UBS Subsidiary Loses Appeal Over $600 Million Fraud Award
UBS subsidiary Credit Suisse Life Bermuda lost its final appeal before the Privy Council in London against a $600 million plus fraud damages award to Georgian billionaire Bidzina Ivanishvili. The liability finding was upheld, confirming that the Credit Suisse unit turned a blind eye to the fraud orchestrated by relationship manager Patrice Lescaudron. This ruling, alongside a separate $461 million verdict in Singapore, compounds the legal costs UBS inherited from the Credit Suisse merger.
ramzi.a@financemagnates.com
A Bermuda based insurance unit, Credit Suisse Life Bermuda Ltd (CS Life), now owned by UBS, lost its final appeal at the Privy Council in London regarding a substantial damages award. The ruling largely upheld the $607 million compensation originally awarded by a Bermuda court in 2022 to Bidzina Ivanishvili, the founder of Georgia's ruling party. The Privy Council dismissed most arguments by CS Life but ordered a modest recalculation of the final payout amount. The case stems from a decade long fraud scheme (2006 2015) run by Credit Suisse relationship manager Patrice Lescaudron, who was convicted in 2018. Courts in both Bermuda and Singapore have consistently found that Credit Suisse entities failed to properly supervise Lescaudron and "turned a blind eye" to his activities. This legal defeat follows a separate 2023 ruling from Singapore's International Commercial Court, which ordered Credit Suisse Trust to pay $461 million to Ivanishvili. UBS, having inherited all legal liabilities from the Credit Suisse takeover, continues to face significant costs related to these and other legal issues.
The Privy Council Ruling and Parallel Verdicts
A Bermuda based insurance unit now owned by UBS lost its final appeal against a massive damages award connected to one of the banking industry's more notorious internal fraud cases.
- Liability Upheld: The Privy Council in London dismissed most arguments from Credit Suisse Life Bermuda Ltd (CS Life) on Monday, leaving the liability finding intact. The original Bermuda ruling in 2022 found that CS Life had turned a blind eye to the fraud.
- Damages Award: The Privy Council upheld the $600 million plus award to Bidzina Ivanishvili, but ordered a modest recalculation based on a "narrow victory on timeline dispute," adjusting the start date for damages.
- Rogue Banker: The litigation stems from losses Ivanishvili suffered at the hands of Patrice Lescaudron, a relationship manager who ran a fraud scheme for nearly a decade before being caught in 2015 and later convicted in a Swiss court.
- Parallel Verdict: The Singapore International Commercial Court issued a separate ruling in 2023 ordering Credit Suisse Trust to pay $461 million, finding the bank failed to adequately protect Ivanishvili's assets.
Financial Burden and Legacy Issues
UBS continues to pay for the rescue of Credit Suisse several years ago, absorbing its extensive litigation portfolio.
- Mortgage Settlement: In early August, UBS agreed to pay about $300 million to settle mortgage related obligations inherited from Credit Suisse.
- Remaining Costs: UBS still faces potential costs tied to other Credit Suisse legal matters, including fallout from the 2021 collapse of Archegos Capital Management. Bloomberg Intelligence estimates that the remaining cases could total roughly $500 million.
- Payment Status: UBS has already set aside the required funds in an interest bearing escrow account, though questions remain about when and how payment will be made given sanctions against Ivanishvili and ongoing geopolitical complications.