Maputo, 29 Sep (AIM) – The UBS Group, which purchased the bank Credit Suisse in June this year, is reported to be closing a deal with the Mozambican government over Credit Suisse’s role in the country’s largest ever financial scandal, known as the case of the “hidden debts”.
UBS wants to reach a deal, the reports say, in order to avoid the scrutiny of a trial in London, which could last for 13 weeks.
The scandal concerns three fraudulent, security-related Mozambican companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management) which, in 2013 and 2014, borrowed over two billion US dollars from Credit Suisse and the Russian bank VTB.
Although the three newly-formed companies had no business record whatever, and although they were all run by the Security and Intelligence Service (SISE), the banks handed over the money.
They did so because the government of the day, under the then President Armando Guebuza, provided guarantees for the entire sum. The loan guarantees were signed by Guebuza’s Finance Minister, Manuel Chang – who is currently under arrest in New York, awaiting trial for money-laundering and other financial crimes.
The guarantees were illegal under Mozambican law, since they smashed through the ceiling on loan guarantees established by the 2013 and 2014 budget laws.
A key player in the scandal was the Abu Dhabi based group Privinvest, which became the sole contractor for Proindicus, Ematum and MAM. It made its money by selling the three companies assets (such as fishing boats, patrol vessels and radar stations) at vastly inflated prices.
An independent audit of the three companies in 2016-17 calculated that Privinvest had inflated its prices by over 700 million dollars. Privinvest also ensured its contracts by bribing key Mozambican officials (including Chang) and Credit Suisse bankers. Three of these bankers, Andrew Pearse, Detelina Subeva, and Surjan Singh, confessed to taking bribes from Privinvest.
The fraudulent companies soon went bankrupt, and so what had been hidden loans became hidden debts, since the creditors wanted their money back.
Mozambique is now asking the London High Court to declare the loan guarantees null and void. It also wants UBS and Privinvest to pay compensation.
According to the Bloomberg financial news agency, “Credit Suisse has made an offer which is close to being accepted, asking not to be identified because the negotiations are private”.
A settlement with Credit Suisse/UBS would mean that the trial, scheduled to start in London on Monday, will still go ahead with Privinvest as the key defendant.
The case, according to Bloomberg, is one of the many legal troubles that UBS has inherited from its rescue of Credit Suisse. The US Department of Justice is stepping up its probe into suspected compliance failures at Credit Suisse that allowed Russian clients to evade sanctions.
Privinvest has attempted to muddy the waters by dragging Mozambican President Filipe Nyusi into the scandal. It claimed that it had made payments to Nyusi, and that he should therefore be one of the defendants. But a London judge ruled that Nyusi should have immunity from any allegations he was involved.
According to the UK Supreme Court, cited by Bloomberg, the financial claim against Credit Suisse and Privinvest amounts to about 1.5 billion dollars.
Credit Suisse agreed in 2021 to pay almost 475 million dollars to resolve multiple investigations into its role in the hidden debts. As part of this deal, a European unit of the bank pleaded guilty to a single charge of conspiracy to commit wire fraud and Credit Suisse also entered into a three-year deferred-prosecution agreement with the US Justice Department.
The London Financial Times also reported on Thursday that UBS is seeking a last-minute deal to avoid a trial.
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