Credit Suisse Rogue Banker's Victims Take Fight to New York
(Bloomberg) -- The victims of convicted Credit Suisse Group AG fraudster Patrice Lescaudron are taking their fight to New York.
Lawyers for an investment firm owned by former Russian senator Vitaly Malkin have turned to a federal court in New York to request an array of documents to boost planned lawsuits against the bank in its home country of Switzerland, which they argue should bear some responsibility for client losses.
Malkin’s gambit opens a fresh chapter in the long-running saga of Lescaudron, once the star of Credit Suisse’s Russia desk, and the half dozen wealthy Russians he was convicted of defrauding in January. While Lescaudron serves a five-year prison sentence, the whole affair shows no sign of ending soon as all sides appeal the verdict and civil lawsuits loom.
In addition to “all relevant documentation” on Malkin’s accounts which “Credit Suisse has also refused to provide,” his Top Matrix Holdings is also seeking to question Brady Dougan, Credit Suisse’s chief executive officer from 2007 to 2015, while Lescaudron was managing the Russian businessman’s money. Lescaudron’s fraud cost Top Matrix at least $100 million, his lawyers argued.
A spokeswoman for Credit Suisse declined to comment. A spokesman for Dougan’s investment firm did not have any immediate comment when reached by phone in New York. There is no indication or implication that Dougan was suspected of any wrongdoing.
Malkin and a second client who’s made a similar request -- known as a 1782 filing -- will have to persuade a federal judge that their requests are needed for the Swiss proceedings and are not mere fishing expeditions. They will also have to convince the judge that although Credit Suisse’s U.S. unit is a separate legal entity, it could plausibly have information about the Lescaudron affair that has not been shared to date.
Lescaudron’s victims argue the U.S. is a valid place to gather evidence because much of his losses were caused by a massive wrongway bet on a California healthcare company that was traded in New York. In addition, Malkin’s lawyers argue that he met with Dougan on at least one occasion, according to the court filing.
The information sought “relates to Credit Suisse’s knowledge of Mr. Lescaudron’s fraudulent activities; Credit Suisse’s supervision, or lack thereof,” as well as “Mr. Dougan’s knowledge about these matters,” Top Matrix argued in court documents.
The Zurich-based bank was scolded last month by Swiss finance regulator Finma for failing to rein in Lescaudron, but escaped any real penalties for its compliance shortcomings. Unusually, Credit Suisse wrote to Geneva’s Criminal Appeals Court in May 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.
Lawyers for his victims argued that such an unprecedented move by Credit Suisse shows the bank 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.
The various appeals in the Lescaudron case are scheduled to be heard Jan. 21 in Geneva.
Second discovery effort
Russian businesswoman Olga Kurbatova has also sued for discovery, asking that Lyxor Asset Management and Daniloff Capital founder Elliot Daniloff hand over evidence about Kurbatova’s assets they were mandated to manage by Lescaudron. In total, Kurbatova says she lost at least $35 million because of his fraud.
Messages left for Lyxor and for Daniloff at his firm were not returned. Both companies have offices in Manhattan. As with Dougan, there is no suggestion that either firm is suspected of wrongdoing.
“To perpetrate his scheme, Mr. Lescaudron lied about the nature and quality of the investments, forged Ms. Kurbatova’s signature on authorization forms, and made investments without her prior consent,” said her lawyers in their Oct. 11 filing. The Lyxor product and Hudson River Russia Fund, managed by Daniloff “were two of the improper investments.”
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