Banker Admits Mozambique Fraud -- WSJ

Date : 07/24/2019 @ 8:02AM
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Banker Admits Mozambique Fraud -- WSJ

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 24, 2019).

By Rebecca Davis O'Brien, Matt Wirz and Gabriele Steinhauser 

The U.S. Department of Justice has gained a key advantage in its prosecution of an alleged global corruption ring involving $2 billion of Mozambican government-debt deals.

Prosecutors working on the case got a guilty plea last week from the former banker at Credit Suisse AG who designed the loans. Now, they seem poised to win custody of Mozambique's former Finance Minister, Manuel Chang, due to a change of stance by authorities in South Africa, where he is awaiting extradition.

Andrew Pearse, who headed the global financing group in Credit Suisse's London office at the time of the alleged scheme, pleaded guilty to one count of wire-fraud conspiracy Friday in federal court in Brooklyn. He also incriminated executives of Abu Dhabi-based naval contractor Privinvest Group whom the Justice Department has accused of masterminding the alleged fraud, and stated that Credit Suisse profited substantially from the deals.

"Privinvest, with the knowledge of its executives Jean Boustani, Iskandar Safa and Najib Allam, wired me millions of dollars in unlawful kickbacks from loan proceeds and illegal payments for my assistance in securing loans made by Credit Suisse," Mr. Pearse told the court.

"Privinvest denies the statements attributed to Andrew Pearse in his guilty plea in U.S. federal court last week," a spokesman for the company said. "Neither Privinvest nor its CEO, Iskandar Safa, had knowledge of, or involvement in, the crimes Pearse claims he committed."

A spokesman for Credit Suisse, which hasn't been charged in the case, declined to comment. The bank has previously said the charged former employees defeated the bank's internal controls out of "a motive for personal profit."

Mr. Allam, whose whereabouts couldn't be determined, couldn't be reached for comment. Lawyers for Mr. Boustani have sought to have his charges dismissed, saying in court filings that the alleged conduct falls "outside the reach of U.S. law." They also say Mr. Boustani didn't know about alleged representations in the underlying loan documents provided to investors.

The U.S. has brought charges against Messrs. Boustani and Allam, while Mr. Safa, Privinvest's billionaire Lebanese owner, is considered an unindicted co-conspirator in the case, according to people familiar with the investigation. Privinvest received most of the money Mozambique raised in the allegedly fraudulent loans, and more than $1 billion is unaccounted for.

Federal prosecutors allege that executives at Privinvest recruited London-based Credit Suisse bankers to make loans guaranteed by the Mozambican government, which were then sold to investors around the world. Credit Suisse and other banks raised $2 billion in loans and bonds in 2013 and 2014, some of which were kept secret from the public and investors who had bought other parts of the debt until The Wall Street Journal reported their existence in 2016.

Prosecutors from the Brooklyn U.S. attorney's office and the Justice Department allege that Privinvest executives negotiated at least $200 million in bribes and kickbacks to Mozambican government officials, Credit Suisse bankers and themselves.

Mr. Pearse said he helped arrange the loans in exchange for bribes and to benefit Credit Suisse. Others at the bank knew the deals presented a high risk of bribery, he said.

"I had observed that Credit Suisse had used intermediating brokers in transactions that featured a high risk of corruption with the apparent view that doing so insulated itself from legal liability," Mr. Pearse said during his plea.

A lawyer for Mr. Pearse declined to comment. Mr. Pearse, who had originally been charged with four counts related to the alleged scheme, couldn't be reached for comment.

Mr. Chang, Mozambique's former finance minister, two other former Mozambican officials, Messrs. Boustani and Allam, Mr. Pearse and two other Credit Suisse bankers have been charged in the case.

One of those bankers, Detelina Subeva, a former vice president for Credit Suisse's global financing group, pleaded guilty in May to one count of conspiracy to launder money. Mr. Chang, who has denied wrongdoing, has been arrested in South Africa and is fighting extradition to the U.S. Mr. Boustani is awaiting trial in a Brooklyn detention facility.

U.S. prosecutors have also gained ground in their fight to bring Mr. Chang before a U.S. judge. Earlier this month, South Africa's justice minister, Ronald Lamola, said he was seeking to reverse a decision by his predecessor to extradite Mr. Chang to Mozambique rather than the U.S. The U.S. prosecutors allege that Mr. Chang received at least $12 million in bribes in return for approving a government guarantee for the $2 billion borrowed.

Mr. Lamola said that extraditing Mr. Chang to Mozambique would break South African law, citing questions over whether the former minister's immunity from prosecution, which he enjoys as a member of parliament, has been lifted. Mozambique's attorney general's office has said it was charging Mr. Chang with crimes including abuse of power, fraud and embezzlement in connection with the alleged debt scheme. But an affidavit filed by the South African ministry's director-general states that Mr. Chang is much more likely to face justice in the U.S., where a trial date has been set for Oct. 7.

Mr. Chang's lawyer, Rudi Krause, said Monday that he would oppose a reversal of the extradition decision at a Johannesburg court hearing expected next month.

Write to Rebecca Davis O'Brien at Rebecca.OBrien@wsj.com, Matt Wirz at matthieu.wirz@wsj.com and Gabriele Steinhauser at gabriele.steinhauser@wsj.com

 

(END) Dow Jones Newswires

July 24, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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