Credit Suisse Group AG has agreed to pay about $475 million to US and UK authorities, including nearly $100 million to the Securities and Exchange Commission, in a scheme involving two bond issues and a syndicated loan that obtained cash on behalf of state-owned firms in Mozambique.
According to the SEC orders, the proceeds from these transactions totaled more than $1 billion, which were used to fund a concealed debt scheme, pay bribes to now-indicted former Credit Suisse investment bankers and their middlemen, and bribe corrupt Mozambique government officials. According to the SEC’s ruling, Credit Suisse’s offering documents, which were developed and distributed to investors, concealed the underlying corruption and falsely said that the revenues would be used to boost Mozambique’s tuna fishing industry. Credit Suisse failed to disclose the entire magnitude and nature of Mozambique’s debt, as well as the risk of default associated with these transactions.
The SEC’s order also finds that the scheme resulted from Credit Suisse’s deficient internal accounting controls, failing to address significant and known risks concerning bribery adequately.
“When it comes to cross-border securities law violations, the SEC will continue to work collaboratively with overseas law enforcement and regulatory agencies to fulfill its Enforcement mission,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Our action against Credit Suisse today is yet another example of our close and successful coordination with counterparts in Europe and Asia.”
“Credit Suisse provided investors with incomplete and misleading disclosures despite being uniquely positioned to understand the full extent of Mozambique’s mounting debt and serious risk of default based on its prior lending arrangements,” said Anita B. Bandy, Associate Director of the SEC’s Division of Enforcement. “The massive offering fraud was also a consequence of the bank’s significant lapses in internal accounting controls and repeated failure to respond to corruption risks.”
Separately, a London-based affiliate of Russian bank VTB agreed to pay more than $6 million to settle SEC allegations stemming from its role in deceiving investors in a second 2016 bond offering. According to the SEC decision, the second offering, as structured by VTB Capital and Credit Suisse, permitted investors to exchange their notes from an earlier bond offering for new sovereign bonds issued directly by the government of Mozambique. However, the SEC determined that the offering papers distributed and marketed by Credit Suisse and VTB Capital failed to disclose the true nature of Mozambique’s debt and the high risk of bond failure.
The SEC’s ruling against Credit Suisse alleges that it violated antifraud provisions of the federal securities laws, as well as internal accounting controls and books and records regulations. Credit Suisse agreed to pay the SEC disgorgement and interest totaling more than $34 million, as well as a $65 million penalty. The United States Department of Justice imposed a $247 million criminal fine as part of coordinated resolutions, with Credit Suisse paying $175 million after crediting, and Credit Suisse also agreed to pay more than $200 million in a penalty as part of a settled action with the United Kingdom’s Financial Conduct Authority.
VTB Capital consented to an SEC order finding that it violated negligence-based antifraud provisions of the federal securities laws. Without admitting or denying the findings, VTB Capital agreed to pay over $2.4 million in disgorgement and interest along with a $4 million penalty.