Credit Suisse Swap Lawsuit Linked to ‘Disastrous’ Vestia Trades

Stichting Vestia Groep’s former treasurer lost as much as 2 billion euros ($2.8 billion) on unsuitable derivative trades with “distrastrous” results, the Dutch affordable-housing provider said on the first day of a London trial over a disputed swap with Credit Suisse Group AG.

Marcel de Vries, who’s under investigation by prosecutors in the Netherlands, “took it upon himself to trade interest-rate derivatives in Vestia’s name on an enormous scale and with disastrous consequences,” the Dutch company said in court documents.

Vestia says it doesn’t owe anything to Credit Suisse because De Vries had no legal authority to make speculative trades. The Swiss lender argues it is owed about 83 million euros under 11 derivative contracts, including so-called “swaptions,” signed in 2010 and 2011.

Bank customers from Italian regional governments and a German city’s water utility to the sovereign wealth fund of Libya have sued lenders in the U.K. over complex deals that turned costly when the 2008 financial crisis hit.

Vestia, which owns about 89,000 homes, nearly collapsed because of its derivative losses. Nine banks including Citigroup Inc. and Deutsche Bank AG agreed to unwind their contracts with Vestia in 2012.

Credit Suisse spokeswoman Sofia Rehman declined to comment. Vestia spokesman Ronald Florisson didn’t immediately comment when reached by phone.

‘Well Known’

The trading by De Vries, who was arrested in April 2012 by prosecutors investigating fraud, “was well known and well appreciated by not simply the internal supervisory board but also the regulatory authorities,” Timothy Howe, a laywer for Credit Suisse, told the court today.

By 2011, De Vries had built up positions with a notional value of more than 23 billion euros with several banks, compared to total borrowing of about 5 billion euros, according to Vestia’s court documents. When a restructuring agreement was reached in 2012, the portfolio had a negative mark-to-market value of more than 2 billion euros, according to Vestia.

“The fundamental defect in the disputed transactions is that they were entered into by Mr. De Vries for speculative purposes,” Vestia said in the documents. Credit Suisse “was well aware of that.”

Ed Van Liere, a lawyer representing De Vries, declined to comment when reached by phone.

The trial is scheduled to last for 10 days.

The case is: Credit Suisse International v. Stichting Vestia Groep, High Court of Justice, Queen’s Bench Division, 12-1164

Before it's here, it's on the Bloomberg Terminal.