Hidden Debts: Credit Suisse, Russia's VTB Agree to Final Settlement
Russia's VTB Capital and Credit Suisse have agreed to pay fines to the United States and British authorities for their role in a business fraud, which has been known as the "hidden debts" scandal since 2013 in Maputo, Mozambique.
According
to reports, after the final ruling on the case the US Securities and
Exchange Commission (SEC) announced that Credit Suisse has agreed to pay
almost $475 million to the United States and British authorities "for
fraudulently misleading investors and violating the Foreign Corrupt
Practices Act (FCPA). Russia’s VTB Capital, currently under sanctions,
will pay a $4 million penalty.
According
to reports on the "hidden debts” scandal, many United States investors
had lost money in what was described as a $2 billion loan scam involving
two banks, the Credit Suisse and the Russia’s VTB bank. The secrecy and
corruption surrounding the loans dealt devastating blows to
Mozambique’s credibility and reputation. It was the Wall Street Journal
first revealed the hidden debt in April 2016.
The
fraud and corruption involved millions of dollars in bribes to sign off
on about $2.2 billion in loans from Credit Suisse and the Russian VTB
bank to Mozambican government agencies to buy fishing trawlers and
military patrol vessels in 2013 and 2014. It involved three
security-linked Mozambican companies, Proindicus, Ematum (Mozambique
Tuna Company) and MAM (Mozambique Asset Management).
The
loans were only possible because of guarantees issued illegally by the
government of the time under the then president Armando Guebuza. The
loans and the guarantees violated the 2013 and 2014 budget laws, and the
Mozambican Constitution.
"A
London-based subsidiary of Russian bank VTB separately agreed to pay
more than $6 million to settle SEC charges related to its role in
misleading investors in a second 2016 bond offering,” the US Securities
and Exchange Commission announced in a statement.
"VTB
Capital consented to an SEC order finding that it violated
negligence-based antifraud provisions of the federal securities laws.
The VTB agreed to pay "without admitting or denying” the charges of
"misleading investors in a second 2016 bond offering,”
According
to the SEC order, "the second offering as structured by VTB Capital and
Credit Suisse allowed investors to exchange their notes in an earlier
bond offering for new sovereign bonds issued directly by the government
of Mozambique”.
"The
SEC found that the offering materials distributed and marketed by
Credit Suisse and VTB Capital failed to disclose the true nature of
Mozambique’s debt and the high risk of default on the bonds. The
offering materials further failed to disclose Credit Suisse’s discovery
that significant funds from the earlier offering had been diverted away
from the intended use of proceeds that was disclosed to investors.
Mozambique later defaulted on the financings after the full extent of
‘secret debt’ was revealed,” the SEC press release reads.
On
October 19, VTB Capital said in an official media release that it had
entered into a settlement with the United States Securities and Exchange
Commission (SEC) to end the SEC’s investigation into VTB’s involvement
in a series of transactions with the Republic of Mozambique. VTB did not
admit or deny the allegations in the SEC’s order.
In
its order, the SEC expressly recognizes that VTB had no knowledge of or
involvement in the corrupt kickback scheme hatched by Mozambican
officials and others. The SEC also did not find that VTB engaged in
intentional misconduct or fraud.
Instead,
the SEC’s findings with respect to VTB center on alleged disclosure
failures in a single transaction: the 2016 EMATUM Exchange offering.
Specifically, the SEC has found that VTB was negligent because the
offering materials contained misleading statements by Mozambique and
omissions that VTB failed to prevent. These alleged disclosure failures,
the SEC found, relate to (1) the full nature of Mozambique’s
indebtedness, and (2) VTB’s role as a lender on two earlier
transactions.
The
SEC order recognizes the difficult position which VTB was put in by
senior Mozambique officials during the offering process, and that VTB
itself was defrauded by Mozambique officials. Neither VTB nor any of its
personnel were charged with criminal conduct by the United States
Department of Justice. No VTB personnel were charged by the SEC in
today’s order.
VTB
takes the settlement seriously and fully cooperated with the SEC
investigation. The settlement announced today marks the end of the SEC’s
investigation into VTB’s role in the Mozambique transactions. VTB seeks
to hold itself to the highest standards and remains committed to
ensuring that VTB clients have the information they need to invest in
today’s markets.
VTB
has for years, cooperated extensively with all government enquiries.
VTB also tried for years to cooperate with the Mozambican government to
find a constructive solution to the country’s debt situation. Those
efforts to date have been unsuccessful. Accordingly, in 2020, VTB
commenced legal proceedings in the English courts to recover the sums
due to it. VTB expects to prevail.
VTB will pay a $4 million penalty and disgorge $2 million in fees.
Comment on behalf of VTB Capital:
"The
settlement reached today marks the end of the SEC’s investigation into
VTB’s role in the Mozambique transactions. As we have previously said,
VTB took significant steps to ensure the accuracy of the Eurobond
disclosure, which were met with resistance and pressure from a number of
other parties engaged in the deal, as the SEC recognized.
"We’d
like to emphasize that throughout the numerous international
litigations and investigations related to the Mozambique loans, none of
our employees have been charged with unlawful conduct.
"VTB
operates in a completely open and transparent manner observing the
highest levels of corporate governance and compliance in our daily
operations, and we remain confident that VTB acted responsibly in this
matter, notwithstanding an extensive scheme perpetrated by others. We
are confident of our legal position and look forward to finding a
solution in the remaining proceedings related to this situation,”
according to the VTB Bank.
*Kester Kenn Klomegah writes frequently about Russia, Africa and the
BRICS. As a versatile researcher, he believes that everyone deserves equal
access to quality and trustworthy media reports. Most of his well-resourced
articles are reprinted elsewhere in a number of reputable foreign media.
Leave a comment
- Popular
- Rated
- Commented
04/11/2021 - 11:05:02
12/03/2023 - 22:58:08
22/01/2023 - 11:24:06
13/12/2015 - 09:27:08
01/03/2021 - 09:00:37
Opinions
30/04/2024 - 01:33:18
17/04/2024 - 22:46:39
08/03/2024 - 02:04:01
Politics
06/05/2024 - 02:52:53
02/05/2024 - 23:52:49
30/04/2024 - 01:33:18
Terror Watch
05/05/2024 - 01:52:29
05/05/2024 - 01:47:23
Press Releases
30/04/2024 - 22:03:16
18/04/2024 - 21:29:03
Hidden Debts: Credit Suisse, Russia's VTB Agree to Final Settlement
Russia's VTB Capital and Credit Suisse have agreed to pay fines to the United States and British authorities for their role in a business fraud, which has been known as the "hidden debts" scandal since 2013 in Maputo, Mozambique.