A lawyer for a Credit Suisse trust seeking to overturn the US$743 million in damages the bank owes to Georgian billionaire Bidzina Ivanishvili said the staff responsible did their “incompetent best.”
In a surprise concession to the challenge the Swiss bank faces in its appeal over its mishandling of rogue banker Patrice Lescaudron, the lead lawyer for Credit Suisse Trust told a Singapore court on Monday that staff failed to inform their client of the illicit payments Lescaudron had made.
“Put it simply, they were trying to do their incompetent best to address” the unauthorized payments, Lee Eng Beng said at the hearing at the Singapore Court of Appeal. They went to their superiors about Lescaudron but the one thing they didn’t do by March 30, 2008 is to let Ivanishvili know, he said.
Lee and his team are seeking to have the award cut after a lower court earlier ruled that the bank’s trust had failed to safeguard Ivanishvili’s assets. It was revised down from an initial US$926 million in a sprawling case spanning three continents.
The parent bank said that the original verdict was “wrong and poses very significant legal issues.” A spokesman for the bank declined to comment before Monday’s hearing. Since the litigation began, Credit Suisse has been taken over by rival UBS Group AG.
The fallout centres around the case of Lescaudron who was convicted in 2018 for running a fraudulent scheme in which he took money from Ivanishvili’s accounts to try and mask growing losses in other, Russian clients’ portfolios.
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Lawyers for Ivanishvili have always contended that the banker’s supervisors were aware or should have known of Lescaudron’s subterfuge, and if they didn’t should be held criminally negligent. The bank has always consistently countered that the Frenchman was a “lone wolf” who hid his crimes from his colleagues and bosses.
No one at the trust had knowledge of Lescaudron’s fraud for a specific period between 2006 to 2008 and staff did their best to flag the suspect transactions to superiors, Lee told the panel of three judges. But two of the judges questioned whether the trust exhibited “willful blindness” in relation to the wrongdoing.
One of them, Justice Andrew Phang Boon Leong, used the analogy of employees guarding a vault being confronted with the sound of drilling noises inside.
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“Is your duty just to sit outside and do nothing unless you hear an explosion, the door is blown open?” he asked.
Under repeated questioning, Lee argued the trust’s employees were acting in good faith and without tainted consciences. He also argued the judgment generated overcompensation for Ivanishvili when just a fraction of the over 27,000 transactions the trust made were affected.
Ivanishvili’s lawyer, Cavinder Bull, countered that the judgment has correctly concluded that the trust put the interests of its parent Credit Suisse ahead of its obligation to its client. He also said the defense was downplaying what the trust actually knew about Lescaudron’s actions, as it had sufficient knowledge to know something “grave” was transpiring. He also disputed that the fraud encompassed a small number of transactions, since the whole portfolio was tainted by fraud.
The Bermuda judge who ruled against Credit Suisse in 2022 said the unit in that island nation had turned a “blind eye” to the rogue banker. It was the bank’s mishandling of that case that contributed to the plunge in shareholder confidence in the bank and its eventual takeover by UBS in March 2023.
Ivanishvili won more than $600 million in the Bermuda ruling, which Credit Suisse is also appealing.
