Yesterday this criminal indictment was unsealed charging former Credit Suisse bankers Andrew Pearse, Surjan Singh, and Detelina Subeva with conspiracy to violate the FCPA’s anti-bribery and internal controls provisions in connection with financing various Mozambican maritime projects.
In many respects, the action is similar to the November 2018 enforcement action against various individuals associated with Goldman Sachs in connection with Malaysia’s 1MDB fund (see here for the prior post).
According to the indictment:
- Pearse, a citizen of New Zealand was a managing director of Credit Suisse and head of its Global Financing Group up until September 2013.
- Singh, a citizen of the United Kingdom, was a managing director in the Global Financing Group until February 2017.
- Subeva, a citizen of Bulgaria, was a vice president in the Global Financing Group until August 2013.
According to the indictment:
“Through a series of financial transactions between approximately 2013 and 2016, Proindicus, EMATUM and MAM borrowed in excess of $2 billion through loans guaranteed by the Mozambican government. The loans were arranged by [Credit Suisse] and Investment Bank 2 [identified as Russian lender VTB] and sold to investors worldwide, including in the United States. Over the course of the transactions, the co-conspirators, among other things, conspired to defraud investors and potential investors in the Proindicus, EMATUM and MAM financing through numerous material misrepresentations and omissions relating to, among other things: (i) the use of loan proceeds; (ii) bride and kickback payments to Mozambican government officials and bankers; (iii) the amount and maturity dates of debt owed by Mozambique, and (iv) Mozambique’s ability and intention to pay back the investors.”
Proindicus, EMATUM and MAM (Mozambique Asset Management) are described in the indictment as “companies owned, controlled and oversee by the Government of Mozambique that performed functions that the Government of Mozambique treated as its own, and were thus ‘instrumentalities’ of a foreign government within the meaning of the FCPA.” According to the indictment, “the companies were created to undertake three maritime projects in Mozambique for and on behalf of Mozambique. Proindicus was to perform coastal surveillance, EMATUM was to engage in tuna fishing and MAM was to build and maintain shipyards.
According to the indictment:
“Each of the companies entered into contracts with Privinvest (a U.A.E. holding company involved in shipbuilding) to provide equipment and services to complete the maritime projects. The loan proceeds were supposed to be used exclusively for the maritime projects, and nearly all of the borrowed money was paid directly to Privinvest, the sole contractor for the projects, to benefit Mozambique and its people. In reality, Boustanai, …., Chang, Pearse, Singh, and Subeva, together with others, created the maritime projects as fronts to raise money to enrich themselves and intentionally diverted portions of the loan proceeds to pay at least $200 million in bribes and kickbacks to themselves, Mozambican government officials and others.”
Pearse, Singh and Subeva are charged with conspiracy to violate the FCPA’s anti-bribery provisions and internal controls provisions as well as conspiracy to commit wire fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering.
Although not charged with FCPA offenses, the indictment also charges Manual Chang (Mozambique’s Minister of Finance), Jean Boustani (a citizen of Lebanon and the lead salesman and negotiator for Privinvest) and other individuals whose names are redacted in the indictment with conspiracy to commit wire fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering.
According to the indictment, Credit Suisse “had internal controls that addressed, among other things, the prevention of bribery of and by Credit Suisse employees; the prevention of money laundering and other financial crimes; conflicts of interest; outside employment; and the use of intermediaries in financial transactions” as well as compliance department that exercised primary responsibility for overseeing and enforcing the internal controls. Moreover, the indictment alleges that Pearse, Singh and Subeva “received regular training on [Credit Suisse’s] internal controls and were also aware of those internal controls through their involvement in numerous transactions.”
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Nevertheless, the indictment alleges that in connection with the various financing deals Pearse, Singh, Subeva and others circumvented Credit Suisse’s internal controls. For instance, the indictment alleges among other things:
- “while conducting due diligence on the Proindicus transaction as required by [Credit Suisse’s] internal controls, the defendants withheld information about the likelihood of corruption connected to the Proindicus transaction”
- the defendants “secretly selected a due diligence firm … to research the transaction and pre-screen the individuals as directors of Proindicus to secure the approval by [Credit Suisse’s] compliance department;
- the defendants “used personal e-mail accounts” to conceal their involvement and “remov[ed] all references to themselves from documents they had prepared,” and created fake documents in connection with certain deals.
Nevertheless, and similar to the previously mentioned enforcement action against individuals associated with Goldman Sachs, the indictment contains the following classic respondeat superior allegation as to certain deals:
“At the time, Pearse, Singh and Subeva were agents acting within the scope of their employment on behalf of [Credit Suisse], with intent, at least in part, to benefit [Credit Suisse].”
Under the heading “Summary of Bribe and Kickback Payments,” the indictment alleges:
“In furtherance of the fraudulent scheme, numerous Mozambican government officials received bribe and kickback payments from Privinvest in connection with Mozambican projects. Specifically,
(a) Chang received at least $5 million in bribe and kickback payment from Privinvest;
(d) Mozambican Co-Conspirator 1 received at least $8.5 million in bribe and kickback payments from Privinvest.
(e) Mozambican Co-Conspirator 2 received at least $9.7 million in bribe and kickback payments from Privinvest.
(df Mozambican Co-Conspirator 3 received at least $2 million in bribe and kickback payments from Privinvest.”
The indictment also alleges that Pearse, Singh and Subeva “received bribe and kickback payments in connection with the Mozambican projects.” Specifically, the indictment alleges:
“Pearse “received over $45 million in bribe and kickback payments from Privinvest in connection with the Mozambican maritime projects. Many of these bribe and kickback payments were paid through a correspondent bank account in New York City …”
Singh received bribe and kickback payments totaling approximately $4.5 million from Privinvest. At least one bribe and kickback payment from Privinvest was paid through a correspondent account in New York City …
Subeva received bribe and kickback payments of at least $2.2 million from Pearse.”
In a statement, Credit Suisse stated:
“The indictment alleges that the former employees worked to defeat the bank’s internal controls, acted out of a motive of personal profit, and sought to hide these activities from the bank.”
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