Credit Suisse racked up a partial win in a long-running legal battle over a luxurious Nevada resort. The verdict bolsters a veteran investment banker who recently joined top management.
The Swiss bank doesn't have to pay $286 million in a legal case over financing for a soured real estate deal, legal outlet «Law360» (behind paywall) reported on Friday, citing a U.S. court ruling. The case dates back to 2007 – and is closely tied to David Miller (pictured below), a Credit Suisse veteran who now runs its investment bank.
More than 15 years ago, Miller was the architect of a scheme called dividend recapitalization loans. The loans allowed major U.S. resort developers to borrow from banks like Credit Suisse, based on the inflated valuation of their projects like the Yellowstone Club, a private Montana ski resort.
Years of Wrangling
The scheme, which included the development 30 kilometers west of Las Vegas alongside a man-made lake that is at the heart of Friday's ruling, blew up, and investors lost money. Credit Suisse, which had earned millions in fees on the deals, spent years in court wrangling over the deals.
Specifically on Lake Las Vegas, Credit Suisse will not have to pony up $211 million in damages and another $75 million in interest that had been awarded to its former client, Highland. The now-defunct hedge fund had invested about $250 million in the resort in 2007.
«Biggest, Deepest Dredge»
The hedge fund accused Credit Suisse of having given fraudulent information about the resort. The court case revealed an unseemly side to Miller when he was co-head of Credit Suisse's syndicated loan group.
The 55-year-old investment banker told a colleague astounded by the scheme «I go wherever I can find a fee,» according to reporting in 2016 by the «New York Times». The colleague had termed Miller's resourcefulness «the biggest and deepest dredge known to mankind».
Loss-Making Unit
Five months ago, Miller took over Credit Suisse's loss-making investment banking and capital markets unit from Jim Amine, who has since left the Swiss bank. The unit was unprofitable before Miller took over, but losses deepened in his first full quarter at the helm.
Credit Suisse, which traditionally adopts a fighting posture to legal cases, faces a host of other lawsuits from before the financial crisis of 2008/09. It and nine other banks were hit with bond collusion accusations this week, while a former client claimed Credit Suisse covertly sold securitized loans it referred to internally as «crappy,» «garbage,» and «sludge,» as finews.com reported on Wednesday.
