The CS faces even more trouble in the Mozambique loan scandal

The almost half a billion fine is just the beginning. Credit Suisse is facing a number of lawsuits and claims for damages.

Red. The scandal surrounding the secret loans from the banks Credit Suisse and VTB totaling more than two billion dollars to Mozambique is leading to even more poverty and inflation in this country. Thomas Kesselring has been reporting on the case on Infosperber since 2016. Kesselring taught at a university in Mozambique for many years.

Thomas Kesselring for the online newspaper INFOSperber

The credit affair, which has been smoldering for over five years, is by no means finished with the settlement * that Credit Suisse concluded with authorities in the USA, Great Britain and Switzerland. Rather, it is the prelude to further demands that the big bank has to adjust to.

So far, the US has done the most valuable educational work in the Mozambique scandal, even though it only has to do with the scandal to the extent that American investors are also among those affected. The US Department of Justice’s sanctions relate accordingly to the fact that the CS at Ematum-Creditt has deceived the security buyers. The required debt waiver of 200 million against Mozambique also relates to this loan. On the other hand, the US Security and Exchange Commission (SEC) and the English Financial Conduct Authority (FCA) are reacting to the brazen bribery in the award of the Proindicus loan and the grossly negligent compliance processes with the imposition of hefty fines. Finma, which is not allowed to impose fines, joins CS with a harsh reprimand and decrees that the bank must fundamentally improve its risk management and have credit transactions with high-risk countries checked by an independent third party.

Mozambique, which has been written off by the bank Proindicus-Kredits demands, after this concerted action, legitimate hopes can be raised.

Because the loans were granted from London bank branches, the London High Court is also investigating. From him, the CS threatens further trouble, because with him, most of the lawsuits accumulate in the Mozambique affair:

  • A creditors’ cartel, including several financial houses and hedge funds, the Banco Comercial Portugues and the United Bank for Africa and also the Banco Internacional de Moçambique, are suing CS;
  • The state of Mozambique is also suing CS, but also against the shipbuilding company Privinvest and its boss, Iskandar Safa;
  • Privinvest (Iskandar Safa) sues Mozambique and in particular its President Nyusi;
  • The Russian bank VTB is also suing Mozambique.

The negotiations in the London High Court announced for August 2021 have been postponed until October to December 2023. The court apparently wants to wait for the development of negotiations elsewhere:

In arbitration tribunals in Geneva and Paris, a claim by Privinvest against Mozambique for approximately $ 800 million is being negotiated;
A monster trial against 19 Mozambican accused has been going on in Mozambique’s capital Maputo since August;
The South African Ministry of Justice has been thinking for two and a half years whether it should extradite the Mozambican finance minister of the Guebuza era, who is stuck there, to Mozambique or to the USA;
Last but not least The Swiss Federal Prosecutor’s Office is also investigating Credit Suisse. A result is not yet available.

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* The comparison between Credit Suisse and the US Department of Justice

According to the Bloomberg agency, the comparison includes the following points:

  • Payment of $ 247.5 million to the US Department of Justice (which, after accounting for payments to other agencies, reduces to $ 175.5 million); the bank is buying a three-year prosecution delay in the US;
  • $ 100 million to the US Securities and Exchange Commission;
  • Payment of £ 147.2 million ($ 200.6 million) to the UK Financial Conduct Authority;
  • $ 200 million waiver in Mozambique’s debt repayment;
  • Commissioning an independent third party to review compliance processes for loans to companies in financially weak, high-risk countries (this is the requirement of the Swiss financial market supervisory authority Finma).

After the bang on Tuesday, Credit Suisse should arm itself with further provisions. If Mozambique pays back the loans only partially or not at all, or if it even wins the case, the creditors will hold the bank liable. It can be assumed that Mozambique will not be able to service its debts in the foreseeable future. Because the country is in the worst economic and political crisis in its history – not least as a result of the credit mess. Around two million people have slipped into absolute poverty because of a lack of development funds. Where huge offshore gas storage facilities were discovered in 2010, war is raging today. Most foreign companies withdrew waiting and waiting. Natural gas production is shifting further and further into the future, and climate change is putting pressure on gas prices. When the unfortunate business of secret loans began nine years ago, however, banks and investors were expecting booming gas exports.

Chronology of the Mozambique Loans Scandal

September 2013: In Mozambique there is an obscure tuna fishing project by an unknown company called Ematum [Empresa moçambicana de Atum – mosambikanische Thunfisch-Firma] Puzzles. French newspapers report the planned construction of a tuna fishing fleet for $ 230 million in Cherbourg. However, the total credit is many times higher. The use of at least $ 500 million remains unexplained and has dominated the headlines in Mozambique for more than two years.

August 2015: The IMF has not been informed of the $ 850 million ematum loan. His request as to whether the Mozambique government is hiding further loans is denied by the latter.

April 2016: After a restructuring of the ematum loan, two more large loans that Mozambique took out secretly in 2013/14 are known. The parliament responsible for approving loans was also not informed. The three loans total $ 2.07 billion and are half organized by CS London and the Russian state bank VTB, London branch. They were related to a coastal protection project for which Mozambique worked together with the Lebanese shipbuilding company Privinvest (founder and boss: Iskandar Safa). A semi-public company had been formed for each of the three loans, all three of which were under the secret service. IMF and donor countries freeze budget support to Mozambique. The country is losing hundreds of millions of dollars a year and minimizing social spending. As a result, around two million people fall back into absolute poverty.

December 2016: In a hearing, the Mozambican parliament learned that the secrecy of the loans was for military reasons (the violent conflict with the Renamo flared up again in 2013-2015). Since it was difficult to find creditors for the construction of naval ships, the idea of ​​the tuna fishing fleet came up. At the same time, the “Rat Kontrapunkt” asks a few questions to the CS management about their Mozambique business in an open letter in the WOZ. The bank is silent.

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April 2017: On the occasion of the CS General Assembly, Chairman of the Board of Directors Urs Rohner stated that the CS loan to Mozambique was for a project for “fishing equipment”. Everything else is mere speculation.

June 2017: After a three-month investigation, the Kroll company presented new findings with its audit report: The banks CS and VTB paid out all loans directly to shipbuilder Privinvest, of which only 18 million went to Mozambique. In 2013, Privinvest opened a subsidiary called Palomar Capital Advisors in Zurich to handle project finances. Her boss, Andrew Pearse, had previously initiated the Proindicus and Ematum loan as an investment banker at CS London. The audit company considers the ships to be massively overpriced and the payments to the Zurich-based Palomar company to be excessive. The mystery of the missing 500 million remains unsolved.

August 2017: The company empire Privinvest buys the company from the French Necotrans Advanced Maritime Transports (AMT) in Nyon and thus has a subsidiary in Switzerland (after the closure of the Palomar company in Zurich). The AMT board of directors occasionally includes people who were indicted by an American court in 2018 for illegal money transfers and bribery payments. AMT operates, among other things, ship transports for oil and gas in Africa. The head of the company, Arnaud Lelouvier, received one million bribes in 2013. AMT has been responsible for logistics in the region of Mozambique’s offshore gas fields since 2020. At this point in time, however, the region is a war zone and the construction of infrastructure for oil production has stopped.

December 2018: The Eastern District Court of New York is bringing legal action against three investment bankers from CS London, three senior officials in Mozambique and two senior executives at the shipbuilding company Privinvest (both temporary members of the board of directors of AMT in Nyon). At least $ 200 million went into bribes and kickbacks. Former Mozambique Finance Minister Manuel Chang is arrested in South Africa. There he is still in preventive detention. Jean Boustani, sales manager at Privinvest, is arrested in a New York airport.

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March 2019: Based on the American indictment, the Mozambique public prosecutor is bringing charges of embezzlement, extortion, money laundering, corruption, abuse of office, forgery and criminal association against 20 people, including the eldest son and the private secretary of former President Guebuza.

April 2019: At the general assembly of the CS, representatives of the Mozambican FMO (Forum de Monitoria do Orçamento, an association of local NGOs) put questions to the CS management. The chairman of the board of directors and chief lawyer answer: The machinations in the London branch are “depressing”, they only recently learned about it through the New York complaint and will cooperate with the authorities. At an informal meeting with representatives of the CS group top management, the Mozambicans sounded out the willingness of the bank to waive a debt. The CS chief lawyer finds nice words, but remains tough and adamant.

June-December 2019: At the New York court, the three guilty investment bankers of CS London successively make confessions of guilt. On the other hand, Privinvest seller Boustani was released after a six-week trial at the beginning of December 2019: The jury ruled that the American court was not competent for his case. Witnesses and accused give detailed insight into the chronology of the scandal and the close friendly relations between Boustani and President Guebuza, but also between Iskandar Safa and the President’s son Ndambi Guebuza.

August 2021: The London High Court London is postponing the planned negotiations in the Mozambique case by two years to October 2023. The Mozambican Centro de Integridade Pública (CIP) has collected various litigation documents. This also includes the lawsuit brought by Privinvest boss Safa against Mozambique’s President Filipe Nyusi, claiming that as President he thwarted the implementation of the coastal protection project in order to set himself apart from his predecessor, ex-President Guebuza.

August 2021: Trials of 19 defendants, including the son and secretary of ex-President Guebuza, begin in Maputo. The negotiations are scheduled to last three months. So far one hopes in vain for guilty confessions. Nyusi and Guebuza are both involved in the scandal but are not charged. There is a deep rift between the two, and two alliances working against each other are emerging: on the one hand, Guebuza and Iskandar Safa, on the other hand, Nyusi and the Mozambican public prosecutor’s office.

October 2021: The US and UK stock market and financial market regulators condemn CS and impose payments of at least $ 675 million (Russian bank VTB is fined $ 6.4 million). At the same time, Finma takes the opportunity to file a sharp reprimand to Credit Suisse.