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Credit Suisse Fights $600 Million Damages Award Over Mishandling of Rogue Banker

The Frenchman, who was convicted in 2018, was a lone wolf who hid his criminal activity from colleagues and supervisors.

A sign for Credit Suisse Group AG in a window of the bank's headquarters in Zurich, Switzerland, on Thursday, March 24, 2022. Credit Suisse warned it may need to set aside more funds for legal costs as a result of an expected Bermuda court ruling finding it liable for potentially more than $500 million in a case involving a local insurance unit. Photographer: Stefan Wermuth/Bloomberg
A sign for Credit Suisse Group AG in a window of the bank's headquarters in Zurich, Switzerland, on Thursday, March 24, 2022. Credit Suisse warned it may need to set aside more funds for legal costs as a result of an expected Bermuda court ruling finding it liable for potentially more than $500 million in a case involving a local insurance unit. Photographer: Stefan Wermuth/Bloomberg

Credit Suisse Group AG’s efforts to recover from a year of legal woes and lost investor confidence turn to a Bermuda court this week, where the lender is fighting a $600 million damages award over its mishandling of a former star banker turned fraudster.

Lawyers for Credit Suisse Life (Bermuda) Ltd., the life insurance unit held responsible for the mistakes, is likely to challenge its ability to pay the money when the week-long appeal trial begins on Monday. A spokeswoman for the Zurich-based bank declined to comment ahead of the appeal. 

A Bermuda judge awarded the damages to bank client and Georgian billionaire Bidzina Ivanishvili in March after ruling that Credit Suisse Life had turned a “blind eye” to convicted fraudster Patrice Lescaudron’s misuse of Ivanishvili’s money. 

The Frenchman, who was convicted in 2018, was a lone wolf who hid his criminal activity from colleagues and supervisors, according to the bank. Regardless, Judge Narinder Hargun ruled that the bank unit bore responsibility because “CS Life knew about certain of Mr. Lescaudron’s wrongdoing, and could and should have known about his further wrongdoing.”  

A spokesman for Ivanishvili declined to comment ahead of the appeal. Credit Suisse has already provisioned for the damages, which are being held in escrow pending the outcome of the appeal. 

Ivanishvili has also gone after the Swiss lender in Singapore over what the Georgian claims are $800 million in losses. Credit Suisse Trust (Singapore) Ltd. admitted during a trial in September it failed to let its billionaire client know about unauthorized transfers from his accounts, in an unexpected move that may shape the outcome of the trial.

It was the latest legal setback in what has been a difficult year for the bank which was hit with a criminal conviction for failing to prevent money laundering in June, and tens of billions in outflows of client money. Credit Suisse is appealing the conviction. 

Limited Scope

A lawyer for CS Life Bermuda said in June that while the insurer wasn’t disputing the Bermuda judge’s ruling or the amount, he argued there was limited scope to pay the damages. 

Bermuda passed legislation in 2000 to create entities called segregated accounts companies that allow for the legal split of assets and liabilities into separate accounts. 

Compensation “is to be met and met only from the assets in the segregated accounts,” set up for Ivanishvili, the lawyer argued. 

Ivanishvili’s lawyer countered in June that such an argument was nonsense as it suggested the liability should be repaid from “the plaintiff’s own assets.”

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