Credit Suisse Group AG, sued by a Georgian billionaire over a fraud scheme run by one of its ex-bankers, lost about $607 million in the case, according to an estimate of his losses introduced in a Bermuda court which is expected to soon rule on damages in the case.
The figure was cited during a hearing Tuesday overseen by Bermuda Supreme Court Chief Justice Narinder Hargun after he told forensic accountants in March on both sides of the case to go away and come up with a more accurate assessment of Bidzina Ivanishvili’s losses.
Hargun put the losses at $553 million three months ago, while Credit Suisse said in April in its first-quarter report that it expected a judgment in the amount of about $600 million. At the time of the March hearing, the judge criticized Credit Suisse Life, saying the bank’s life insurance unit had turned a “blind eye” to convicted fraudster Patrice Lescaudron’s wrongdoing.
At the time, the judge criticized Credit Suisse Life, saying the bank’s life insurance unit had turned a “blind eye” to convicted fraudster Patrice Lescaudron’s wrongdoing. The Frenchman, who was convicted in 2018, was a lone wolf who hid his fraudulent activity, according to the bank.
Jonathan Crow, a lawyer for Credit Suisse Life (Bermuda) Ltd., opened the hearing by saying he didn’t dispute Hargun’s ruling and that he acknowledged the revised figure of $607 million.
Crow instead sought to narrow the scope of where the compensation might come from. Bermuda passed legislation in 2000 to create entities called segregated accounts companies, or SACs, which allow for the legal split of assets and liabilities into separate accounts.
“We fought the action and we lost” and are not seeking to set aside the liability, said Crow. But compensation “is to be met and met only from the assets in the segregated accounts,” set up for Ivanishvili, he said. CS Life Bermuda has already appealed the verdict.
Joe Smouha, Ivanishvili’s lawyer, countered that such an argument didn’t make sense and that CS Life was in essence arguing that the liability should be repaid from “the plaintiff’s own assets.” The law was never intended to give such companies “presumptive immunity,” he said.
“To raise the issue at this stage, post-judgment, is an abuse of process,” said Smouha.
Hargun said at the end of Tuesday’s hearing that he would issue his ruling on the $607 million agreed by the accountants, as well as the various arguments made about the segregated accounts versus CS Life’s responsibility, at a later date.
‘Waste of Time’
He gave a possible hint of what direction he was headed when he interrupted Crow mid-sentence to challenge his argument.
Hargun said it “seems a complete waste of time” that during the trial participants spent many hours trying to assess what the losses were if CS Life would not be held liable. “What is the point of all that if the money was simply going to come out of the segregated accounts,” he asked.
The Bermuda trial was seen as a test of whether the bank might be insulated from future liability in cases pending elsewhere in Switzerland. A Geneva prosecutor earlier this month told bank representatives that he thought it had let more than $60 million be laundered by Lescaudron, paving the way for what would be a historic indictment for money laundering of the bank itself.
Credit Suisse already added 600 million Swiss francs ($622 million) in legal provisions, some of which was related to the Bermuda case, in the first quarter of this year and flagged the possibility of more legal hits as it works through a backlog of legacy cases and prepares for new ones.
Source: Bloomberg
