In a class action lawsuit, Credit Suisse and its former auditor KPMG are accused of violating a US federal law originally aimed at organized crime.

Shareholders of Credit Suisse have filed a RICO lawsuit in New York, seeking damages for losses amounting to billions of dollars, which they claim are the result of collusion between the bank and its former long-time auditor KPMG.

Targeting the Mafia

The class action lawsuit was filed Wednesday by the law firm Bottini & Bottini, the «New York Law Journal» reported (behind paywall). It alleges two RICO violations and breaches of duty to shareholders under both Swiss and New York law.

The term «RICO» is often associated with racketeers and organized crime, an acronym for The Racketeer Influenced and Corrupt Organizations Act, a US federal law providing for criminal penalties as well as civil claims for acts committed within the scope of a criminal organization. It was originally directed primarily against the racketeering activities of the Mafia in the United States.

It is through the RICO statute that United States Attorney Rudolph Guiliani indicted the heads of New York's five Mafia families in 1985. It crippled what was known as «The Commission», a committee that resolved disputes within the families. 

Deficient and Insufficient

The allegations mirrored a lawsuit filed a week earlier by the same lawyers on behalf of another shareholder plaintiff, it adds.

Auditor KPMG was replaced by PricewaterhouseCoopers (PwC) as Credit Suisse's auditors in 2020. According to the statement of claim, PwC found that Credit Suisse suffered from a lack of financial and legal controls and risk management protocols, to which it attributed harm being done.

Detriment to Shareholders

Internal controls were deficient and inadequate for over 20 years, something KPMG was aware of when it attested to the propriety of Credit Suisse's financial statements and the adequacy and effectiveness of its controls and risk management processes in annual reports to shareholders for years, according to the report

Invoking Omerta

It said the long downward spiral of the Swiss bank was the result of long-term and persistent mismanagement, from which Credit Suisse insiders personally benefited at the expense of shareholders.

Credit Suisse declined to comment.