Africa-Press – Mozambique. Credit Suisse Group AG is nearing an agreement with the U.S. government that would resolve a criminal probe regarding its role in a $2 billion Mozambique bond scandal, according to people familiar with the matter.
The discussions with the U.S. Justice Department involve a deferred prosecution agreement that would include a fine, according to the people, who asked not to be identified because the talks are confidential. An agreement is expected to be announced Tuesday.
Any deal with U.S. prosecutors would be the latest action in a multi-year, international legal saga arising out of the 2013-14 deals that were supposed to fund a new coastal patrol force and tuna fishing fleet in Mozambique, one of the world’s poorest countries. In a 2018 indictment, the U.S. Justice Department alleged the contracts were a front for government officials and bankers to enrich themselves. Three former Credit Suisse bankers have pleaded guilty to U.S. charges stemming from the scheme.
Credit Suisse declined to comment on any agreement, as did the U.S. Justice Department.
A deal could help put to bed one scandal, even as the bank is trying to move past others. The lender was forced to freeze $10 billion in supply-chain finance funds this year related to defunct finance company Greensill Capital, and it took a $5.5. billion from the collapse of prime brokerage client Archegos Capital Management.
The Swiss bank has overhauled its management ranks in the aftermath of those blow-ups, and new chairman Antonio Horta-Osorio has vowed to clean up the lender’s problematic attitude toward risk management. He has spent the last few months debating strategic options, with an expectation to finalize the long-term vision and mid-term targets by the end of the year.
Credit Suisse had provisioned 1.7 billion Swiss francs ($1.8 billion) for litigation matters as of year-end 2020 and estimated a maximum of 900 million Swiss francs ($977 million) in litigation losses not covered by the provisions.
Last year the bank had been forced to drastically increase provisions — driving it to a fourth quarter loss — for legacy legal cases in the U.S., most notably one involving financial crisis era mortgage-backed securities.
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Mozambique has filed suit against Credit Suisse and shipbuilder Privinvest, one of several cases in U.K. courts that involve the bond deal. The English High Court is scheduled to begin a trial in the matter in October 2023, according to the bank’s most recent quarterly filings.
In defending its London lawsuit, Credit Suisse has insisted that it was deceived by rogue bankers and couldn’t be held responsible for their “unlawful conduct” when it arranged the loans in early 2013. The Swiss bank has said it carried out its usual due diligence before the transactions and was aware of the risk of bribery and corruption.
Andrew Pearse, who led the global financing group in the bank’s London office, testified at a federal trial in Brooklyn, New York that he’d pocketed at least $45 million in illicit payments for his role in the arrangement of the loans.
The Credit Suisse loans were for three separate maritime projects including a tuna fishing fleet, the building of a shipyard and surveillance operation to protect Mozambique’s coastline and protect against pirates, according to Pearse. Mozambican government officials, corporate executives and investment bankers stole about $200 million, prosecutors said.
Both Pearse and his successor at the bank, Surjan Singh, who also pleaded guilty, testified at the 2019 trial of Jean Boustani, a Privinvest Group executive accused by the U.S. of being behind the plan to get Mozambique to borrow billions of dollars and overpay for dubious maritime projects. A third banker, Datelina Subeva, Pearse’s subordinate, also pleaded guilty but didn’t testify.
All three bankers await sentencing. After a six-week trial in late 2019, a federal jury cleared Boustani of all charges.
Patricia Hurtado, Jonathan Browning and Sridhar Natarajan