(Bloomberg) — A prosecutor has identified more than $60 million that he believes was laundered through Credit Suisse Group AG, in the precursor to what would be just the second Swiss criminal indictment ever against a major local lender.
Geneva’s top financial-crime prosecutor, Yves Bertossa, identified a series of 8 transactions the bank failed to prevent between 2008 and 2014 at a hearing last week, which he said constituted aggravated money laundering by the Swiss lender, according to people familiar with the investigation.
Patrice Lescaudron, the fraudster at the heart of the case, faked signatures and contrived dummy portfolio statements to illegally transfer millions, primarily from the accounts of his biggest client, Georgian billionaire Bidzina Ivanishvili, in a desperate bid to cover growing losses in other clients’ portfolios. That led to Lescaudron’s conviction for fraud and forgery and imprisonment in 2018.
Credit Suisse has never been directly implicated by a prosecutor in the scandal. If a full indictment is issued against the bank it’ll be just the second time a major lender has been put on trial in Switzerland. The last one was also against Credit Suisse.
The Zurich-based bank was indicted in 2020 for failing to prevent money laundering by a Bulgarian wrestler-turned-cocaine trafficker, for which it stood trial in February. A verdict hasn’t yet been delivered in that case, in which Credit Suisse said it “unreservedly rejects as meritless all allegations in this legacy matter.”
Credit Suisse has faced a steady drumbeat of scandals, profit warnings and and high-level departures that has undermined both investors and regulators’ confidence in the bank. The stock is trading at near-record lows, and the U.K.’s Financial Conduct Authority has put Credit Suisse on its watch list because of its ongoing problems.
Credit Suisse has consistently said that Lescaudron was a lone wolf who kept his crimes secret from his colleagues and supervisors.
“All investigations into this matter conducted by the bank, FINMA and the criminal authorities since 2015 have shown that the former relationship manager was not supported by any other employee of Credit Suisse in his criminal activities,” the bank said in a statement this week. “In the concluded criminal proceedings against the former relationship manager, he was not convicted of money laundering.”
A spokesman for the Geneva prosecutor’s press office declined to comment, citing the fact the investigation is still ongoing.
A lack of oversight of Patrice Lescaudron and the bank’s organizational defaults permitted the acts of money laundering, Bertossa said at the June 8 hearing, according to the people familiar. A formal indictment, however, may still be months away, as appeals into the admissibility of evidence in the case wind their way through the Swiss courts.
Under Swiss law, a bank found lacking the necessary surveillance or organization to prevent acts of money laundering can itself be charged with money laundering. All of the transfers cited by Bertossa were then made to a third-party account, according to the people, which obfuscated the illicit origins of the funds.
During the meeting, a bank director at the hearing was advised by his lawyer to not respond to questions about the accusations against Credit Suisse he couldn’t answer, said the people familiar with the proceedings. Instead, she advised that he invoke his right to stay silent and refer those questions to the bank in writing.
A Bermuda court ruled in March in a case involving an offshore insurance unit that managed Ivanishvili’s money that the bank had turned a “blind eye” to Lescaudron’s activities.
The judge in that case assessed the losses of billionaire client Bidzina Ivanishvili at about $550 million, which Credit Suisse has said it will appeal. A hearing is scheduled for next week in Bermuda to determine a more precise figure for the losses.