Hanspeter Walder had a loving family, a prestigious job and the respect of his community. He even owned a castle—one of the world’s fine small luxury hotels. But he also had a secret: the reckless and doomed embezzlement scheme with which he created his castle.
It was to be a great night. hanspeter Walder and his wife Steffi, surrounded by close friends and family, were celebrating their 30th wedding anniversary under the vaulted arches of the cathedral-like Great Hall in the Castle at Tarrytown. As the couple and their guests enjoyed a five-course meal, the Walders—he a 6’5”, salt-and-pepper-haired 58-year-old, Swiss-born private banker; she a 5’9” impeccably dressed, brunette from Germany—were celebrating more than their wedding. The outgoing couple had achieved their decade-long goal of becoming visible and respected members of the community. Hanspeter and Steffi were the proud owners of the 56,000-square-foot Castle, a-century-old Gilded-Age monument built in the style of a medieval Norman fortress, overlooking the Hudson River.
For seven years, husband and wife, who had bought the Castle for close to $2 million, worked tirelessly to transform it from a cluttered, drab office building into a prestigious, four-star Relais & ChÃ¢teaux luxury hotel. While Hanspeter continued to work as a bank officer at UBS in Manhattan, they poured huge amounts of energy and money into the place, hiring woodworkers and stained-glass artisans from Europe, buying exquisite European tapestries and elegant furnishings, stocking their wine cellar with the finest wines and providing the best soaps, linens and towels in each of the hotel’s 31 rooms.
On the night of the Walders’ anniversary, September 24, 2001, the hotel was nearly full.‑As the hotel’s guests were dining at the Castle’s award-winning restaurant, Equus, down the hall the Walders and their guests had just completed the main course. While the chef was readying the cheese tray, Hanspeter stood up with a microphone in one hand, a glass of champagne in the other, and toasted the occasion.
What the Walders and their guests did not know was that at that moment four FBI agents and two Tarrytown police officers were in the lobby of the Castle, asking the receptionist to direct them to the anniversary party and Hanspeter. At first, the receptionist refused to help them, but then they pulled out their badges and were shown the way to the Great Hall. The FBI agents stood outside and asked one of the passing waiters to alert Hanspeter. He stepped out into the hallway, and the agents politely introduced themselves.
Hanspeter knew why they had come: He had already confessed his crime to his employer, UBS in Manhattan. But to give his curious friends and staff the impression that the men were merely late-to-arrive guests, he tried to put his arm around one of them. The agent recoiled and ordered him not to try it again. Hanspeter was led to a side room where corporate meetings were often held.
“I’m not going to be cooperative if you don’t handle this with diplomacy,” they say Hanspeter, who had been drinking, told them.‑The agents agreed to be diplomatic and even promised not to handcuff him. “We wanted to arrest him, not embarrass him,” recalls one of the agents. However, when Hanspetter refused to answer even such simple questions as “What is your Social Security number?” the agents say they decided to handcuff him after all. Just then, Michelle, his younger daughter, opened the door to the side room, and much to her shock, saw her father being arrested. The agents asked her to take her dad’s valuables—a watch, a ring, his wallet—and then led him to a patrol car parked in the driveway, not far from Hanspeter’s 1948 Bentley. As Hanspeter passed dumbfounded waiters, he calmly assured them, “Don’t worry, it’s nothing.‑I’ll be back soon.”
Steffi Walder ran to the patrol car, opened the back door, demanding to know what in the world was going on. The FBI agent slammed the door shut without answering her. The car drove off with her husband in the back seat.
His wife, daughter, and son-in-law reportedly thought that Hanspeter was being unfairly picked on by overzealous government agents looking for ties to terrorism. The reason? Earlier that evening, Hanspeter told then that, in the wake of September 11, the government had decided to dispatch accounting specialists to check the books of all companies with ties to Middle Eastern money sources, and the Castle would be investigated because the main “investor” was a Saudi Arabian.
After arguing with the federal agents about what she perceived to be her husband’s unfair treatment, Steffi Walder reportedly returned to her guests in the Great Hall and insisted they continue the anniversary celebration because, she said, that is what her husband would have wanted.
Hanspeter Walder’s arrest had nothing to do with September 11.
Nearly a year later, on August 1, 2002, in federal court in Manhattan, he pled guilty to 16 counts of embezzlement by a bank officer. The private banker had embezzled more than $70 million from his very rich and apparently very unsuspecting clients at UBS. Today he faces seven and a half years of jail time. The bank, which was granted operating control of the Castle by the government, has since fired Hanspeter’s wife, his daughter, Bettina, and son-in-law, Eric Landt, who were the Castle’s innkeepers, and many key employees. (The government has presented no evidence that Hanspeter’s family or the staff of the Castle had any idea of his illegal activities.)
Why did Hanspeter, who seemed to have so much—a loving family, a comfortable home, and a senior job at an international bank—steal the money?
“That’s the question,” says Nancy Gold, founder of The Gold Standard, a marketing communications firm in Katonah, who knew the Walders from her work as project director of Historic River Towns of Westchester. “He was a nice, sophisticated, outgoing, generous man. Everyone was really, really shocked.”
Hanspeter has declined to comment, saying a court order bars him from speaking to the press. Eric and Bettina, today innkeepers in Nantucket, declined to comment as well, as did Steffi Walder, who recently opened her own interior decorating firm.
The Walders’ daughter, Bettina, did say to Westchester Magazine before the embezzlement was discovered that her father always dreamed of owning the Castle. (The family, she said, could see the imposing structure from their Tarrytown home.) When it was put up for sale in 1992, Hanspeter and his wife seized the opportunity. Two years later it was theirs. The Walders began the project of turning what had been an odd setting for an office building into an impressively located luxury hotel and restaurant.
Peter Gisolfi, the architect hired to renovate the existing structure and build an additional guest wing with 24 rooms, and Elvira Aloia, the real estate agent for the Walders, think the Castle the Walders purchased was a “white elephant.”
“It was a very difficult property to sell,” Aloia says. Gisolfi notes that property taxes on the 10-acre estate were high and the zoning regulations complex. The Walders tried to manage the renovations themselves at first, but after six months, Walter Prawzinsky was hired as the project’s construction manager. “The project was mired in all sorts of problems,” he says. “It was languishing.”
The Castle, Gisolfi says, was “reinvented” in different phases. Each ratcheted up the price. “The building had a nonexistent ventilation system,” builder Marco Martelli reports. “Then we had to build new stairways and elevators to conform to access laws.” Building on the property’s rocky, hilltop land was costly, too. “We built an underground tunnel from the boiler room to the kitchen, and we had to carve it out of solid rock,” says Martelli. Prawzinsky recalls asking the Walders where the money for the project was coming from. “A group of investors,” he says they answered, and nothing more was said. “When the construction costs reached twenty million dollars, I realized it wasn’t worth it,” Prawzinsky says. “What they were spending they would never recover.”
The modifications, renovations, drilling, and restorations were causing the costs to double and triple, but the Walders didn’t seem to mind. The Castle became an obsession for Steffi, who, Martelli says, wanted to win awards. She imported German woodworkers and went to Europe on shopping sprees. “Talk about additional costs!” Prawzinsky says. “I kept complaining, but they kept on paying.”
Hanspeter spent weekdays at UBS, thus much of the day-to-day oversight was handled by Steffi. “She was the hands-on owner at the site,” says construction manager Prawzinsky, who says he tried to find ways of cutting costs, but Steffi was not to be hampered by financial restraints. “Steffi wanted me off the job because I wasn’t letting her do whatever she wanted,” he maintains. “She considered me a thorn in her side.” He left after two and a half years. Recalls Martelli: “At some point, we had over a hundred union employees working at once. Labor salaries alone were $100,000 a week.”
While the new guest wing was still being built, the Castle at Tarrytown opened with a handful of hotel rooms in the original building. A gala masked ball was held to mark the event in March 1997. The Castle, which won Gisolfi one American Institute of Architects award and a preservation award from Westchester County, was finally completed when the guest wing opened a year later.
“They both worked very hard to make it happen and it did,” says Linda Mehner, the hotel’s executive assistant manager in those years.
The castle became the place for Westchester galas and weddings. It was named one of the 20 best small hotels in America in a CondÃ© Nast Traveler poll. The hotel rooms were never inexpensive, and have been consistently priced in the range of $285 to $625 per night. The restaurant drew top ratings from Zagat. When the Castle was criticized for its limited selection of wines, Hanspeter hired a top wine steward, traveled to wine auctions, and pumped in however much money was necessary to make the wine list enviable. Most important for its reputation, the hotel was accepted as a Relais & ChÃ¢teaux property, an honor bestowed to a select number of hotels primarily in Europe. Only a couple of dozen hotels in North America have received this honor. “Over here most Relais & ChÃ¢teaux properties are owned by people successful in other businesses,” says former head of public relations Pamela Cohen. “Making money doesn’t seem to be the driving motivation.”
It is a good thing that money wasn’t a driving factor, because the hotel and restaurant weren’t making a profit. Says one former employee, “The place never made a nickel. Usually if you’re losing money something has to happen. Usually the place is sold or it closes.” But neither happened. A rumor circulated among the staff that the Castle was being bankrolled by Middle Easterners. Ironically, it was true—sort of.
The staff was under the impression that a group of investors, under the title The Benedict 400 Corporation, owned the Castle at Tarrytown. Rent was paid to the Benedict 400 Corporation by the operating company, the Castle at Tarrytown, Inc.
Hamza Al-Kholi, the Saudi chairman of First Arabian Hotels and Resorts Co., which owns, among other properties the Four Seasons Hotel Cairo, was listed as the sole shareholder in The Benedict 400 Corporation. According to court documents, Al-Kholi said he had never heard of the corporation and had never knowingly invested in it. Hanspeter, the documents state, had been stealing money from the accounts of Al-Kholi and many of his richest customers for years. That was how he paid for his grandly expensive hotel.
Hanspeter Walder’s scheme, which in retrospect, was reckless and doomed, was also quite ingenious and demanded considerable skill. Trusted on one side by his employer and on the other side by his clients, he seems to have had freedom to toy with accounts to which no one but he seemed to pay attention. Still, how did he embezzle $70 million without his clients noticing?
Welcome to the world of luxury banking and the careless rich. Walder had dozens of clients but elected to steal from extremely wealthy, usually foreign, victims, who had so much money they did not want to be bothered by some tertiary account in New York. Many of these clients had their monthly account statements held by the bank, rather than sent to them. Says FBI supervisor Steve Garfinkel, “Frequently clients in South America, for example, don’t want their statements mailed because they don’t want the government to find out how much money they have. Also, if the statement gets into the wrong hands, these clients may become targets for kidnapping.” Information on transactions involving these accounts rarely left the shelter of the bank, much to Walder’s advantage. “Private banking provides a lot of income, and when someone is a trusted employee, sometimes things aren’t looked at as closely as they should be,” says Garfinkel, who at the time headed the internal banking-fraud squad.
Walder began embezzling from his clients at least five years before the purchase of the Castle at Tarrytown, according to court records. “I’ve been involved with a number of such cases,” Garfinkel says. “They start out small but become like a boulder rolling down a hill.” Walder started by completely emptying $670,000 from a dormant account, those records say. The account holder apparently did not notice. Walder then reportedly began to employ more complex methods of embezzlement on other accounts, held by other clients.
At one point, court records show, Walder decided that he needed a new client and a new account to bilk, so he chose a wealthy foreign client, and invented a relative for the client. He opened a new account for this nonexistent relative. Then he reportedly opened a $5.25 million line of credit for the fictitious relative, using his original client’s account—accessed through a forged signature—for collateral. When the real client naively asked for bank statements, Walder gave him doctored statements, masking the theft of funds. Walder reportedly used nearly $2 million from this account to buy the Castle in June 1994.
Documents also show he obtained loans for at least a dozen clients—all unaware of what their banker was up to. He would use one loan to partially pay off another, just before the bank became suspicious about tardy payments. But most of the money, those documents show, ended up in accounts connected to the Castle.
Other than winning the lottery, the only way Walder could have paid off all the outstanding loan and credit payments on his clients’ accounts was for The Castle at Tarrytown to be so popular that the profit would have been able to cover up what he had stolen. But that wasn’t happening. After all the money spent before the Castle even opened, Walder must have known there was no way to recoup. He faked more loans and lines of credit to cover up ones already overdue. A prisoner of his crime, if he opted to stop the embezzlement, the outstanding payments would have alerted the bank authorities.
The withdrawals grew larger and larger—$21.75 million from one account, $17.85 million from another, $20 million taken from two separates accounts in September 1999.
On august 30, 2001, UBS noticed an irregularity in one of Walder’s accounts. Fifty million dollars had been transferred into the account, though the account appeared to have an outstanding loan of nearly $30 million. It was strange that Walder would extend such a large loan to a client with a significant loan already outstanding. When confronted by UBS officials, Walder had a clever explanation: The client, a company, was reorganizing and needed to call in its old shares and issue new ones. This involved buying back all of its old stock, thus the necessary massive loans; when they issued their new shares, the revenue would be used to pay back the loans. Unfortunately, UBS called the client, who confirmed that the loan had in fact been paid off in December 2000 and the company had not requested another loan.
The scheme began to unravel. The bank traced the $30 million to an account held by the Tarrytown Bank of New York in the name of The Benedict 400 Corporation. UBS checked all of Walder’s clients’ accounts and discovered numerous outstanding loans and financial transactions leading to The Benedict 400 Corporation, or other accounts connected with the Castle. The clients in whose names these loans and transactions had been conducted had never heard of The Benedict 400 Corporation. The Benedict 400 Corporation was a shell, nothing more than a bank account in which to dump money. Confronted a second time, Walder admitted his guilt. The game was up.
By the time of his arrest, Walder had transferred $54 million from 19 private accounts to The Benedict 400 account. Millions more were transferred to accounts at Citibank, Chase Manhattan, and The Bank of New York in the name of The Castle at Tarrytown. Obviously not all of the money was spent on the Castle. Walder reportedly used some of the money to pay off a million-dollar American Express bill, and he placed $1.7 million in offshore accounts. He also maintained an extravagant lifestyle. Chief among his expenditures, according to court records, were down payments of $200,000 on his home in Tarrytown, $100,000 on his plush Upper East Side apartment near Rockefeller University, and the acquisition of his Bentley.
In cases of bank fraud of more than $60 million, the FBI usually investigates for months before arresting the suspect. But UBS had already done a thorough investigation before contacting the U.S. Attorney’s Office. Because it was so soon after the September 11 attacks, the U.S. attorney’s office didn’t think the FBI would have time for the case. However, four hours after first learning of the case, the FBI was on its way to arrest Walder. One of the investigating agents says, “It was the quickest case I’ve ever worked on.”
One would think that after their boss’s arrest, the staff who lost their jobs would feel betrayed. However, none of the staff members I spoke to had an unkind word to say about the Walders. When asked, “What were they like?” one longtime employee’s response is typical: “The Walders were wonderful people. I don’t care what happened.”
Herbert and Rosaretha Thomas worked on the property—he as a groundskeeper and she as a housekeeper—from the early eighties until their dismissal by the bank in late 2001. They were the Walders’ first employees. “We don’t regret any of the time we worked for them,” Herbert says. “If there were 100 people in the room, he would be noticed. He had immense charm.” Rosaretha adds, “Steffi worked seven days a week, eighty to ninety hours a week. It was her life. She never gave the impression that she owned the Castle, but acted as if she were one of us, one of the employees. If you have a boss like her, you try to keep up with her, and it makes you want to work harder. Losing all that was like losing your family. I don’t think I’ll feel that close to any employer again.”
Another employee, who served Steffi Walder, adds: “If you look at even the smallest details, they were all perfect because Steffi worked so hard on everything herself. She would get her sewing machine out just to make things perfect.”
While Walder sat in a Brooklyn jail, awaiting his bail hearing, business continued at the Castle. But UBS had already dispatched a team of auditors from PricewaterhouseCoopers to check the Castle’s records. Pamela Cohen said of the weeks following the arrest, “The atmosphere was grim. We were afraid for our jobs. We were afraid that the Castle would close. This auditing team, sent by UBS, was at the Castle every day. There were these little people in the conference room upstairs with their computers, working behind closed doors.”
Most of the anger from the Castle’s former employees who were around at that time is reserved for UBS’s handling of the situation. On November 2, bail was set for Walder at $5 million, and the Walders were forced to use their Tarrytown house as collateral to pay it. Walder was placed on home detention, allowed to leave only to go to church, and to visit his psychiatrist and lawyers. The federal government, which had seized the Castle at Tarrytown upon his arrest, gave nominal control of the property to UBS. Chris Rowland, the president and CEO of private banking for UBS in New York, who was Walder’s boss, traveled up to the Castle to promptly fire the senior staff of the hotel. Says Cohen, “When they made their decision, they fired us very quickly and without notice. I was called into an office by some people from the bank and told I was let go. The UBS people were pretty cold fish.”
Herbert and Rosaretha Thomas were the most incensed by the way the firings were handled. “They treated us as if we were the ones who had stolen from them,” Herbert says. “Chris Rowland had the gall to question us as to why we never asked Hanspeter where the money to pay for the hotel was coming from. What kind of a logic system do you have when your own banker can steal $70 million out from under your nose and you not notice anything, but you criticize the building manager of the Castle for not discovering this?”
He adds, “The bank had no concept of loyalty.” To be fair, UBS might have responded that Hanspeter Walder didn’t show them much loyalty in getting them into this mess in the first place.
In a strange addendum, soon after Steffi Walder was fired from the Castle at Tarrytown, she visited the Bird & Bottle Inn in Garrison. The owner, Ira Boyar, had been quietly talking of selling the place if the price was right. “One afternoon she came in and asked to buy the place,” Boyar says. “I gave her a tour, but nothing transpired. And I never pursued it.”
The Castle hotel and Equus restaurant have, meanwhile, continued to run smoothly, without Steffi and Hanspeter Walder. A new chef, Michael Coldrick, was hired in September 2002, and his work has received enthusiastic reviews. (It is one of six restaurants labeled “hot this winter” by Westchester Magazine.)
Though Hanspeter pled guilty to 16 counts of embezzlement, and each count of his indictment potentially carried a sentence of 30 years, he will serve much less. The press officer for the United States Attorney’s Office in New York says that the plea deal calls for Walder to spend up to 87 months in jail. His plea agreement also stipulates that he forfeit $70 million in cash, the Castle and the surrounding 10 acres, and his Manhattan apartment. A federal agent says that Walder will probably be sent to one of the federal “camps” where white-collar criminals serve their time—where inmates hardly ever get handcuffed, where they can play tennis and work out. “It sounds like fun and games but they are still being deprived of the thing they value most: freedom.”
Why Did He Do It?
No one can say for sure—perhaps not even Hanspeter himself. One former employee said, “If you steal 70 million and pocket $20 million of it, there’s the motive. If you steal $70 million dollars and put it almost all into the Castle, where’s the motive?” FBI supervisor Garfinkel says, “Who knows why he did it? He worked for extremely wealthy clients. You work for them and after a while you say, why can’t I have some of this? My own personal feeling is that this scheme must have been emotionally draining. It was akin to having an affair—instead of cheating on your wife you cheat on your employer.”
A contractor offers, “He enjoyed the limelight. I saw that at any of the events he gave. He was a great host, and he was king of the roost. There is an expression that it is better to live for one day like a lion than for a hundred years as a lamb.”
Declares William Prawzinsky: “He had delusions of grandeur. Why would a guy steal more money than a place is worth, and gamble the rest of his life for it? What universal, lifesaving retribution is there for that act? Any answer he gives would be a lie, any justification he could give, he would just be tricking himself again.”
Another theory is that Hanspeter did it for his wife. “He loved her, and he wanted to please her,” says Nancy Gold, of the Gold Standard. There is no doubt that the Castle at Tarrytown—made so lovely by all those millions—pleased Steffi Walder. “It was a‑shame it happened,” Gold says. “They did the region a tremendous service. The Castle put the Hudson Valley on the luxury tourism map.”
And what does Hanspeter Walder himself say? The FBI agent who interviewed him after his arrest asked him why he did it and how he planned to get away with it. Hanspeter admitted that he had no miraculous solution, no endgame to save himself. “A lot of times bank tellers will take money from the drawer with the intention of giving it back,” declares the agent. “It was like that. His embezzlement scheme ballooned, and it got to the point where there was no turning back. He told me that he knew he would get caught, but he just wanted to live the good life to the largest extent possible in the time before they caught him.”
Nicholas Engstrom is a freelance writer based in New Haven, CT.