Madoff ties bring down a brash Vienese banker, in: The International Herald Tribune, 01/07/2009 Madoff ties bring down a brash Viennese banker By Nelson D. Schwartz and Julia Werdigier VIENNA: With an aggressive style that stood out in the stuffy world of European banking even more than her bouffant red wig, Sonja Kohn made few friends gathering billions for Bernard Madoff from wealthy investors in Russia and across the Continent. Now, she has even fewer. Kohn has dropped out of sight, leaving the company she founded, Bank Medici, in the hands of Austrian regulators, who took it over last Friday. Bank Medici may not survive and her wealthy clients are furious, according to bankers, former employees and others who crossed her path in Vienna, New York, and London over the past few decades. The talk in this city's small, close-knit financial community is that Kohn has gone into hiding, afraid of some particularly displeased investors: Russian oligarchs whose money made up a sizable chunk of the $2.1 billion Bank Medici invested with Madoff. ''With Russian oligarchs as clients,'' said one acquaintance, a fellow Viennese banker who knew Kohn and her husband socially, ''she might have reason to be afraid.'' It is a stunning fall for the 60-year old Kohn, once known here as ''Austria's woman on Wall Street.'' And it is especially bitter for those Kohn lured to Bank Medici with stories of her friendship that spanned decades with Madoff. Kohn owns 75 percent of Bank Medici, with Bank Austria, a part of the Italian financial company UniCredit, holding the rest. From unlikely beginnings as the daughter of Jewish refugees who moved to Vienna after World War II, Kohn and her bank flourished until Madoff's downfall. Like Access International Advisors, whose French co-founder, René-Thierry Magon de la Villehuchet, committed suicide in New York last month, Bank Medici served as a middleman for Madoff, distributing funds linked to his firm with the promise of exclusive access to safe, steady returns. With her husband, Erwin, a former banker, Kohn was also able to draw interest from wealthy Russians, Ukranians and Israelis. And though she moved from a traditional Jewish background to an ultra-Orthodox stance - which is why she covered her hair with the red wig - Kohn and her husband even managed to secure meetings with deep-pocketed Arab investors. ''He was the door opener, she was the go-getter,'' said the Viennese acquaintance of the Kohns who insisted on anonymity because of the publicity surrounding the Madoff case, both in Europe and the United States. ''She's not somebody for small talk.'' It was a lucrative model, with rich fees that Bank Medici garnered with the help of European financial giants like Bank Austria and its parent, UniCredit. In recent years, Sonja Kohn traveled constantly to Milan, Zurich, London, Tel Aviv and New York, returning from time to time to an apartment in an upscale neighborhood of Vienna near the Parliament building. She also has a villa outside Zurich. But she maintained her close ties to the Viennese banking and governing elite. ''The Austrian banking market is relatively small, and many banks get their growth from Eastern Europe,'' said Christopher Kummer, a professor of mergers and acquisitions at Webster University in Vienna. ''The industry's ties with the government are strong and the environment is one where most people know each other or of each other.'' Two former government ministers, Hannes Farnleitner and Ferdinand Lacina, sit on Bank Medici's supervisory board. Former employees say Kohn was always dreaming up potential new products, like a credit card allowing rich Russians to arrange private jet service or a life insurance package based in Liechtenstein. In Britain, one London banker recalled how Kohn would always stay at Claridge's, a five-star Mayfair hotel, and receive her clients in a suite there. The banker described her as generous with employees and clients, frequently bestowing small gifts like pens as well as Sacher torte, the classic Viennese chocolate cake. While some bankers were put off by what they described as her aggressive style and occasional name- dropping, he said Kohn could be charming, displaying flashes of the amiability her hometown is famous for. ''She could be hard to say no to,'' he recalled. Kohn is fluent in a host of languages, including English, German, Hebrew and Italian. Before founding Bank Medici in 1994, she started a broker-dealer firm in New York in the 1980s that catered for other trading firms. That is when she first got to know Madoff, who in addition to being a money manager, also ran a substantial market-making operation. She found a powerful ally in Gerhard Randa, then the chief executive of Bank Austria, which distributed funds sold by Bank Medici that in turn fed into Madoff's funds. A spokesman for Bank Austria declined to comment. As for Kohn, a spokeswoman for Bank Medici, Nicole BŠck-Knapp of the public-relations firm Ecker & Partner in Vienna, said she did not want to speak to the press. ''She is a victim and the Bank Medici as well,'' BŠck-Knapp said. She declined to comment on whether Kohn is hiding out from any of her Russian investors. Gerhard Altenberger, the government-appointed commissioner in charge of securing the interests of Bank Medici's creditors, said the bank had been cooperating fully, and that he had been able to interview Sonja Kohn in Vienna. But friends of the couple say they have not seen them since shortly after Madoff was arrested on Dec. 11. A fellow banker said when he last saw Erwin Kohn in Vienna, on Dec. 13, ''he looked shattered and nervous. He couldn't believe it.'' The banker, who insisted on anonymity, said neither of the Kohns had returned his phone calls since then. Like other middlemen who promoted Madoff's products around the world, exclusivity was a key element in Kohn's pitch, recalled one top Geneva banker who met with her in Vienna several years ago. ''She said it was hard to get into, but she could give me access,'' the banker said. ''Other people also told me she was close friends with him.'' With just 16 employees, Bank Medici itself was hardly a powerhouse. But from her small fourth-floor office in a nondescript building overlooking the Vienna State Opera, Kohn was able to draw billions from European investors eager to gain access to Madoff. In 2007, Madoff-linked investments produced the bulk of Medici's fees of 9.7 million, or about $14.5 million at current exchange rates, and net income of 472,300. But Madoff's name does not appear in the bank's 2007 annual report, its most recent statement. Instead, Kohn presented herself as the gatekeeper to the Madoff funds, and made it clear to her employees that only she could contact Madoff. Although based in Vienna, Bank Medici focused on marketing and distributing the Madoff-linked investment vehicles through other banks and asset managers in Europe and beyond. Nearly all of Bank Medici's $2.1 billion exposure to Madoff comes from clients outside Austria. Bank Medici's chief executive, Peter Scheithauer, resigned last week, as did Werner Tripolt, a top board member. The bank is now effectively being managed by Altenberger, the government-appointed commissioner. Bank Medici has announced it intends to come forward with a new business strategy in the coming weeks and that it will name new management. For now, at least, Sonja Kohn remains chairman of the supervisory board. Altenberger is trying to familiarize himself with the bank's books. ''I'm still at the very beginning of the work,'' he said, ''but it's not a big bank and I don't see any immediate need for action.'' .