UBS Group AG is set to dodge one of the long list of legal problems it inherited from its takeover of Credit Suisse, as Geneva’s top financial-crimes prosecutor prepares to shut down a money-laundering probe targeting the failed bank.
(Bloomberg) — UBS Group AG is set to dodge one of the long list of legal problems it inherited from its takeover of Credit Suisse, as Geneva’s top financial-crimes prosecutor prepares to shut down a money-laundering probe targeting the failed bank.
Just a year after saying there were grounds for indicting Credit Suisse in a case related to a rogue banker, Yves Bertossa last month informed the parties he now plans to drop the investigation, according to people familiar with the matter who spoke on condition of anonymity.
Bertossa didn’t give an immediate time frame for when he would formally close the probe but asked those concerned to lodge any objections by last week, the people said.
Credit Suisse’s mishandling of Patrice Lescaudron, the Geneva banker-turned-fraudster, cost it dearly. A string of court losses from Bermuda to Singapore left the bank facing a damages bill in the hundreds of millions of Swiss francs, exposed its cavalier approach to compliance and contributed to the plunge in investor confidence that ultimately required it to be rescued by rival UBS.
The Lescaudron case is one of more than a half dozen UBS must now grapple with. It faces the negative publicity of a trial in London over a Mozambican bond scandal unless it settles the case, while UBS has said that Credit Suisse’s legal liabilities could run to as much as $4 billion over 12 months.
Before his U-turn, Bertossa had previously highlighted eight transactions Credit Suisse failed to prevent between 2008 and 2014, which he said constituted aggravated money-laundering. Under Swiss law, a failure to stop illicit money moves can be tantamount to money-laundering if the negligence and amounts are deemed serious enough.
The prosecutor’s decision last month was based on the fact that Lescaudron was convicted of fraud and forgery not money-laundering, according to one of the people familiar with his thinking.
While Bertossa acknowledged Credit Suisse’s serious organizational deficiencies, given that Lescaudron nor anyone else was convicted of money laundering, it was seen as unfair to attribute such a crime to the bank, the person said.
The government-brokered takeover of Credit Suisse by UBS was completed this month, and there is no doubt a desire among both the banks and government to move forward and not litigate the past.
Lescaudron faked signatures and contrived dummy portfolio statements to illegally transfer millions, primarily from the accounts of his biggest client, Georgian billionaire Bidzina Ivanishvili, in a desperate bid to cover growing losses in other clients’ portfolios.
The scheme, which also saw Lescaudron skim profits for himself, went undetected for almost a decade until his tearful confession in 2015 when a serious of outsized stock bets backfired. He later took his own life.
The Geneva Prosecutor’s Office didn’t have an immediate comment. Spokespeople for Credit Suisse and Ivanishvili declined to comment.
Credit Suisse has always maintained that Lescaudron was a lone wolf who hid his deception from colleagues. But at least one court has disagreed, saying that the bank turned a blind eye to his wrongdoing.
(Updates with reaction from Geneva Prosecutor’s Office in 12th paragraph)
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