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Financial Services/Private Equity
Switzerland
Nationality of Foreign Officials: Mozambique
Summary of Allegations:
In 2012, Credit Suisse worked with defense contractor Iskandar Safa to structure financing for purchases of military and surveillance equipment for Mozambique through Safa's company, Privinvest Group. From 2013 to 2014, companies owned by Mozambique’s Defense Ministry entered into contracts to purchase equipment and services from Privinvest Group, financed through USD 2 billion in bonds and loans raised by Credit Suisse, Russian company VTB Group and BNP Paribas. Press reports alleged that approximately USD 1.2 billion of the debt was not publicly disclosed. The reports also stated that the transactions were structured in an unusual way, sending proceeds directly to Privinvest from the banks, instead of to the Defense Ministry-owned companies. The International Monetary Fund (IMF) commissioned an audit of the deals, which determined that USD 500 million of the loan proceeds could not be accounted for, while the prices of Privinvest equipment to be provided to the Defense Ministry companies exceeded the estimated costs by about USD 700 million.
Press reports indicate that U.S. authorities are investigating the banks to determine whether they facilitated bribery of Mozambican officials.
According to SEC settlement, between 2013 and 2016, Credit Suisse structured three loans on behalf of Mozambique state-owned entities ProIndicus S.A. (“ProIndicus”) and Empresa Mocambicana de Atum S.A. (“Ematum”), fully knowing both SOEs lacking previous business operation records.
The transactions raised over US$1 billion in total, which was used to hide debts, pay kickbacks to bankers, and bribe Mozambique government officials. Credit Suisse made material misrepresentations and omissions regarding the loan use, by hiding the schemes from its offering materials as well as defrauding investors on the usage of funds by falsely stating that the proceeds would be exclusively contributed to developing the fishing industry. Credit Suisse’s internal control system unreasonably ignored the proceeds disparities and the bribery risks, failed to make timely disclose and remedy the risks.
Through these financing projects, Credit Suisse’s bankers, intermediaries recruited to facilitate the schemes, and Mozambique government officials received kickbacks and bribes totaling over US$200 million. Credit Suisse’s books and records omitted the illicit usage of proceeds.
Approximate Alleged Payments to Foreign Officials: over US$200 million
Business Advantage Allegedly Obtained: secure business with foreign government
Agencies: United Kingdom: Financial Conduct Authority, United States: Department of Justice, United States: Federal Bureau of Investigation , United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Criminal Fine, Deferred Prosecution Agreement, Disgorgement
Year Resolved: 2021
Compliance Monitor:
Ongoing: No
Details:
U.S. authorities are reportedly investigating Credit Suisse, VTB Capital, and BNP Paribas SA, for potentially facilitating corruption by helping Mozambican officials skim money from large transactions in Mozambique.
On 19 October 2021, Credit Suisse reached a settlement with the SEC, DOJ, and the UK FCA to resolve charges of FCPA violations, conspiracy to commit wire fraud, and serious financial crime due diligence failings respectively, all stemming from the above allegations.
Under the settlement terms, Credit Suisse will pay approximately US$99 million of disgorgement, interest, and penalty to the SEC, an after-crediting criminal fine of US$175.5 million to the DOJ, and a penalty of UK£147 million to the FCA with US$200 million loan to Mozambique government written off.
VTB separately entered into settlements with the SEC and UK FCA for misleading investors.
On 10 November 2021, the New York Times reported that Manuel Chang, the former Finance Minister in Mozambique, will be extradited from South Africa (where he is currently being held) to the U.S. to stand trial on corruption charges for his involvement in the scandal.
Discovery Method: Unspecified
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