5 Jan 2019

Kiwi among ex-Credit Suisse bankers in $3 billion loan scandal

3:00 pm on 5 January 2019

A New Zealander is among the Ex-Credit Suisse bankers charged over a major scandal involving bribes and kickbacks from $US2billion in loans to fund sham projects in Mozambique.

Phillip Colebatch worked as an executive at Credit Suisse.

Photo: 123RF

Andrew Pearse, 49, is named by US prosecutors in an indictment that has also charged top Mozambican officials, including the country's former finance minister.

Mr Pearse is one of three ex-Credit Suisse bankers alleged to have conspired to borrow vast sums of money guaranteed by the Mozambique government, ostensibly to fund maritime projects in the poor African nation.

According to the indictment, the projects were just fronts to raise money to get themselves paid and to bribe Mozambican officials.

It's alleged Mr Pearse received over $US45m in bribe and kickback payments through the scheme.

Mr Pearse was arrested in London on Thursday, along with UK national Surjan Singh and Detelina Subeva, of Bulgaria.

They were released on bail pending attempts by prosecutors to have them extradited to the United States.

Former Mozambique finance minister Manuel Chang, 63, was arrested in South Africa this week as part of the same case.

A fifth man, Jean Boustani, was arrested on Wednesday at New York's John F. Kennedy Airport and was refused bail.

Mr Boustani is a Lebanese citizen who worked as lead salesman for Privinvest - an Abu Dhabi-based holding company whose subsidiaries include a ship-building firm hired to provide equipment and services to the Mozambican companies, according to the indictment.

"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," Credit Suisse said in a statement, adding that the bank would continue to cooperate with authorities.

$3 billion in loans

According to the indictment, between 2013 and 2016, three Mozambican state-owned companies borrowed more than $3 billion through loans guaranteed by the government and arranged by Credit Suisse and another investment bank, which was not named in the document.

Apart from Credit Suisse, the Russian lender VTB also arranged financing for Mozambique's state-owned companies. Both Credit Suisse and VTB also arranged a eurobond for Mozambique's government, which is earmarked - like other Mozambican sovereign debt - for restructuring.

VTB and the Mozambican government did not respond to a request for comment.

Mozambique - one of the most indebted countries in the world - admitted in 2016 to undisclosed lending, prompting the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and a default on its sovereign debt. It is still struggling to overcome the resulting debt crisis.

According to the indictment, the three state-owned companies were created to undertake maritime projects, but were really "fronts" for Mr Chang, Mr Boustani and the three bankers to enrich themselves.

Prosecutors said at least $NZ297 million was diverted to the defendants and other Mozambican government officials. They said the defendants concealed the misuse of the funds and misled investors in the United States and elsewhere about Mozambique's creditworthiness.

US takes the lead

The companies missed more than $NZ1bn in loan payments after defaulting in 2016 and 2017, the indictment said.

Debt cancellation activists welcomed the arrests, but criticised British authorities for not taking a leading role.

"It is scandalous that it has required action from the US authorities for this investigation and arrests to be made in London," said Tim Jones, a policy officer at the British-based Jubilee Debt Campaign.

"It was the London branches of Credit Suisse and VTB which lent the $US2 billion, yet there has been a shocking lack of action taken by UK authorities in holding them to account."

Britain's finance industry watchdog, the Financial Conduct Authority (FCA), started looking at Credit Suisse's involvement in Mozambique in 2016. The FCA declined to comment on the latest events.

Mr Jones also urged Credit Suisse to face up to its own responsibility.

- Reuters / RNZ