Credit Suisse Trust was found liable for multi-million dollar fraud against Bidzina Ivanishvili and their family, resulting in substantial losses.
TWC – In a significant ruling, the Singapore International Commercial Court has instructed Credit Suisse Trust to compensate former Georgia prime minister Bidzina Ivanishvili and his family with $926 million. The court concluded that a fraudulent individual within the bank had siphoned off millions of dollars from the trust over nine years and that the defendant had violated its duty to safeguard the assets entrusted to them.
The case involved prominent legal representatives such as Senior Counsel Cavinder Bull and Ms. Woo Shu Yan from Drew and Napier, representing the plaintiffs, who were heard over multiple days in September 2022 and February 2023. On the other side, lawyers from Allen & Gledhill, Ms. Han Rebecca, and Mr. Justin William Jeremiah represented Credit Suisse Trust, a wholly owned subsidiary of Swiss company Credit Suisse Trust AG, which is itself a subsidiary of the Credit Suisse Group. The defendant, Credit Suisse Trust, is incorporated in Singapore.
The lawsuit was filed by Mr. Ivanishvili, his wife, and three of their children, seeking damages of approximately $1.2 billion. They were the beneficiaries of the Mandalay Trust.
Born in Georgia, Mr. Ivanishvili received his education there, including a Ph.D. in economic science. In the 1980s, he ventured into business alongside his associate Vitaly Malkin, a Russian-Israeli oligarch. Together, they successfully imported inexpensive telephones and computers from Asia for sale in the USSR. The profits from their enterprise enabled them to establish Rossiyskiy Kredit, one of Russia’s earliest privately owned banks.
Mr. Ivanishvili’s longstanding association with Credit Suisse Trust in Singapore began in 2004 when an officer from the private investment banking division of Credit Suisse Group approached him and offered wealth management services. Based on the bank’s advice, he deposited over $1.1 billion into the Mandalay Trust, with the primary objectives of inheritance planning and asset preservation.
Regrettably, the individual appointed as the trust’s relationship manager, Patrice Lescaudron, turned out to be a fraudster. Over nine years, Lescaudron embezzled millions of dollars from the trust. His illicit activities persisted until 2015 when he was finally apprehended and incarcerated.
In 2018, the Swiss Correctional Court found Lescaudron guilty of embezzlement and manipulating securities at inflated prices, which caused substantial harm to both the trust and Mr. Ivanishvili. Furthermore, Lescaudron opened various accounts and conducted unauthorized transfers to conceal losses in other clients’ statements that he had caused.
Until August 2022, the defendant maintained that the plaintiffs were required to prove Lescaudron’s fraudulent actions, despite his guilty plea and subsequent conviction. Lescaudron was sentenced to five years in prison by a Geneva court in 2018 and reportedly died by suicide in 2020 after an early release.
Shortly before the trial commenced, the defendant altered its stance, acknowledging its obligation to protect the trust assets if it knew the purchases were not appropriately managed. However, they contended that their role was minimal in the events leading to the fraud, and based on their involvement and the information provided, they could not have prevented or terminated the fraudulent activities.
In a comprehensive 257-page judgment, International Judge Patricia Bergin observed that the defendant had conceded breaching its duty to safeguard the trust assets by December 31, 2008. Furthermore, Justice Bergin concluded that the plaintiffs had successfully demonstrated that the defendant had breached its duty as of March 30, 2008, to protect their assets.
“The plaintiffs’ losses are calculated as the difference between the results that would have been achieved if the entire portfolio had been managed by a competent, professional trustee with no impact from fraud and the actual outcomes,” explained Justice Bergin.
The court has now directed the defendant to compensate the plaintiffs $926 million. The defendant has already made a partial payment of approximately $79.4 million. Both parties have been instructed to provide submissions regarding the matter of costs.
Credit Suisse Trust intends to pursue an appeal against the ruling vigorously.