Credit Suisse Warns of $500 Million Hit From Billionaire’s Lawsuit

In a statement Wednesday, Credit Suisse said a judgment against the bank was expected shortly in Bermuda for potentially more than $500 million. A person familiar with the matter said the judgment stems from Mr. Ivanishvili’s lawsuit. 

Mr. Lescaudron was sentenced in Switzerland to five years in prison in 2018 for fraud and forgery. He admitted cutting and pasting client signatures to divert money and buy stocks without their knowledge, causing more than $150 million in losses, according to the Geneva criminal court.

At his trial, Mr. Lescaudron said his aim was always to make big returns for his clients, and some money for himself, too. He apologized to Credit Suisse, former colleagues and his clients for his actions. Mr. Lescaudron served a two-year pretrial detention and was released in 2019. He killed himself in 2020. 

Credit Suisse contested Mr. Ivanishvili’s claims, and has said it was also a victim of a rogue employee breaking the rules. But evidence in the Bermuda trial included a report for Switzerland’s financial regulator in 2017 that found around a dozen executives or managers in Credit Suisse’s private bank knew Mr. Lescaudron was repeatedly breaking rules but turned a blind eye, proposed lenient punishment for his misconduct or otherwise glossed over the issues because he brought in around $25 million in revenue a year. 

Credit Suisse tried to block the report, whose contents were first reported by The Wall Street Journal in February 2021, from being shared with Mr. Ivanishvili in the Bermuda proceedings.

The regulator, Finma, publicly censured Credit Suisse in 2018 for inadequately supervising and disciplining Mr. Lescaudron, and said he had repeatedly broken internal rules. Credit Suisse has said it discovered Mr. Lescaudron’s fraud in September 2015, when a stock he bought for clients crashed.

The Finma-commissioned report found Mr. Lescaudron’s activities triggered hundreds of alerts in the bank that weren’t fully probed in the 2009-2015 period studied. A business-risk manager who tried to escalate the issues told the report’s investigators he feared losing his job if he raised the alarm further, according to the report.

Credit Suisse said it had taken reserves previously, without saying for how much, and that it intends to pursue all available legal actions. 

As recently as November, the bank declined to say whether it took any provisions for the billionaire’s cases. It didn’t disclose a provision specific to the cases in its annual report published earlier this month either.

Credit Suisse had litigation provisions of $1.65 billion at the end of 2021, and it estimated up to another $1.6 billion in potential charges not provisioned for. The bank said it will consider whether further reserves are needed in its first-quarter results due on April 27.