The billionaire and former Georgian prime minister was the victim of a fraudulent Credit Suisse client advisor.
(Photo: PD)
Zurich Credit Suisse suffered a defeat in a long-standing legal dispute with its former top client Bidzina Ivanishvili, a billionaire and former Georgian prime minister. A Bermuda court found a life insurance subsidiary of the bank complicit in the loss of hundreds of millions of dollars Ivanishvili had invested in the tax haven through Credit Suisse.
The bank said it took note of the verdict but intended to appeal. The long-standing dispute between the billionaire and Credit Suisse should thus enter a new round.
Ivanishvili, along with other wealthy customers from Eastern Europe, was a victim of fraud by former customer advisor Patrice Lescaudron. Between 2010 and 2015, he diverted millions to his own advantage. In 2018, a Geneva court sentenced him to five years in prison and 130 million Swiss francs in damages for fraud and forgery. In 2020, Lescaudron took his own life.
However, Ivanishvili and other former clients of Lescaudron see the bank as partly to blame. They have sued Credit Suisse in Bermuda and Singapore, among other places. In Switzerland, the public prosecutor’s office in Geneva is investigating against the bank. For Ivanishvili, the latest success in Bermuda is a stage win.
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It could be expensive for Credit Suisse: last week it warned that the foreseeable negative verdict could cost the bank up to $500 million. However, it is still being examined whether further capital needs to be set aside for the first quarter of 2022.
New trouble in the US
The dispute with rich clients from Eastern Europe in Bermuda is not the only legal risk that the bank’s asset management has to deal with at the moment. As it became known on Monday evening, members of the US Congress are asking for information on how the bank is dealing with US sanctions against Russian oligarchs in a letter addressed to Credit Suisse boss Thomas Gottstein.
The background to the letter is a report by the “Financial Times” from early February on exotic derivatives that the bank offered, among other things, to hedge fund customers. Accordingly, the bank had structured loan portfolios into securities, which were secured with yachts and private jets of its ultra-rich customers. The bank apparently wanted to get rid of credit risks from these so-called Lombard loans and passed them on to investors via derivatives.
According to the FT, at the beginning of March the bank sent a letter asking investors to destroy information about the derivative deals. The members of Congress around the committee chairwoman Carolyn Maloney suspect a connection with the sanctions against Russian oligarchs. “The Committee is particularly concerned that Credit Suisse’s order to destroy documents (…) coincided with Switzerland’s announcement that it would (…) impose sanctions on Russia,” the letter reads.
Credit Suisse declined to comment. However, the bank has always pointed out that it will fully implement the sanctions policies of the USA, the UK and Europe – regardless of whether Switzerland is also involved.
More: Credit Suisse faces multimillion-dollar defeat in legal dispute with former Georgian prime minister