Credit Suisse Settles Multi-Jurisdiction Bribery and Fraud Case for $547 Million (Part I of II)

Michael Volkov
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The Volkov Law Group

Credit Suisse Group AG (“Credit Suisse”), a global financial institution, and its London-based European subsidiary, Credit Suisse Securities (Europe) Limited (“CSSEL”) resolved a wide-ranging bribery and fraud scheme involving investments and financing arrangements for an $850 million loan for a tuna fishing project in Mozambique. To resolve the violations, Credit Suisse agreed to pay a total of $547 million in penalties, fines and disgorgement as part of comprehensive criminal and civil resolutions in the United States and the United Kingdom.

Credit Suisse entered into a three-year deferred prosecution agreement (“DPA”) coupled with the filing of a criminal information charging Credit Suisse with conspiracy to commit wire fraud. CSSEL entered a guilty plea to a cone-count information charging it with wire fraud conspiracy. 

Under the Settlement Agreement, Credit Suisse will pay approximately $175.5 million to the United States and will pay restitution to investors based on a future proceeding. Credit Suisse also reached parallel resolutions with the SEC and the United Kingdom’s Financial Conduct Authority (“FCA”), and Switzerland’s Financial Market Supervisory Authority (“FINMA”).  Credit Suisse agreed to pay $200 million to the FCA and to forgive $200 million in debt to the Mozambique government.

Credit Suisse entered a separate settlement with the SEC and agreed to pay nearly $100 million for fraudulently misleading investors and violating the FCPA’s books and records, and internal controls provisions.

Credit Suisse’s resolution follow the entry of guilty pleas by three CSSEL bankers: in July 2019, Andrew Pease pleaded guilty to conspiracy to commit wire fraud; in September 2019, Surjan Singh, pleaded guilty to conspiracy to commit money laundering; and, in May 2019, Detelina Subeva, also pleaded guilty to conspiracy to commit money laundering.

The bribery and fraud scheme involved two bond offerings and a syndicated loan that raised funds on behalf of state-owned entities in Mozambique. These transactions raised over $1 billion to perpetrate a hidden debt scheme, pay kickbacks to the former Credit Suisse investment bankers and their intermediaries, and to bribe corrupt Mozambique government officials.

Between 2013 and 2017, Credit Suisse, through CSSeL defrauded investors related to Empresa Mocambicana de Atum (“EMATUM”), a state-owned entity created in Mozambique to develop a fishing project in Mozambique. Credit Suisse defrauded investors by making material misrepresentations and ommissions involving: (1) the use of loan proceeds; (2) the payment of kickbacks to CSSEL employees and bribes to Mozambican government officials; and (3) the existence and maturity dates of debt owed by Mozambique, including another loan arranged by Credit Suisse to another Mozambican state-owned entity, ProIndicus.

Credit Suisse investment bankers diverted loan proceeds to pay themselves kickbacks totaling approximately $50 million and bribes to Mozambican government officials totaling approximately $150 million.

Credit Suisse also admitted that it identified and ultimately ignored significant red flags prior to and during the financing of EMATUM.  Specifically, Credit Suisse learned of significant corruption and briobery concerns associated with a contractor affiliated with the project.  Subsequently, in 2015, Credit Suisse learned that EMATUM was having financial difficulties and faced a significant risk of defaulting on the loan. 

In the face of these risks, Credit Suisse arrange to restructure and exchange the original EMATUM security into a bond with a longer maturity date.  During this process, Credit Suisse employees raised significant bribery and corruption concerns amid serious concerns as to the use of the original loan proceeds.

Credit Suisse conducted a market valuation of the EMATUM tuna fishing project and learned that there was a significant shortfall of between $265 million and $394 million between the funds raised and the market value of the EMATUM tuna fishing project assets. Credit Suisse never disclosed this information to investors during the restructuring and the exchange.  Some of Credit Suisse’ fraudulent conduct was revealed in April 2016, and the price of the EMATUM securities to fall in value.

Applying DOJ’s Corporate Enforcement Policy, the Justice Department found: (1) Credit Suisse did not receive voluntary disclosure credit; (2) Credit Suisse received only partial credit for its cooperation with the DOJ investigation because it significantly delayed production of relevant evidence relating to recordings of Credit Suisse telephone calls; and (3) Credit Suisse agreed to enhanced its compliance program and internal controls, and to provide enhanced reporting on its remediation and compliance program.  Based on all of these factors, Credit Suisse earned a 15 percent discount from the bottom of the U.S. Sentencing Guidelines range.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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