A New Zealander is one of three former Credit Suisse bankers embroiled in an international fraud loan scheme.
Andrew Pearse, 49, was arrested in London, charged by the United States for allegedly helping to arrange over US$2 billion (NZ$2.9 billion) in loans that were guaranteed by the government of Mozambique.
The loans were supposed to be used on maritime projects in the East African nation - which are now being described as nothing but a front.
The charges stem from an investigation of three companies created to complete projects for Mozambique that would provide "coastal surveillance," aid for tuna fishing and shipyards.
As part of the scheme, three companies were formed to borrow more than US$2 billion in loans guaranteed by the Mozambique government between 2013 and 2016, the indictment says. "The proceeds were supposed to be used exclusively for the maritime projects," it says.
"In reality," it adds, "the defendants created the maritime project as fronts to enrich themselves and intentionally diverted portions of the loan proceeds to pay at least US$200 million in bribes and kickbacks to themselves, Mozambican government officials and others."
Prosecutors allege at least US$200 million was used as bribes and kickbacks to the bankers, government officials and others.
Manuel Chang, the former finance minister of Mozambique, has also been charged in connection with the scheme. Prosecutors say Chang was arrested and detained in South Africa last week pending the outcome of an extradition request.
Also charged were former Credit Suisse bankers, Andrew Pearse, Surjan Singh and Detelina Subeva.
Mozambique's mission to the United Nations and defence lawyers had no immediate comment earlier this week.
The indictment reveals how the bankers allegedly worked to circumvent internal compliance rules in order to approve the loans.
Pearse and Singh, former managing directors, and Subeva, a vice president, previously worked together in the global financing unit at the bank.
The indictment alleges Credit Suisse's bankers helped officials in of one of the world's poorest countries go deep into debt for legally dubious projects whose rationale were flimsy. Loans were concealed from foreign donors, who suspended aid after they were revealed, leading the southern African nation to default on its debts early last year.
The charges focus on deals several years ago that allowed Mozambique to borrow US$2 billion for maritime projects and coastline protection, according to the indictment. But the fundraisings, once pitched as efforts to grow the economy and fend off sea pirates, were themselves plundered, with at least US$200 million diverted for bribes and kickbacks, prosecutors said.
Credit Suisse said it was deceived by its own staff and wasn't named as a defendant in the indictment. The bank has also said it's seeking to boost transparency in emerging-market financing involving government entities, including working on new industry standards.
In a similar case, US prosecutors last year charged former Goldman Sachs bankers with conspiring in bribery tied to fundraisings for Malaysian wealth fund 1MDB. Like Credit Suisse, the bank has denied knowledge of the scheme, blaming rogue executives.
US prosecutors accused Pearse, Singh and Subeva of withholding information from Credit Suisse's compliance staff as the firm began arranging US$622 million in loans to a government-controlled entity that was supposed to help protect the nation's territorial waters.
Credit Suisse's due diligence files included a report on an executive at another company involved in the project, labelling him a "master of kickbacks," and a regional executive at the bank rejected doing a deal with him, according to the charges. But Pearse and Singh didn't relay that to compliance, which "failed to pursue its inquiry further." The trio also removed some bank conditions from the loan, such as a requirement that Mozambique's attorney general vouch for the validity of the government's guarantee, prosecutors said.
Pearse, Singh and Subeva were released on bail in London. Their lawyers couldn't immediately be reached for comment.
Prosecutors cited emails to illustrate how bribes were negotiated. Jean Boustani, a salesman and negotiator at Privinvest Group, an Abu Dhabi-based holding company whose units include a shipbuilder, allegedly agreed to pay US$50 million bribes and kickbacks to Mozambican government officials in December 2011, and US$12 million to his co-conspirators at Privinvest.
Privinvest was hired to provide equipment and services to complete the maritime projects, prosecutors said. Pearse, who headed Credit Suisse's global financing group at the time, and Subeva both left in 2013 and started to work "for the benefit" of Privinvest, according to the indictment.
Boustani was arrested at John F. Kennedy airport in New York Wednesday and ordered to be detained, according to the government.
In response to an email from Boustani requesting a number for a bribe and kickback, an official whose name is blacked out in the indictment allegedly responded: "Fine brother. I have consulted and please put 50 million chickens. Whatever numbers you have on your poultry I will add 50 million of my breed."
According to the indictment, Boustani forwarded the email to Privinvest personnel, stating: "50M for them and 12M for [Privinvest Co-Conspirator 1] (5 per cent) = total of 62M on top."
Boustani's lawyer, Michael Schachter, didn't immediately respond to requests for comment.
Prosecutors said Privinvest officials "charged inflated the prices for the equipment and services" provided to Mozambique, freeing up money for the bribery scheme. As part of the deal, Mozambique officials diverted some of the money to buy anti-pirate patrol boats that could be armed with cannons and military drones, according to Stratfor, a global security advisory firm.
"The indictment alleges that the former employees worked to defeat the bank's internal controls, acted out of a motive of personal profit, and sought to hide these activities from the bank," Karina Byrne, a company spokeswoman, said in an email.
The International Monetary Fund suspended lending to Mozambique after it found out about the deals. The FBI probed whether the banks paved the way for the deal by making improper payments to Mozambican officials, according to the indictment.
As part of the deal, the group of defendants "conspired to defraud investors" in the bonds by making false statements about whether they paid bribes and kickbacks to Mozambican officials and bankers, and the country's ability to pay back investors, the indictment said.
- Additional reporting from Associated Press and Bloomberg