Credit Suisse Group AG’s Singapore trust unit “failed in its basic duty” to safeguard a billionaire client’s assets, his lawyers argued on the opening day of a widely anticipated trial.
Bidzina Ivanishvili is suing CS Trust (Singapore) for US$800 million in damages and lost income, arguing the bank should have spotted the fraud being committed by former Credit Suisse banker turned fraudster Patrice Lescaudron much earlier.
“This is a claim against a trustee to whom assets were entrusted, who failed in its basic duty of keeping them safe,” Cavinder Bull, Ivanishvili’s lawyer said in court.
But CS Trust’s defence lawyer countered that their client’s duty was to administer the trust structure, and not to make any investment decisions. Ivanishvili could have exercised his power to transfer his assets to another bank, said Lee Eng Beng, a lawyer for the trust. Lee also argued that while there were unauthorized payments from the trust, some of those were with the knowledge of Ivanishvili, who wanted to expedite the payments.
The dispute with Ivanishvili adds to the problems the newly appointed Chief Executive Officer Ulrich Koerner and chairman Axel Lehmann are keen to resolve as the bank reels from reputational hits in the last two years. The potentially expensive legal spat with the Georgian is one of many that still weigh on the bank’s costs, on top of likely restructuring charges amid a strategic review that could see the investment bank drastically reduced.
The trial will also be a test of whether the Zurich-based bank can insulate itself from blame for alleged compliance failures of an overseas unit, or in this case a Singapore-based trust through which Ivanishvili had hundreds of millions of dollars invested.
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Credit Suisse has long argued that it and its units were in the dark about the fraud scheme perpetrated by convicted banker Patrice Lescaudron and also that Switzerland is the appropriate forum for any litigation. Lescaudron was convicted at the beginning of 2018 but was released from prison late that year on medical leave before he took his own life in 2020.
‘Came to the Expert’
Ivanishvili, who was once his country’s prime minister, began testifyng on Monday afternoon via video link from Georgia. Dressed in a navy blue blazer and matching light blue tie, he told the court the only purpose in going to Credit Suisse was that he wanted his assets protected.
“I thought I came to the expert, who can protect my capital and my family,” he said.
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Credit Suisse Life (Bermuda) Ltd., which handled some of Ivanishvili’s investments, unsuccessfully made the same argument that it wasn’t aware of Lescaudron’s activities in a case at the Bermuda Supreme Court in November. That line of reasoning was rejected by the judge, who ruled in March that the Bermuda unit had turned a “blind eye to Mr. Lescaudron’s wrongdoing.”
Ivanishvili was awarded damages of more than US$600 million in the Bermuda dispute, which is being put into escrow pending the outcome of an appeal.
Still, it hasn’t all been losses for the bank in its battle with its client, who was the wealthiest of a clutch of rich individuals from Russia and neighbouring Georgia handled by Lescaudron.
The New Zealand High Court dismissed Ivanishvili’s case there in 2018, accepting the bank’s argument that Switzerland was the correct jurisdiction.
And though a last-minute appeal to cancel the Singapore trial was rejected in August, Credit Suisse’s lawyers successfully argued that any litigation in Singapore should be limited to CS Trust and not the bank.
US$800 Million Sought
Lawyers for the trust said before the trial that it “denies that it had failed to take any or any reasonable steps to protect and safeguard the assets of the Mandalay Trust” created for Ivanishvili’s investments.
Credit Suisse itself said it doesn’t comment on ongoing litigation matters.
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Ivanishvili’s London lawyers have said the US$800 million in total they’re seeking is a sum derived from misappropriated assets as well as losses that wouldn’t have been incurred if the money had been prudently invested. They declined to comment ahead of the trial.
There was a modest overlap in the funds invested in Bermuda and Singapore and laws in both jurisdictions would prevent Ivanishvili from double-dipping in the event of victory in Singapore.
The Georgian is represented by a team led by Singapore-based Drew & Napier LLC.
CS Trust is being defended by Allen & Gledhill LLP and Rajah & Tann Singapore LLP.
