm\u00e8s shares were transferred to banks and then on to LVMH in this way. Almost all of these transited through Puech\u2019s bank accounts, the lawsuit states.<\/p>\n

The multiyear operation didn\u2019t become public until Oct. 23, 2010, when LVMH declared that it held 14.2% of Herm\u00e8s and would increase this percentage to 17% in the following days. It later increased its stake to 23%.<\/p>\n

Arnault and LVMH insisted that they had no intention of taking control of Herm\u00e8s or seeking board representatives. But the Herm\u00e8s family considered it an assault on family unity.<\/p>\n

Herm\u00e8s Chairman Bertrand Puech, Nicolas Puech\u2019s late brother, told the French daily Le Figaro, \u201cWith friends like these, who needs enemies?\u201d<\/p>\n

Swiftly, the Herm\u00e8s family set up a holding company to pool its shares. Those who participated relinquished their rights to sell the shares for several decades, making it impossible for anyone to take over the fashion house.<\/p>\n

Nicolas Puech was one of the few family members who refused to participate.<\/p>\n

The Ch\u00e2teau d\u2019Yquem, LVMH\u2019s wine property in Bordeaux, where Nicolas Puech and his then-financial adviser Eric Freymond met with LVMH head Bernard Arnault in 2006, according to a lawsuit. PHOTO: FRAN\u00c7OIS DUCASSE\/GAMMA-RAPHO VIA GETTY IMAGES
\nHe registered to vote for the May 2011 Herm\u00e8s annual meeting as the personal holder of more than 5 million shares. His foundation was listed in the shareholder documents as owning an additional 900,000 shares.<\/p>\n

The takeover thwarted, Arnault\u2019s LVMH was fined 8 million euros for not properly disclosing its purchases of Herm\u00e8s shares. The luxury giant agreed to distribute its Herm\u00e8s shares to LVMH shareholders and promised in writing not to purchase further shares of the company for the next five years.<\/p>\n

Still, some family members and Herm\u00e8s executives suspected that Puech had betrayed them and sold his stake to Arnault. How else could they explain that Arnault had amassed such a large amount of shares, given that only about a quarter of the company\u2019s shares were publicly available?<\/p>\n

Despite taking credit for the subterfuge, Freymond has consistently claimed\u2014and reiterated to the Journal\u2014that the LVMH stake did not include Puech\u2019s inherited family holdings, and that he never managed those shares.<\/p>\n

In 2012, Herm\u00e8s chairman Henri-Louis Bauer flew to Biarritz to confront Puech directly. He denied selling shares to LVMH, saying they were in a bank account in Geneva. Bauer said he followed up a few months later, and Puech promised to double check.<\/p>\n

In 2014, Herm\u00e8s asked Puech for a bank statement confirming how many shares he owned. He refused. Herm\u00e8s stopped stating how many shares Puech owned in its annual report.<\/p>\n

In October 2015, Herm\u00e8s lodged a criminal complaint in Paris against an unnamed individual for \u201cforgery and use of forged documents\u201d stating the number of shares he held. The unnamed individual, according to people familiar with the matter, was Puech.<\/p>\n

Investigators later broadened the case to include Freymond.<\/p>\n

Puech at the time denied the allegations, writing to a judge in 2018 that he had \u201cpersonally, on several occasions\u201d verified his Herm\u00e8s holdings.<\/p>\n

Puech in his farm in the south of Spain. The property\u2019s name means Four Winds in English. PHOTO: BERNARD BISSON\/JDD\/SIPA\/SHUTTERSTOCK
\nTip of the iceberg<\/p>\n

Some people close to Puech say that he believes he was being truthful in all of his previous attestations to owning the shares, and only came to believe otherwise after his split with Freymond.<\/p>\n

In 2023, a year after revoking Freymond\u2019s mandates as financial adviser, Puech filed three lawsuits against him in Geneva, accusing his former adviser of \u201cmassive fraud.\u201d The lawsuits also target another board member of the foundation, along with \u201call other individuals involved in the offenses described.\u201d<\/p>\n

One of the lawsuits says that in 2021, but mostly in 2022, Puech began to ask Freymond more questions about his wealth as he was trying to organize his estate.<\/p>\n

\u201cI blindly signed all the documents that Eric Freymond asked me to sign, without any further explanation, given the complexity of managing such a large fortune,\u201d Puech wrote in the lawsuit. \u201cEric Freymond\u2019s strategy was aimed at stripping me of my fortune. Me, his supposed friend.\u201d<\/p>\n

In his lawsuit, Puech called on the court to solicit testimony from Arnault and raid his house in Paris\u2019s seventh arrondissement, as well as LVMH headquarters, to determine what he knows about the fate of the shares.<\/p>\n

He asked the same for Freymond and his wealth-management firm in Geneva.<\/p>\n

Arnault and LVMH didn\u2019t respond to requests for comment.<\/p>\n

For now, both sides continue to fight on the legal front. In throwing out Puech\u2019s lawsuits, the court cited Puech\u2019s inattention to his own financial affairs.<\/p>\n

Switzerland\u2019s child and adult protection authority has dismissed Freymond\u2019s report without taking any action.<\/p>\n

The foundation is in a holding pattern and hasn\u2019t received any money.<\/p>\n

Puech wrote in one of the lawsuits that he believed Freymond had created a trust or some other entity abroad that was now holding either the Herm\u00e8s shares or the proceeds from their sale. He attached bank statements, including one from Panama, for accounts that he said he only learned about recently.<\/p>\n

The documents he provided, he said, \u201clikely represent only the visible tip of the iceberg.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

A Luxury Giant, a Reclusive Heir and the Case of the Missing $13 Billion A member of the Herm\u00e8s family says his fortune is gone.…<\/p>\n

Continue readingA Luxury Giant, a Reclusive Heir and the Case of the Missing $13 Billion<\/span><\/a><\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"bgseo_title":"","bgseo_description":"","bgseo_robots_index":"","bgseo_robots_follow":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[118],"class_list":["post-11382","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-corp-misdeed","entry"],"_links":{"self":[{"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/posts\/11382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11382"}],"version-history":[{"count":3,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/posts\/11382\/revisions"}],"predecessor-version":[{"id":11393,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=\/wp\/v2\/posts\/11382\/revisions\/11393"}],"wp:attachment":[{"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ireneeng.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}