Credit Suisse Group AG, and its UK subsidiary, Credit Suisse Securities (Europe) Limited, have admitted to conspiring to commit wire fraud. In other words, they have conspired to set up a scheme to defraud investors and other parties by means of electronic communications. As a result, the Swiss-based global financial institution will have to pay around $547 million to both the American and British authorities and forgive $200 million of debt owed by Mozambique.
The charge concerns a $850 million Mozambican wire fraud scandal in relation to the financing of ‘EMATUM’, a state-owned tuna-fishing project in Mozambique. As per its admission and court documents, Credit Suisse has through its UK subsidiary used U.S. wires and the U.S. financial system to defraud investors in securities related to EMATUM.
Through its employees and agents, Credit Suisse has conspired to and did defraud the investors and potential investors by making misrepresentations and omissions in relation to the use of the loan proceeds, kickback payments (an illegal payment intended as compensation for preferential treatment or any other type of improper services received) and bribe to Mozambique officials, among others. Investors were made to believe that the loan proceeds would only be used for tuna-fishing project, however, the proceeds were diverted by co-conspirators and then used to pay approximately $50 million to its UK subsidiary’s bankers and approximately $ 150 million to Mozambican government officials.
Moreover, Credit Suisse identified major red flags before and during the EMATUM financing. They became aware of corruption and bribery concerns associated with one of its co-conspirators. Furthermore, in 2015, during a restructuring of loans, Credit Suisse had retained the service of two experts to address issues such as allegations made by the press and disparities in the proceeds of loan. The experts identified a shortfall of between $256 million and $394 million between the funds raised for the EMATUM loan and the fair market value of boats that one of the co-conspirators, a contractor, had sold to EMATUM. Credit Suisse did not disclose these shortfalls to the investors.
Credit Suisse has reportedly entered a 3-year deferred prosecution agreement which will halt the prosecution against the global institution, in light of its admissions, at the condition that a certain number of requirements are fulfilled. The failure to voluntarily disclose the criminal conduct and the nature and seriousness of the offence were important considerations that played against Credit Suisse in the making of the deferred prosecution agreement. The approximate fraud loss encountered by the victims of Credit Suisse’s criminal conduct will be calculated by a specific methodology. The amount payable will be determined in future proceedings. Among other things, Credit Suisse has agreed to “cooperate with and report to the United States Department of Justice as well as to submit yearly reports regarding the status of its remedial efforts and the result of its testing of its compliance program.”
