Georgian billionaire claims victory over Credit Suisse
A damning “indictment” of the business dealings of Credit Suisse bank follows a Supreme Court judgment in which more than half a billion dollars were at stake and where the court found fraud in policy accounts that the bank’s Bermuda subsidiary held for former Georgian leader and billionaire Bidzina Ivanishvili.
Mr Ivanishvili has won a legal battle that pitted him against the Swiss banking giant’s subsidiary, Credit Suisse Life (Bermuda).
Chief Justice Narinder Hargun’s 281-page judgment in the complex and lengthy case concluded that the plaintiffs, who include Mr Ivanishvili’s family members and two companies, were the victims of fraud and that the Swiss bank had put revenue ahead of the interests of their clients.
Mr Ivanishvili’s relationship manager at Credit Suisse, Patrice Lescaudron, committed multiple fraudulent acts, and the bank and/or Credit Suisse Life (Bermuda) did not take adequate action to prevent the fraudulent acts from occurring, said the Chief Justice.
His judgment stated: “The group function (of Credit Suisse) and/or CS Life did not take action (or adequate action) to prevent Mr Lescaudron’s fraudulent mismanagement of the policy accounts because it was prioritising the revenues Mr Lescaudron generated for Credit Suisse over the interests of its clients including the policyholders or Mr Ivanishvili.”
The case was brought because the plaintiffs were seeking relief for the losses they suffered because of Lescaudron’s wrongdoing in respect to their Credit Suisse Life unit-linked life insurance policy accounts.
Unit-linked life insurance policies are tax-saving financial products that allow for both insurance and investment. The holder of the policy, through a power of attorney for the insurer, can also withdraw funds.
The plaintiff’s primary claim was for damages calculated as amounting to $553.86 million, which was assessed as being the difference between the value of assets, had they been invested in a medium-risk portfolio, and its actual value.
The Chief Justice ordered forensic accounting experts for the parties in the case to calculate the damages according to his instructions, which would determine the losses in line with the plaintiff’s claim.
A spokesman for the Ivanishvili legal team said: “The verdict utterly discredits CS Life’s argument that it was separate from Credit Suisse and confirmed that CS Life was aware of the frauds being committed at Credit Suisse, yet failed to inform the Claimants and deliberately withheld key documents and witnesses as a result of direction from central counsel’s offices in Switzerland.
“The Court has found CS Life responsible for losses which Credit Suisse has itself recognised as more than $500 million. It is shocking that Credit Suisse continues to refuse to offer the Claimants compensation or repay the money it admits was stolen, whilst continuing to behave in a manner which has drawn severe criticism from the Court.
“The Claimants will continue to quantify their losses both in Bermuda and in Singapore where Credit Suisse’s Trust business is adopting the same tactics to avoid taking responsibility for crimes committed by the Bank’s personnel.”
Chief Justice Hargun added that Lescaudron had committed a long-running fraud against Mr Ivanishvili involving the policy accounts.
“That fraud included: (i) making investment decisions without proper authority; (ii) forging documents; (iii) executing investments for the purpose of obtaining unlawful commissions; (iv) directing the sale of assets for an undervalue; (v) directing the purchase of securities at an overvalue; and (vi) transferring assets to other clients.”
He also said Lescaudron was fraudulently mismanaging accounts with the bank before the policies were taken out. “If Mr Ivanishvili had known that fraudulent transactions had been taking place on his accounts with the bank, he would not have agreed to set up the LPI policies but would instead have moved the management of the money to a reputable European bank to be invested in a medium-risk investment portfolio,” he said.
The court further held that the plaintiffs succeed in their claims against CS Life in that the actions and omissions of CS Life were in breach of its contractual obligations and fiduciary duties owed to the plaintiffs.
The court said the plaintiffs are entitled to damages for implied misrepresentation at the time the policies were issued, namely that Lescaudron (and the bank) was not fraudulently managing the plaintiffs existing accounts and/or did not intend to manage the policy assets fraudulently.
The court agreed to hear the parties in relation to the issue of costs.
The plaintiffs had claimed that in 2011 Mr Ivanishvili was persuaded by Lescaudron to entrust more than $750 million (within trusts for the benefit of Mr Ivanishvili, his wife and children) with the defendant, CS Life, using a Bermudian life insurance policy investment structure. Under this structure, the plaintiffs entrusted $755 million by way of premiums paid to CS Life which it was to invest with its parent, the bank.
The structure operated on the basis that the money and assets were legally held in CS Life's name and placed for investment in CS Life accounts with the bank (so that the plaintiffs had their contractual relationship in respect of their investments only with CS Life).