Prosecutors are nearing the end of their case after over three weeks of trial for Privinvest Group executive Jean Boustani, who is accused of conspiring to defraud investors in loans made by Credit Suisse and Russian bank VTB to Mozambican state-backed special-purpose vehicles (SPVs).
The government alleges that Boustani structured the deals so that the $2 billion in loans to fund maritime projects for Mozambique were instead funneled directly to the bank accounts of Privinvest, the projects’ main contractor. Prosecutors claim that the three Mozambican SPVs were created as shams to divert over $200 million in bribes and kickbacks to Mozambican government officials and investment bankers. The superseding indictment alleges that after conducting little or no business activity, each of the three SPVs defaulted on its loan.
Credit Suisse employees have admitted to their role in facilitating the fraud and kickback scheme. Andrew Pearse, the former head of Credit Suisse’s Global Financing Group, testified that he received $45 million in kickbacks from Privinvest for ensuring loan approval. Surjan Singh, a former Credit Suisse banker, also testified that he took $5.7 million in kickbacks for promoting two of the SPV deals. The bankers also allegedly intentionally withheld red flags about the likelihood of corruption connected to the deals from Credit Suisse’s compliance department. Pearse and Singh, along with another former Credit Suisse investment banker, Detelina Subeva, have pled guilty to conspiracy charges.
A former AllianceBernstein portfolio manager testified that the hedge fund lost millions of dollars from its approximately $75 million stake in one of the impacted SPVs. AllianceBernstein was offered and accepted Eurobonds in exchange for its debt securities, and ultimately liquidated its position at a loss.
The case is U.S. v. Boustani et al., case number 1:18-cr-00681, in the U.S. District Court for the Eastern District of New York.