The US Justice Department took a win and a loss this week in its prosecution of an alleged $2bn corruption scheme in Mozambique that destabilised the impoverished country’s economy.
On Monday, a former banker at Credit Suisse became the first person to plead guilty in the case brought earlier this year by federal prosecutors in New York and Washington, D.C. Less than 24 hours later, South Africa’s justice ministry rejected the Justice Department’s request to extradite another defendant in the case — Mozambique’s former finance minister, Manuel Chang, who was arrested in Johannesburg in December at the request of US authorities.
While the guilty plea marks a victory for US authorities, the declined extradition request shows the challenges the Justice Department faces as it polices the intersection of high finance and government corruption in emerging markets, including pursuing individuals in far-flung locations.
Detelina Subeva, a former vice president for Credit Suisse’s global financing group, pleaded guilty Monday in federal court in Brooklyn to one count of conspiracy to launder money. Subeva was one of three Credit Suisse bankers charged earlier this year in the alleged bribery and kickback scheme, which grew out of $2bn of debt deals in Mozambique.
Others charged include Chang, two former Mozambican government officials and two executives of Privinvest Group, an Abu Dhabi-based naval contractor that allegedly paid kickbacks to the bankers and officials.
South African Justice Minister Michael Masutha rejected the US extradition request for Chang on Tuesday in favor of a competing extradition request filed by the Mozambican government in February. Mozambique’s government said it wants Chang and others involved in the alleged fraud to face charges at home, but Mozambican civil-society groups and opposition politicians have said they believe the move was aimed at preventing more serious prosecution in other jurisdictions.
Masutha said he decided in favour of the Mozambican request after taking into account that the alleged crime was committed while he was a minister in South Africa’s neighbour and that the country now carries the burden of the resulting debt.
A spokesman for the Brooklyn US attorney’s office, where the case has been charged, declined to comment Tuesday on the South African decision and on Subeva’s guilty plea. A lawyer for Subeva declined to comment.
According to the US indictment unsealed earlier this year, Privinvest executives recruited London-based Credit Suisse bankers to make loans guaranteed by the Mozambican government that were sold to investors around the world. Credit Suisse and other banks raised $2bn of loans and bonds in 2013 and 2014 and Privinvest received the bulk of the proceeds, The Wall Street Journal previously reported.
Prosecutors allege that Privinvest executives negotiated kickbacks and bribes of at least $200m to government officials, including Chang, to the Credit Suisse bankers and to themselves.
“Privinvest, which is not a defendant in the US criminal proceedings, denies wrongdoing with respect to the supply agreements in Mozambique,” a spokesman for the firm said.
Mozambique defaulted on the debts in 2017 and sued Credit Suisse in the UK this year seeking cancellation of some of the loans and damages for the bank’s role in the alleged fraud. Nongovernmental organisations from Mozambique and in Switzerland also began campaigns this year seeking cancellation of the debt.
A spokeswoman for Credit Suisse declined to comment on Subeva’s plea. The bank itself hasn’t been accused of wrongdoing and has previously said the charged former employees defeated the bank’s internal controls out of “a motive for personal profit.” Prosecutors alleged that Subeva and the other bankers withheld information about the transaction from the bank’s compliance department and from the International Monetary Fund.
Subeva was arrested in London with the two other indicted former Credit Suisse bankers — Andrew Pearse and Surjan Singh — in January after the US initiated extradition proceedings against the alleged conspirators. A lawyer for Pearse declined to comment. A lawyer for Singh couldn’t be reached for comment.
Subeva had served as vice president of Credit Suisse’s Global Financing Group and was fired in August 2013, according to the indictment. The indictment alleges she received at least $2.2m in bribes and kickbacks in connection with the Mozambique projects.
Financial News | May 22, 2019