Although the United States prosecutors have not charged Credit Suisse with any crime, under the investigation into the scandal of Mozambique’s “hidden debts”, the bank’s involvement could still cost it fines of perhaps 300 million dollars, according to the consultancy Bloomberg Intelligence, cited by the Portuguese news agency Lusa.
Three former Credit Suisse executives, Andrew Pearse, Surjan Singh and Detelina Subeva, have been indicted for their role in the creation of three fraudulent Mozambican companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management), and the subsequent draining of hundreds of millions of dollars into private pockets.
The three companies borrowed over two billion dollars from Credit Suisse and the Russian bank VTB. The banks were happy to lend the money, because the Mozambican government issued loan guarantees – although a little research would have shown that these guarantees, signed by the then Finance Minister, Manuel Chang, were illegal.
Credit Suisse has distanced itself from the scandal, claiming that Pearse, Singh and Subeva acted on their own, and were not under the bank’s control.
The American indictment accepts that the three evaded Credit Suisse’s internal controls and concealed information from their employers. But this does not absolve Credit Suisse of blame. The indictment notes that, when the three were negotiating the loan to the first of the three fraudulent companies, Proindicus, they “were agents acting within the scope of their employment” on behalf of Credit Suisse, and with the intention to benefit the bank “at least in part”.
Furthermore, the Credit Suisse review process identified a series of “red flags” concerning the Proindicus loan, at an early stage. As early as March 2012, Credit Suisse employees identified allegations of corruption against an unnamed “co-conspirator” from the Abu Dhabi-based company Privinvest, which became the sole contractor for Proindicus, Ematum and MAM. This co-conspirator had been identified as “an undesirable client”.
Yet the loan went ahead, and it is hard to pin the lax Credit Suisse procedures entirely on the shoulders of Pearse, Singh and Subeva.
The analysts cited by Bloomberg Intelligence believe the US authorities could pursue Credit Suisse for “violation of the rules of investment in financial markets”, and for its failure to stop the fraudulent scheme of Pearse, Singh and Subeva, which went on for about four years.
The report reckoned that Credit Suisse might have to strike a deal with the US authorities which would result in the bank paying between 100 and 300 million dollars. Such figures are based on the fees and commissions that Credit Suisse earned from the Mozambique loans (estimated at 100 million dollars), and fines of twice that amount.
However, since Credit Suisse has pledged to work with the US authorities, and is also involved in “restructuring” the Mozambican debt, “the penalties could be mitigated because of these two factors”, claimed the analysts cited by Bloomberg.