‘That’s What Oligarchs Do,’ Credit Suisse Says in Trial
‘That’s What Oligarchs Do,’ Credit Suisse Says in Trial Defense
(Bloomberg) -- A Georgian billionaire who lost vast sums to a former rogue banker at Credit Suisse Group AG should bear responsibility for some of his losses, a lawyer for an offshore unit of the bank argued.
Taking “a punt on a risky pharmaceutical stock, that’s what oligarchs with loose change do,” Stephen Moverley Smith, lawyer for Credit Suisse’s Bermuda unit, said in his opening defense on the second day of the trial in the island’s capital of Hamilton. “What’s CS supposed to do?”
Smith was referring to an outsized bet that convicted fraudster Patrice Lescaudron made on behalf of Bidzina Ivanishvili in Raptor Pharmaceutical Corp. It was the sharp plunge in Raptor stock that triggered margin calls far greater than what Ivanishvili believed he’d ever be liable for and exposed Lescaudron’s fraud, which had gone undetected for close to a decade.
Ivanishvili, a former prime minister of Georgia, accuses Credit Suisse Life (Bermuda) Ltd. of failing to stop Lescaudron from losing $400 million of his fortune when clues about his crimes had become apparent. Ivanishvili is one of at least five clients that continues to pursue the bank for damages, refusing to accept that the bank had no knowledge of Lescaudron’s crimes.
Lescaudron, who took his own life in 2020, was a lone wolf who hid his misdeeds from colleagues and superiors, the Zurich-based bank has consistently said. Credit Suisse declined to comment ahead of the trial.
At its heart, the trial is about whether the Bermuda unit bears responsibility for misdeeds by Geneva-based Lescaudron and how much discretion the Frenchman had to invest on Ivanishvili’s behalf.
Moverley Smith said Ivanishvili or his own adviser oversaw his investments in conjunction with the bank, not the Bermuda life insurance unit. If CS Life was not involved in the selection of individual investments, it’s “entirely inconsistent” for CS Life to monitor the performance of those investments, he said.
Lawyers for Ivanishvili yesterday said that Lescaudron met Ivanishvili for as little as 45 minutes a year, was trusted by the Georgian, and had wide discretion to invest on his behalf.
Starting in around 2012, Lescaudron encouraged his clients to invest heavily in Raptor. Ivanishvili and the banker’s other accounts soon became some of the largest single holders of the stock.
But in addition to the purchases the clients had authorized, the banker told Swiss prosecutors he bought millions more shares on credit that he’d taken out without their permission.
When in September 2015, Raptor announced trials of a new drug failed, the stock plunged 37%. Ivanishvili began getting margin calls, one for $128 million, for the leveraged positions the banker had bought without permission.
Moverley Smith continued to attack the case made out by Ivanishvili’s lawyer on Monday as vague and lacking specific transactions that led to losses, even when Lescaudron’s own confession he faked trades and forgeries were taken into account.
“There simply isn’t the material to conclude that forgeries took place that give rise to any loss,” said Moverley Smith.
“The whole approach of the plaintiffs to lump everything together and say these are all terrible things that happened,” he said. “What they haven’t done is to identifying the specific transactions that have given rise to losses.”
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