May 14 (Bloomberg) -- Credit Suisse Group AG Chief Executive Officer Brady Dougan must pay a year’s worth of interest on a late $7.5 million payment he made to his ex-wife under their 2005 divorce agreement, a Connecticut appeals court ruled.

Dougan, 49, and Tomoko Hamada Dougan, 52, were divorced on June 17, 2005, under an agreement requiring him to pay $7.83 million within 30 days and another $7.5 million by June 16, 2006, according to an opinion released by the appellate panel yesterday in Hartford. Dougan made the second payment 12 days late, triggering a 10 percent interest payment provision.

The dispute was over what period the interest should cover. Dougan paid $24,999.96 in interest, covering the 12 days he was late. In a 2-1 opinion, the court said he owed interest dating to the time of the divorce agreement, covering another year. The court reversed a ruling by the trial judge, who found the interest provision was unenforceable even though the parties had negotiated and agreed to it.

Dougan “had use of $7.5 million for one year,” according to the majority opinion by Judge C. Ian McLachlan. The bank CEO “could have made that payment at the time of the judgment. Instead, the plaintiff, an investment banker, had the use of the money with the knowledge that he would lose the benefit of no interest for that year if he failed to pay the defendant on time.”

Credit Suisse

An attorney for Dougan, Gary Cohen, didn’t return calls seeking comment. A spokeswoman for Credit Suisse, Victoria Harmon, declined to comment.

Gaetano Ferro, an attorney for Tomoko Hamada Dougan, estimated in an interview that Dougan owes about $970,000 in interest based on the appeals court’s ruling, which sent the case back to the lower court to implement the findings.

Dougan became the first American to serve as sole CEO of Credit Suisse in May 2007 after heading the company’s investment bank for three years. He helped steer Credit Suisse clear of subprime mortgage investments before their collapse froze debt markets and led to $1.46 trillion in writedowns and losses at financial companies worldwide.

After graduating from business school in 1982, Dougan joined Bankers Trust Corp. He worked in the investment banking department and later for the nascent derivatives unit. He moved to London and then to Tokyo, where he built the firm’s bond underwriting division from scratch at the age of 24. He joined Zurich-based Credit Suisse in 1990.

Divorce Case Appeal

In his divorce case appeal, Dougan, represented by the same lawyer who helped him negotiate the disputed interest provision, argued that the money he was required to pay for being 12 days late was an illegal penalty. The majority of the state court panel disagreed, citing Connecticut law and the facts of the case.

“The plaintiff has never contended, either in the trial court or this court, that he did not understand that he was required by the agreement to make the payment on June 16, 2006, and that according to the terms of the agreement, a late payment would obligate him to pay interest, not from that due date, but from the date of the agreement,” the concurring judge, David Borden, said in his opinion.

In his appeal arguments, Dougan said he “does not argue that he had a ‘good excuse’ for failing to pay the required amount on the required day,” saying only that he admitted he did it “unwittingly” rather than willfully, Borden wrote.

Married in 1988

Dougan and his ex-wife were married in 1988 in Tokyo and had two children. At the time of the divorce, they had assets of $77.4 million and he had a gross weekly income of $384,615, according to the ruling.

His ex-wife also got a residence valued at $9.6 million, accounts totaling $143,336, and a 2000 BMW X5, according to the opinion.

Dougan, who earned undergraduate and business degrees from the University of Chicago, according to the opinion, listed among his assets an 1803 Stradivarius violin worth $2.35 million, court records show.

Credit Suisse rose 55 percent in Swiss trading this year, overtaking UBS AG as the country’s biggest bank by market value. The stock is the fourth-best performer in the 65-company Bloomberg Europe Banks and Financial Services Index in 2009.

The case is Dougan v. Dougan, AC-28711, Appellate Court, State of Connecticut (Hartford).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net and; Jane Mills in New Haven, Connecticutt .

Last Updated: May 14, 2009 14:30 EDT