Maputo — The bank Credit Suisse has admitted that much of the money supposedly intended to create a Mozambican tuna fishing fleet was in fact diverted into bribes and kickbacks and has agreed to compensate some of the American investors who purchased bonds in the fraudulent scheme.
The fraud was designed in 2012-2013 by corrupt Credit Suisse managers, by the Abu Dhabi based group Privinvest, and by Mozambican officials, including the then Finance Minister Manuel Chang.
It was part of a grandiose scheme involving three fake, security-linked companies – ProIndicus, Ematum (Mozambique Tuna Company), and MAM (Mozambique Asset Management) – which were supposed to guarantee coastal protection and revive tuna fishing.
The three companies obtained loans of over two billion US dollars from Credit Suisse and the Russian bank, VTB. The loans were only granted because the Mozambican government of the day, under the then President Armando Guebuza, issued illegal loan guarantees signed by Chang.
The largest loan, for 850 million dollars, was for Ematum and took the form of bonds issued on the European market. American investors were among those who purchased the bonds, which is why United States prosecutors have taken a particular interest in the case.
What the investors did not know was that the three Credit Suisse managers who negotiated the Ematum loan (Andew Pearse, Detelina Subeva and Surjan Singh) had all taken bribes from Privinvest. They confessed to bribe taking to a New York court but have yet to be sentenced for their role in the scandal.
Privinvest was the sole contractor for the three fraudulent Mozambican companies, and it grossly over-invoiced them for the fishing boats, patrol vessels, radar stations and other assets it provided. An independent audit of Proindicus, Ematum and MAM found that the over-invoicing amounted to more than 700 million dollars.
This provided Privinvest with more than enough money to pay off the Credit Suisse managers and the Mozambican officials involved in the corrupt deal.
None of the three companies was ever viable. All have gone bankrupt and are now being liquidated. What started life as hidden loans have now become hidden debts, as the creditors demand their money back from the Mozambican state.
A Credit Suisse subsidiary, Credit Suisse Securities Europe, pleaded guilty to conspiracy charges last year and reached a settlement for 475 million dollars with the American and British financial authorities.
At Wednesday’s hearing, the prosecutors asked US district judge William Kuntz to order Credit Suisse to pay restitution to 18 named investors. According to a Reuters news agency report, the Credit Suisse subsidiary agreed that it owes those 18 investors 22.6 million dollars in restitution.
This is certainly not the end of the case. Judge Kuntz is expected to give his ruling on Friday.
Last October, Credit Suisse entered a three-year deferred prosecution agreement with the U.S. Justice Department, in which it accepted responsibility for defrauding bondholders, and agreed to pay restitution to investors who has been harmed.
According to Reuters, Court filings listed the proposed payouts to institutional investors, including nearly five million dollars to New York-based hedge fund NWI Management and 4.3 million dollars to asset manager AllianceBernstein.
A spokesperson for Credit Suisse declined to comment on the case.