In the legal battle between Credit Suisse and its former client, Bidzina Ivanishvili, the Swiss lender admitted to having neglected its fiduciary duties.
At the end of the second week of the trial between Credit Suisse and former Georgia Prime Minister Bidzina Ivanishvili, there is a surprising turn of events. A Credit Suisse Group trust admitted before the International Commercial Court in Singapore not to have informed its billionaire client about unauthorized transfers from his accounts, as reported by «Bloomberg» (behind paywall) on Friday.
Merely a Fiduciary Duty
The admission of this omission could significantly determine the trial outcome around a possible liability of the CS subsidiary for the faulty behavior of the former client advisor Patrice Lescaudron.
Over the first nine days of the trial, Lee Eng Beng, lead counsel for Credit Suisse Trust Singapore, argued the bank's responsibility was limited to managing Ivanishvili's assets. The Georgian and his business advisor had made the investment decisions and should therefore be liable for any losses.
Abrupt U-Turn
On Friday afternoon, however, Lee acknowledged to the chief judge that in some administrative procedures, the trust had failed to meet self-imposed standards.
«The defendant accepts that it ought to have, as at 31 December 2008, taken reasonable steps to address the issue of unauthorized transfers from the bank accounts of Meadowsweet Assets Limited, including directly contacting Mr. Ivanishvili to verify the propriety of the transfers out of Meadowsweet’s bank account,» according to «Bloomberg» reporting.
Conclusion in Sight?
With this change of strategy, the legal team appears to be attempting to limit the possible consequences of the damaging statements made by employees of the trust at the beginning of the trial. However, these statements should not be seen as an admission of guilt, if only some administrative procedures of internal standards had not been followed.
In March, Ivanishvili won a judgment in a Bermuda court, which ruled a local Credit Suisse life insurance didn't take adequate action to prevent Lescaudron’s fraud. That decision is being appealed.
Credit Suisse repeatedly stressed that Ivanishvili's client advisor Lescaudron had been a lone wolf who was not supported by any other employee of the bank. He had been summarily dismissed from the firm in 2015 and was sentenced to prison for fraud in Geneva in 2018.
Previously, observers of the trial had expected Credit Suisse to appeal a guilty verdict in Singapore and that no out-of-court settlement was on the horizon. The trial is expected to continue through next week with a verdict expected sometime in the first quarter.
