WILMINGTON (Delaware) • Three former Credit Suisse Group bankers were charged in New York with defrauding US investors who helped provide more than US$2 billion (S$2.7 billion) in loans to Mozambique, thrusting another global bank into a fund-raising scandal.
Andrew Pearse, a former managing director at the bank; Surjan Singh, a former managing director of its global financing group; and Detelina Subeva, a former vice-president in that unit, were arrested in London on Thursday and face extradition to the US, according to prosecutors in Brooklyn, New York.
The underlying indictment also names Manuel Chang, Mozambique's former finance minister, as a defendant. He was arrested on Dec 29 in South Africa and has said he will fight extradition.
The charges focus on deals allowing Mozambique to borrow US$2 billion for maritime projects and coastline protection, according to the indictment. But the funds were themselves plundered, with at least US$200 million diverted for bribes and kickbacks, prosecutors said.
The indictment alleges that Credit Suisse's bankers helped officials in one of the world's poorest countries go deep into debt for legally dubious projects.
The loans were concealed from foreign donors, who suspended aid after they were revealed, leading the southern African nation to default on its debts. The deal generated fees for the Swiss bank, which was not named as a defendant and said it was deceived by its own staff.
In a similar case, US prosecutors last year charged former Goldman Sachs Group bankers with conspiring in bribery tied to fund raising for Malaysian wealth fund 1Malaysia Development Berhad. Like Credit Suisse, the bank has denied knowledge of the scheme, blaming rogue executives.
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$2b
Amount in US dollars Mozambique was allowed to borrow for maritime projects and coastline protection.
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$200m
At least this amount in US dollars was diverted for bribes and kickbacks, prosecutors said.
In the charges unveiled on Thursday, prosecutors accused Pearse, Singh and Subeva of withholding information from Credit Suisse's compliance staff as the firm began arranging US$622 million in loans to a government-controlled entity that was supposed to help protect the nation's territorial waters.
Credit Suisse's due diligence files included a report on an executive at another company involved in the project, labelling him a "master of kickbacks", and a regional executive at the bank rejected doing a deal with him, according to the charges. But Pearse and Singh did not relay that to compliance, which "failed to pursue its inquiry further", according to the charges.
The trio also removed some of the bank's conditions from the loan, such as a requirement that Mozambique's attorney-general vouch for the validity of the government's guarantee, prosecutors said.
Chang signed papers on behalf of the government of Mozambique to guarantee the debts if the projects did not pay off, according to the indictment.
Pearse, Singh and Subeva were released on bail in London.
The International Monetary Fund suspended lending to Mozambique after it found out about the deals.
BLOOMBERG
