The African nation had argued that Credit Suisse ignored red flags and the corruption of its own bankers in deals struck as part of the $2 billion (R37bn) fund-raising. Photo: Reuters
Mozambique won a fraud case over a $2 billion (R37bn) bond scandal that embroiled Credit Suisse and created a financial crisis for the southern African nation.
After a three month trial, a London judge ruled that Mozambique was defrauded in a controversial maritime project meant to finance the construction of a new coastal patrol and a tuna fishing fleet.
The government-backed fund-raising was plagued by corrupt deals, with hundreds of millions of dollars looted, while much of the debt was kept hidden from bondholders and other lenders.
Mozambique had initially sued Credit Suisse, which arranged most of the debt, before settling with the bank on the eve of the trial. That left the nation pursuing shipbuilder Privinvest and its wealthy French founder, Iskandar Safa, who died during the trial.
“The scale and nature of what was able to happen in this case presented systemic threat to Mozambique’s economy,” Judge Robin Knowles said in his ruling.
The African nation had argued that Credit Suisse ignored red flags and the corruption of its own bankers in deals struck as part of the $2bn fund-raising – the bank’s internal records described Safa as a “master of kickbacks”.
Mozambique is entitled to $825 million from Privinvest. The African nation must also be compensated for the $1.5bn payment that it has to make to holders of the refinanced Eurobonds, the judge said.
It is an “unfair and unjustified” that Privinvest may face the burden of damages of hundreds of millions of dollars, Privinvest said in a statement after the ruling. “Privinvest trusts that more senior courts will correct what Privinvest perceives as a trial having taken place in circumstances that the Republic failed so completely to fulfil its own obligations and ignored orders of the court.”
The case was one of the many legal troubles inherited by UBS Group. Three Credit Suisse bankers pleaded guilty for their roles in the deals, while in 2021, Credit Suisse paid almost $475m to resolve multiple investigations – including in the US.
It was one of the highest-profile financial setbacks the Swiss bank faced in the years leading up to its collapse. A UBS spokesperson declined to comment.
The scandal also rocked the economy of Mozambique, one of the world’s poorest countries, just as it was preparing to reap the riches of a massive offshore natural gas discovery. The nation ultimately defaulted on the bond meant to guarantee the loans.
Mozambique will continue to work “to eradicate corruption and all organised and transnational crime, making those involved responsible”, the government said in a statement after the ruling.
The ruling comes as Mozambique’s former finance chief separately faces a criminal trial in New York over his role in the scandal. Prosecutors alleged that Manuel Chang was among corrupt officials who conspired with the bankers to take Mozambique deeper into debt.
Earlier this month, Mozambique agreed to pay creditors including VTB Capital Plc and Banco Comercial Português $220m in a settlement tied to the tuna bond scandal.
BLOOMBERG