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February 2024
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AAM Magazine
February 2024
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Analysis: Singapore court deals a blow to Credit Suisse

Credit Suisse

Another day, another Credit Suisse saga. The Singapore International Commercial Court has ruled that Credit Suisse Trust must pay Bidzina Ivanishvili, former prime minister of Georgia, some US$926 million minus deductions from an earlier $79.4 million settlement, and potentially subject to further adjustments. Credit Suisse Trust says it will appeal, claiming the judgement is wrong.

Whatever Credit Suisse’s view, there seems little doubt that Credit Suisse private banker Patrice Lescaudron, in the words of the judgment, “misappropriated many millions of dollars” from a $1.1 billion trust administering Ivanishvili’s assets. Lescaudron was investigated and subsequently imprisoned by the Swiss Correctional Court in 2018, and committed suicide two years later. But according to the Singapore judgement, Credit Suisse breached its duty of safeguarding client assets as early as 2008 by failing to investigate his actions.

Credit Suisse argued that it acted honestly and reasonably in 2008, and therefore was not liable for breach of trust. But the court said the bank had in fact allowed numerous unauthorised trades, and concealed unauthorised payments and Lescaudron’s fraud from the plaintiffs. It said Credit Suisse preferred the importance of Lescaudron retaining the ‘big client’, i.e., the plaintiff, to compliance with its core obligation of keeping the Trust assets safe.

Credit Suisse “was in breach of its directions that had been established for the purpose of avoiding employee fraud and in some instances waited for up to two years for a response from him when he was questioned about his flagrant breaches. Its tolerance of these flagrant breaches was not in good faith and was unreasonable”, the judgement states.

The court ruling will loom large in the minds of high-net-worth investors, especially in Asia, who are already burned by losses over Credit Suisse’s Additional Tier 1 bonds. And what can it mean for the relative attractiveness of Singapore versus Switzerland as a private wealth management hub, especially given that wealth managers worldwide are targeting Asia for future high growth opportunities?

Arrogance and entitlement have been the words bandied around concerning the entire Credit Suisse debacle. Indeed, these are words often bandied about regarding Switzerland’s attitude towards the outside world. Would any wealthy investors be wise to trust Switzerland with their money until the country shows that it has learned its lesson and cleaned up its act?