Credit Suisse recently announced its exit from its trust business. A prominent trial in Singapore reveals some of those business practices.
New details have emerged in the damages trial against a Credit Suisse subsidiary in Singapore, with the manager responsible for the firm's trust business at the time, taking the witness stand.
There he was questioned as to why former Credit Suisse banker Patrice Lescaudron was able to embezzle hundreds of millions of dollars from the assets of Georgian billionaire Bidzina Ivanishvili undetected.
No Policing
As «Bloomberg» (behind paywall) reported from the courtroom, the manager allegedly knew about withdrawals from the trust assets without formal pre-approval from the administrator of the trust assets.
«No, we were not policing that,» the former trust chief explained. He had assumed that Ivanishvili wanted to communicate only with his client advisor Lescaudron.
Furthermore, among the approximately 1,500 trusts administered in Singapore at the time, it was «not uncommon» for payments to also be triggered without formal pre-approval from the administrator of the trust assets.
No Monitoring Obligation
The Credit Suisse trust subsidiary argued in the lawsuit that, as trustee, it was not contractually obligated to monitor investments in the trusts. From a purely technical point of view, it is the case that in the case of so-called unauthorized payments, the principal of the trust initiates the transfer and this atakes place before the trustee formally approves the distribution.
At the very outset, the company asked the Singapore court to dismiss the lawsuit because it was against the wrong defendant and on the wrong basis.
Credit Suisse repeatedly stressed that Lescaudron had been a lone wolf who was not supported by any other employee of the bank. The institution sees itself as an aggrieved party.
However, the fact that Lescaudron was apparently able to exploit the mechanism with the unauthorized trust payments for criminal acts does not cast a good light on the unit. A few days ago, Credit Suisse announced that it was exiting its trust business, often located in tax havens, as finews.com reported.
A Secretive Deal
It is unknown for what price the division will be sold and how much wealth is lying dormant in the unit. Within the «old», pre-financial crisis Credit Suisse, the trust unit belonged to the most predominant areas within the group, along with the private banking subsidiary Clariden Leu, since integrated into the group.
A verdict in Singapore is expected in the first quarter of 2023. But for the subsidiary and the banking group, the stakes have already increased significantly. As also reported by finews.com, Ivanishvili has recently put the damages he incurred at $1.27 billion.
