Mozambique’s legal battle against Credit Suisse and shipbuilder Privinvest over the decade-old “tuna bond” scandal could result in a $1.5 billion-plus clash next week. The lawsuit, set to take place in London, has the potential to pit one of the world’s poorest nations against corporate heavyweights. However, on Friday it was revealed that Mozambique and UBS, the parent company of Credit Suisse, were engaged in out-of-court settlement talks.
The last-minute negotiations aim to reach a deal that would allow UBS to resolve a legal issue inherited from Credit Suisse and avoid a three-month trial at the High Court, scheduled to begin on Monday. If the talks fail, UBS, three of its former bankers, Privinvest, and its CEO Iskandar Safa will have to defend their involvement in deals related to financing a fishing fleet and maritime security.
The case, also known as the “hidden debt” scandal, involves the disappearance of hundreds of millions of dollars and resulted in Mozambique experiencing a prolonged economic downturn. Both the Mozambican and U.S. governments initiated criminal proceedings in response.
UBS declined to comment on the ongoing discussions, while Privinvest has not yet responded to requests for comment.
Mozambique’s objective in this lawsuit is to revoke a sovereign guarantee on a loan that it alleges was procured through corruption and to seek compensation for other alleged wrongdoing.
The “tuna bonds” scandal originated when three state-owned Mozambican companies secured loans from Privinvest and banks, including Credit Suisse, in 2013 and 2014. These loans were supported by undisclosed government guarantees and were presented as funds for various projects, such as a state tuna fishery. Credit Suisse subsequently sold a significant portion of its exposure to international investors.
When the misappropriation of funds and excessive borrowing came to light in 2016, international support, including from the International Monetary Fund, was suspended, leading to a debt default and the launch of criminal investigations.
Mozambique accuses Privinvest of paying over $136 million in bribes to corrupt officials and Credit Suisse bankers, potentially exposing it to a liability of at least $2 billion. The country also argues that Credit Suisse is accountable for the actions of its bankers, who pleaded guilty in the U.S. in 2019 to conspiracy charges related to breaching anti-bribery laws and committing money laundering.
In 2021, Credit Suisse agreed to pay approximately $475 million to British and U.S. authorities to settle bribery and fraud charges. The bank also pledged to forgive $200 million of Mozambican debt. Credit Suisse maintains that it was unaware of the misconduct of its bankers at the time, and the former bankers deny any involvement in a conspiracy.
Privinvest asserts that it fulfilled its contractual obligations and that any payments made were legitimate investments, consultancy fees, remuneration, or political campaign contributions.
In July, former Mozambican finance minister Manuel Chang, who signed the sovereign guarantees, was extradited from South Africa to the United States. He pleaded not guilty to charges of wire fraud, securities fraud, and money laundering. Chang is scheduled to appear in a Brooklyn federal court on October 27. Additionally, a former central bank governor and two ex-central bank employees in Mozambique have been charged alongside Chang, facing allegations of abusing their positions.
In a separate legal action in December, a Mozambican criminal court found the son of a former president and 10 others guilty of charges including money laundering and bribery, sentencing them to more than 10 years in prison.
More detail via Reuters here… ( Image via Reuters )