Novartis heir sues German nobleman and Rothschild bank: When aristocrats go to war over money

The heir to the Novartis family fortune says she was swindled by a German nobleman and the Rothschild bank. Jim Armitage reports on a blue-blooded battle royale

It is a tale of feuding, wealthy European families that could grace the pages of Tolstoy.

When Corinna von Schönau-Riedweg’s mother died in 2002, she would never have guessed she was about to become part of such a drama.

In the inheritance, Ms von Schönau discovered a treasure trove: hundreds of millions of euros in shares in Novartis, the pharmaceuticals giant. Her grandfather had been the medicines pioneer behind the Geigy group, which went on to become Novartis.

The bequest turned her into one of Europe’s richest women.

Unused to so much wealth, and grieving for her mother, she says she was at a loss about how to manage so much money. Enter her aristocratic confidante, Baroness von Plotho. The two women had long been friends, sharing a passion for horses. Ms von Schönau knew that the Baroness’s husband, Wilfrid von Plotho, was a financial adviser to the blue-blooded Rothschild bank in Zurich.

Confident in her friendship with the family and in the reputation of the famous bank, she entrusted the inheritance to them. She alleges Baron von Plotho advised her to sell tens of millions of the Novartis shares and let him manage the money for her.

However, Ms von Schönau alleges that she later discovered, to her horror, that the Baron had lost tens of millions of dollars of her money on disastrous, highly speculative investments in the United States. One of the punts was on a company aiming to turn scrap into precious metal.

Ms von Schönau recently won more than $15m in a US case against the Baron, in Boston, Massachusetts, and is now seeking to enforce the judgment on him in Europe.

During those proceedings in America, she also sued Rothschild, although the bank successfully had the case against it thrown out, saying the Baron was not an employee and that the Boston courts had no jurisdiction anyway. Other parts of her case were also dismissed.

Yet Ms von Schönau’s legal team claim they have uncovered new evidence about Rothschild and are taking the bank back to the Boston courts.

The heiress described in her original legal filing against the baron how she trusted the famous Rothschild name, adding: “Tragically, this trust was misplaced.”

The Baron invested millions of dollars in a number of US private equity ventures, but they went bad and, at the time of the legal claim, were worth merely tens of thousands.

On top of that, he got about $8m (£5m) in finder’s fees while Rothschild levied management charges of about 450,000 Swiss francs (£306,000), she alleged.

Much of her money went into a US start-up called Continuum Energy Technologies and associated companies. Continuum’s board was chaired by Michael Porter, a Harvard professor, and the company aimed to alter the properties of metals in a way some critics have described as “attempted alchemy”.

Ms von Schönau argued in the US case against the Baron: “The poor investment recommendations were motivated by von Plotho’s fraudulent double-dealing and Rothschild’s zeal for large deposits, accounts and fees.”

She said Rothschild failed to supervise the Baron’s “pathetic” efforts, saying even the lightest of due diligence would have highlighted the risky nature of investing in the likes of Continuum, and said she was misled about the valuations of the investments.

In a statement after winning the case against the Baron, she said: “Since Wilfrid von Plotho was an employee of Rothschild at the time, since there was an asset management contract between me and the bank in place, and since the bank did nothing to prevent him from engaging in behaviour of this sort, I have also filed an action against Rothschild Bank Ltd Zurich which is still pending.”

Rothschild has hit back in a statement: “We categorically reject the claims that have been made against Rothschild Bank AG,” it said.

“The US courts have already dismissed these claims on jurisdictional grounds, having found that there was no relevant link between Rothschild Bank and its former employee, who acted in his private capacity in relation to the matters in dispute.

“This decision was upheld by the US courts upon appeal. We will vigorously resist the renewed attempts to involve us… In light of the ongoing legal proceedings, we are unable to make any further comment.”

For both sides, there is much to play for: the heiress, who remains fabulously wealthy despite the Baron’s work, hopes to recoup her missing millions, while the famous bank, whose offices in London, Switzerland and Paris have served royalty and billionaires for generations, wants to preserve its good name.

Let battle commence.

The missing millions: timeline

2002: Corinna von Schönau-Riedweg inherits large amount of shares in Novartis and retains Baron von Plotho, purportedly working for Rothschild Bank in Zurich, as her financial adviser

2003: The baron allegedly directs Ms von Schönau to sell a large portion of the shares and move her money to Rothschild Bank, where he can direct her investments. Several accounts are opened, including a private equity account

2004-08: At Baron von  Plotho’s direction $44m allegedly invested in Massachusetts-based companies attempting to convert scrap metal into  precious metals and waste materials into commercially scalable  synthetic gas projects

2011: Ms von Schönau allegedly discovers that $44m of investments are now worth approximately $53,000