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Credit Suisse case: banker received millions in kickbacks

At least some share purchases generated kickbacks for a Europe-based Credit Suisse relationship manager, who used a Bermuda subsidiary to facilitate unauthorised acquisitions for a billionaire client’s account, a Bermuda court heard yesterday.

The revelations were made during the second week of a trial in which Bidzina Ivanishvili, the former Prime Minister of Georgia, is suing Credit Suisse Life (Bermuda) for $400 million.

Mr Ivanishvili made billions in the technology and banking sectors at the end of the communist era. In earlier testimony, he described that time as “the wildest capitalism in Russia and Georgia after the break-up of the Soviet Union”.

Mr Ivanishvili says the rogue relationship manager should have been prevented from losing the millions of dollars of his fortune when he was first suspected of committing misdeeds.

Patrice Lescaudron’s fraudulent activities were exposed when Mr Ivanishvili received a demand for $400 million to cover the cost of Raptor Pharmaceutical Corp shares, the total amount of which represented an approximately 5 per cent stake in the company.

The holding was a significant part of two unit-linked life insurance policies’ investment portfolios, and the purchases had, in part, been financed via a credit strategy. When trials of a new drug being developed by Raptor failed, the value of the stock plunged and the demand for payment was made.

Unit-linked life insurance policies are tax-saving financial products that allow for both insurance and investment. The holder of the policy can also withdraw funds.

It also emerged yesterday that it was possible the bank’s employee who was engaged in the fraudulent dealings did not give the direct orders to buy at least a portion of the shares.

It was revealed during the testimony of a Credit Suisse subsidiary head that Lescaudron had been caught and disciplined by the bank for wrongdoing before his role in defrauding the billionaire was uncovered.

Daniele Celia, head of Credit Suisse’s life and pensions subsidiaries, was testifying remotely in Bermuda’s Supreme Court before Chief Justice Narinder Hargun yesterday, defending Credit Suisse Life (Bermuda) against accusations that it bore responsibility for Mr Ivanishvili’s loss of $400 million.

The court heard that a table, drawn up by investigators into Lescaudron’s fraudulent activities, indicated that about 27 million Swiss francs had been paid in kickbacks to him between 2010 and at least 2013.

Joe Smouha, QC, who is Mr Ivanishvili’s lawyer, said to Mr Celia: “It is not news to you that Lescaudron was getting kickbacks for making unauthorised investments in Raptor.”

The lawyer also put it to him that a report drawn up by the Swiss Financial Supervisory Authority found that the transactions to purchase the Raptor shares were almost exclusively recorded as telephone orders and there was “an indication” that they “did not take place at all”.

He added that it had not been suggested that Mr Ivanishvili’s assistant who helped with his assets, George Bachiashvili (who gave evidence on Friday), had given orders in relation to the purchase of the Raptor shares.

Mr Smouha put it to the bank executive that Lescaudron had told the “security services” during a first interview with them, in 2015, that he had done a large amount of solo trading. He had told the investigators that Mr Ivanishvili knew of the initial investment but not about the volumes that followed. He had also admitted that he did not have a mandate to do this, the lawyer said.

When Mr Smouha asked if this “should have been a concern to Credit Suisse Life”, Mr Celia responded: “Yes.”

The case continues this morning.

The head of Credit Suisse’s life and pensions subsidiaries testified remotely in the Bermuda court trial, in the bank's defense