By Kester Kenn Klomegah

Russian VTB Capital and Credit Suisse have agreed to pay US and UK authorities fines for their role in a commercial fraud, known as the “hidden debt” scandal since 2013 in Maputo, Mozambique.

According to reports, after the final ruling on the case, the US Securities and Exchange Commission (SEC) announced that Credit Suisse had agreed to pay nearly $ 475 million to US and UK authorities “for fraudulently deceived investors and violated the Foreign Corrupt Practices Act. (FCPA). Russian VTB Capital, currently under sanctions, will pay a fine of $ 4 million.

According to reports of the ‘hidden debts’ scandal, many US investors lost money in what has been described as a $ 2 billion loan scam involving two banks, Credit Suisse and Russian bank VTB . The secrecy and corruption surrounding the loans have dealt devastating blows to Mozambique’s credibility and reputation. The Wall Street Journal first revealed the hidden debt in April 2016.

The fraud and corruption involved millions of dollars in bribes to sign approximately $ 2.2 billion in loans from Credit Suisse and Russian bank VTB to Mozambican government agencies to buy fishing trawlers and military patrol boats in 2013 and 2014. These were three Mozambican companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).

The loans were only possible thanks to guarantees illegally issued by the government of the day under President Armando Guebuza. The loans and guarantees violated the 2013 and 2014 finance laws, and the Mozambican Constitution.

“A London-based subsidiary of Russian bank VTB has separately agreed to pay more than $ 6 million to settle SEC fees related to its role in deceiving investors in a second bond offer in 2016,” the company said. United States Securities and Exchange Commission in a statement.

“VTB Capital consented to an SEC order that found it violated the anti-negligence-based fraud provisions of federal securities laws. The VTB agreed to pay “without admitting or denying” the accusations of “misleading investors in a second bond offering in 2016”,

According to the SEC order, “the second offering as structured by VTB Capital and Credit Suisse allowed investors to swap their ratings in a previous bond offering for new sovereign bonds issued directly by the government of Mozambique.”

“The SEC found that the offering documents distributed and marketed by Credit Suisse and VTB Capital did not disclose the true nature of Mozambique’s debt and the high risk of default on the bonds. The offer documents also did not disclose Credit Suisse’s discovery that significant funds from the previous offer had been diverted from the intended use of the products that were disclosed to investors. Mozambique subsequently defaulted on funding after the full extent of the “secret debt” was exposed, “the SEC press release read.

On October 19, VTB Capital said in an official press release that it had reached an agreement with the United States Securities and Exchange Commission (SEC) to end the SEC investigation into VTB’s involvement. in a series of transactions with the Republic of Mozambique. VTB has neither admitted nor denied the allegations contained in the SEC order.

In its order, the SEC expressly acknowledges that VTB had no knowledge of or involvement in the bribery scheme organized by Mozambican and other officials. The SEC also failed to find that VTB engaged in willful misconduct or fraud.

Instead, the SEC’s findings regarding VTB focus on alleged disclosure failures in a single transaction: the EMATUM 2016 exchange offer. Specifically, the SEC found that VTB was negligent because the offer documents contained misleading statements from Mozambique and omissions that VTB failed to prevent. These alleged breaches of disclosure, according to the SEC, concerned (1) the full nature of Mozambique’s indebtedness and (2) VTB’s role as a lender in two previous transactions.

The SEC order recognizes the difficult position VTB was placed in by senior Mozambican officials during the bid process, and that VTB itself was swindled by Mozambican officials. Neither VTB nor any of its employees have been charged with criminal conduct by the United States Department of Justice. No VTB staff have been charged by the SEC in today’s order.

VTB takes the settlement seriously and has fully cooperated with the SEC investigation. The settlement announced today marks the end of the SEC’s investigation into VTB’s role in transactions in Mozambique. VTB strives to adhere to the highest standards and remains committed to ensuring that VTB clients have the information they need to invest in today’s markets.

VTB has for years cooperated intensively with all government investigations. VTB has also tried for years to cooperate with the Mozambican government to find a constructive solution to the country’s debt situation. These efforts to date have been unsuccessful. Thus, in 2020, VTB took legal action before the English courts to recover the sums owed to it. VTB hopes to win.

VTB will pay a fine of $ 4 million and reimburse $ 2 million in costs.

Comment on behalf of VTB Capital:

“Today’s deal marks the end of the SEC’s investigation into VTB’s role in transactions in Mozambique. As we have said before, VTB has taken significant steps to ensure the accuracy of Eurobond disclosure, which has met resistance and pressure from a number of other parties involved. in the operation, as recognized by the SEC.

“We would like to point out that in the many international litigation and investigations related to loans in Mozambique, none of our employees have been charged with unlawful conduct.

“VTB operates in a fully open and transparent manner observing the highest levels of corporate governance and compliance in our day-to-day operations, and we remain confident that VTB has acted responsibly in this matter, despite a broad plan perpetrated by d ‘others. We are confident in our legal position and look forward to finding a solution in the remaining proceedings related to this situation ”, according to the VTB bank.


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