When the US Department of Justice charged three former Credit Suisse bankers with fraud and overseas bribery, the allegations had a familiar ring.
Prosecutors alleged last week that the trio had conspired with Mozambique’s former finance minister to borrow more than $2bn to fund a state fishing fleet and divert some of the proceeds into bribes and kickbacks.
It is the second time since November 1 that senior employees of a big global bank have been indicted for allegedly helping to rip off a developing nation. Two former senior Goldman Sachs bankers have been charged with conspiring to siphon bond proceeds out of Malaysia’s 1MDB investment fund to enrich themselves and corrupt officials. (Tim Leissner has pleaded guilty; Roger Ng denies wrongdoing; lawyers for the three CS bankers declined to comment.)
Goldman itself has also been criminally charged by Malaysian prosecutors and it is still under US investigation. Legal analysts expect the Wall Street bank to face serious consequences. Not only is Malaysia seeking $7.5bn, but US prosecutors have used harsh words in court documents filed in the individual cases. They said the bank’s “business culture” was “highly focused on consummating deals, at times prioritising this goal ahead of the proper operation of its compliance functions”. Goldman has said it is co-operating with the DoJ.
Credit Suisse, which also says it is co-operating with authorities, so far looks to be in better shape. The UK has downgraded its investigation into the “tuna bond” scandal from criminal to regulatory, and last week’s US indictment emphasised the efforts the Credit Suisse defendants made to deceive the bank’s compliance department. Prosecutors cited the use of personal email addresses and referred to the employees as having “withheld” information. A former prosecutor told the Financial Times last week that the language of the indictment “adopts the bank’s narrative that these are rogues, they lied to us”.
One reason for the difference may be that Credit Suisse’s leadership has changed since the tuna bonds were marketed in 2013. Chief executive Tidjane Thiam joined the bank two years later and has restructured the way the bank handles deals with African countries. Goldman’s new chief executive David Solomon, by contrast, was among 30 senior executives who reviewed the 1MDB deals and has defended the bank’s culture against some criticisms.
Another difference is that the prosecutors probing Goldman have secured testimony from Mr Leissner, as part of his guilty plea, that misleading the compliance department was “very much in line” with Goldman’s culture. No named defendant in the Mozambique case has openly co-operated with prosecutors.
But the Swiss bank may not be home free. Two former prosecutors told me that it is standard operating procedure for an indictment to emphasise concealment efforts because that supports allegations of intentional wrongdoing.
Two sections of the indictment in particular could spell trouble for Credit Suisse. One specifically says that the defendants were “acting within the scope of their employment . . . with the intent, at least in part to benefit” the bank. The other details the ways the defendants were allegedly able to ignore, lie to or circumvent the bank’s compliance department. Both could be a worry for Credit Suisse if prosecutors conclude that the bank had shoddy controls or put business interests ahead of compliance.
The outcome of the case matters not just to Credit Suisse but also to Mozambique, one of the world’s poorest countries. It lost International Monetary Fund funding over the scandal and is struggling to pay back the debts it racked up with Credit Suisse’s help. Its citizens are hoping for a lifeline. “If Credit Suisse is found to have acted illegally . . . [it] should have to pay back the investors,” says Florival Mucave, a prominent local attorney.
That only seems fair.
Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.