Credit Suisse settles with Mozambique over ‘tuna bond’ scandal

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Credit Suisse, the Swiss bank that was involved in a decade-old $1.5 billion-plus “tuna bond” scandal, has reached an out-of-court settlement with Mozambique, the bank’s new owner UBS announced on Sunday. The deal, which was struck one day before a London civil trial was due to start, ends a long-running dispute that has tarnished the reputation of both parties and plunged Mozambique into a financial crisis.

What was the ‘tuna bond’ scandal?

The ‘tuna bond’ scandal dates back to 2013 and 2014, when three state-owned Mozambican companies borrowed $2 billion from Credit Suisse and another bank, Russia’s VTB, to finance maritime projects, including a tuna fishing fleet and coastal security. The loans were backed by undisclosed government guarantees and arranged by Privinvest, a shipbuilding company owned by Lebanese businessman Iskandar Safa.

However, only a fraction of the money was spent on the intended projects, and hundreds of millions of dollars went missing or were used for bribes and kickbacks, according to U.S. and Mozambican prosecutors. The hidden debt, which amounted to about 20% of Mozambique’s gross domestic product, was exposed in 2016, triggering a default, a currency collapse, and a suspension of aid from international donors.

How did the parties resolve the dispute?

Mozambique sued Credit Suisse, Privinvest, and Safa in London in 2019, seeking to cancel the sovereign guarantee on one of the loans and to recover damages for alleged fraud, bribery, and breach of contract. Credit Suisse denied any wrongdoing and counter-sued Mozambique for failing to repay the loan. Privinvest and Safa also denied the allegations and claimed that they delivered on their contractual obligations.

Credit Suisse settles with Mozambique

The settlement, whose terms were not disclosed, involves most of the creditors who funded the loan to ProIndicus, one of the Mozambican companies, UBS said in a statement. “The parties have mutually released each other from any liabilities and claims relating to the transactions,” UBS said. “The parties are pleased to have resolved this long-running dispute stemming from events occurring a decade ago.”

UBS, which acquired Credit Suisse earlier this year, has been trying to resolve the bank’s legacy legal issues, including the ‘tuna bond’ case and the Archegos Capital Management debacle. The settlement with Mozambique will allow UBS to focus on its core business and avoid a costly and lengthy trial.

What are the implications of the settlement?

The settlement is a relief for both Credit Suisse and Mozambique, but it does not end the legal troubles for Privinvest and Safa, who remain as defendants in the London case. Mozambique is also pursuing criminal charges against former government officials, Credit Suisse bankers, and Privinvest representatives in its own courts, as well as seeking debt relief from other creditors.

The ‘tuna bond’ scandal has had a devastating impact on Mozambique’s economy and society, as the country struggles with poverty, inequality, and insurgency. The settlement may help Mozambique to restore its credibility and access to international financing, but it will also require the country to implement reforms and accountability measures to prevent future corruption and mismanagement.

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