Credit Suisse Gives Rogue Banker Unlikely Boost in Appeal
(Bloomberg) -- Five months after a former Credit Suisse Group AG banker was convicted of orchestrating a near decade-long scheme to hide growing losses from his clients, the financier has got an unlikely boost from his one-time employer.
Lawyers for the bank wrote to Geneva’s Criminal Appeals Court last month asking it to acquit Patrice Lescaudron of a single charge of criminal mismanagement related to a pair of his clients’ accounts outlined in his 2017 indictment. The bank isn’t challenging the 54-year-old’s convictions for fraud and forgery.
A Geneva judge in February sentenced Lescaudron, a cosmetics executive turned wealth manager, to five years in prison for defrauding a clutch of Russian clients, as well as former Georgian Prime Minister Bidzina Ivanishvili. Lescaudron maintained throughout the trial that he hid his deception from his clients and the bank to buy himself time to recover the massive trading losses.
Schellenberg Wittmer, the law firm that represented Credit Suisse as a “plaintiff” that had potentially been harmed by Lescaudron at the trial, didn’t give reasons for the appeal in the letter seen by Bloomberg. Court files aren’t public in Switzerland.
According to the Swiss Criminal Code, someone entrusted with managing another’s assets who “in breach of his duties causes or permits that other person to sustain financial loss” can be prosecuted for criminal mismanagement. “If the offender acts with a view to securing an unlawful financial gain for himself or another,” a guilty conviction carries a penalty of up to five years, the code says.
Giorgio Campa, the lawyer for the two Lescaudron victims, said Credit Suisse is trying to overturn the mismanagement charge because, unlike fraud or forgery, a conviction carries broad implications for what the bank may have to pay out in civil lawsuits.
“I’ve never seen a plaintiff plead for the acquittal of an accused,” said Campa, who asked the court to reject the bank’s appeal. “It’s also ridiculous that the bank is appealing the guilty verdict because it’s my clients, not the bank, who have been hurt here.”
The Zurich-based bank said it has appealed the judgment, but declined to give further details while the legal process is continuing. Lescaudron was convicted of one count of fraud, one charge of forgery, one count of criminal mismanagement and a second charge of aggravated criminal mismanagement.
Under Swiss law, an employer is liable for losses caused by employees unless the organization proves it took “all due care to avoid a loss or damage of this type or that the loss or damage would have occurred even if all due care had been taken.”
Credit Suisse said Lescaudron acted as a lone wolf and none of his colleagues or managers knew about his falsified trading, which began in 2008 and continued until a massive wrong-way bet exposed the scheme in 2016. That didn’t prevent lawyers for the Russians and Ivanishvili from arguing that Credit Suisse knows more than its letting on, or at least that it bears some responsibility for failing to detect it.
With nearly all sides appealing some aspect of Geneva Judge Alexandra Banna’s February decision, it’s unclear when the criminal side of the case will be finally closed and civil proceedings will start. Lescaudron, for his part, has petitioned the appellate court to cut his sentence to four years from five and acquit him on one of the criminal mismanagement charges and some of the fraud charges.
Lastly, his lawyer asked the court to come to a prompt decision to give his client a sense of closure. Lescaudron has already been in prison for more than two years, including his pre-trial detention, as he was deemed a flight risk to his native France.
“Even if Mr. Lescaudron finds himself in detention in La Brenaz prison, this doesn’t detract from the anxiety about his fate as along as the judgment in his case is not final,” Simon Ntah wrote in Lescaudron’s April appeal.
Separate from whatever civil damages may be awarded is the thorny issue of how to distribute the more than $140 million in cash and Mediterranean properties linked to Lescaudron that Judge Banna ordered the bank give to “all clients concerned.”
Ivanishvili was the wealthiest and biggest source of funds that Lescaudron tapped to try and recover his losses and and lawyers for the Georgian have claimed that his losses ran into the several hundreds of millions.
“By not returning the stolen funds and relying on irrelevant excuses, Credit Suisse continues to act irresponsibly towards its customers,” Maurice Harari, Ivanishvili’s Swiss lawyer said in a statement.
No party can make any financial claims against the judgment until all the appeals have been heard, the bank said in a statement.
“Once a final verdict is made, Credit Suisse will allocate any confiscated client assets,” the bank said.
Lescaudron had two apartments in the Sardinian resort of Porto Cervo that he has been ordered to forfeit by Judge Banna. There are also two properties and three parcels of land on the French Cote d’Azur owned by a Russian businessman who was a client of Lescaudron’s that are to be forfeited for reimbursement because they were deemed to be purchased with the proceeds of a crime.
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