Swiss Fraud Probe May Expand to Include Credit Suisse Employees

  • Probe looks at alleged misuse of Turkish investors’ assets
  • Plaintiffs include Aydin Dogan, owner of Istanbul Trump Towers

Swiss prosecutors are pursuing emails and other documents that may lead them to expand a fraud investigation into a defunct Geneva-based asset manager to include Credit Suisse Group AG employees, people familiar with the case said.

The prosecutors are currently looking into alleged misuse of funds by TG Investment Services, set up by two former Credit Suisse bankers, which was managing money on behalf of the bank’s Turkish clients. Prosecutor Johan Droz said he has asked a judge to lift the seal on all email correspondence between May 2008 and April 2015 that belonged to a then-Credit Suisse relationship manager, also under investigation, who worked with TG Investment to execute account transfers.

That request, opposed by Credit Suisse and the ex-employee on privacy grounds, the people said, is currently under review by a local tribunal. The former client relationship manager, who can only be identified as G. under Swiss law, was suspended by the bank in 2015 and has since been fired, the people said.

“The investigation is far from finished and there is still a lot of work to do,” Droz said in a telephone interview.

In Switzerland, individuals can join a criminal probe originated by the prosecutor. This case has attracted 20 individual plaintiffs, including Turkish businessman Aydin Dogan -- a business partner of U.S. President Donald Trump. As part of that probe, the prosecutor alleges that the two TG Investment principals and their two colleagues forged signatures and faked orders to hide some $150 million in client losses, according to the people, who declined to speak publicly about the case. Two employees of a separate bank consulting company have also been charged, the people said.

Seven People Investigated

In total, seven people are being investigated by Droz for alleged crimes ranging from fraud and forgery to criminal mismanagement. Of the seven only one was an employee of the bank. However, the prosecutor has indicated that it’s likely that more Credit Suisse employees will be investigated, the people said. G. is so far only being probed for criminal negligence, but the prosecutor has indicated that may be extended into possible anti-money-laundering violations, the people said.

Saverio Lembo, G.’s lawyer, said his client “feels betrayed by the unsuspected and sophisticated fraud organized by the two leaders of the asset management company with whom he and the bank had a long relationship of trust.”

G.’s role as a relationship manager was at the lower end of the management chain with no decision-making power and his actions were within the law, Lembo added. 

“The criminal investigation is directed against representatives of TG Investment and a former Credit Suisse employee, and not against Credit Suisse,” the bank said in an emailed statement, declining to comment further because of the probe. “Credit Suisse complies with all applicable laws and regulations in all countries in which it operates.”

Bank Alerted Authorities

The TG Investment probe was opened by Geneva prosecutors after Credit Suisse alerted the Swiss Money Laundering Reporting Office to suspicious transactions in March 2015. Under Swiss law, a bank can be found to have violated Switzerland’s anti-money-laundering law if a judge determines that it didn’t do enough to stop the transfers and that guilt can’t be attributed to an individual.

The prosecutor indicated that the bank itself could be investigated for money laundering, the people said, though at least two of them have said that is unlikely.

The potential expansion of the TG Investment probe comes on top of an investigation into a separate case of alleged unauthorized trading of client assets linked to Credit Suisse’s wealth management unit. In that case, a Credit Suisse banker admitted to mishandling assets for wealthy clients from the former Soviet Union. The banker, who can only be identified by the initial L., is facing indictment and a trial later this year, according to the Geneva prosecutor leading the probe.

In that case, Credit Suisse has repeatedly said that the banker acted alone and that no one at the bank was aware of his actions. L.’s lawyer, Simon Ntah, said that his client, who remains in a Geneva jail, “takes responsibility while also explaining the circumstances surrounding the events.”

Fluctuations in Valuations

In the matter involving Turkish investors, the prosecutor has said that Credit Suisse staff failed to note or react to massive fund transfers and inexplicable fluctuations in valuations used by TG Investments, according to the people.

One example involved a closely held marble mining company that was the sole asset in one of TG Investments’ funds, the people said. Amid a series of wildly divergent valuations, the asset manager made trades for investors in the fund at $1,250 a share and zero dollars a share on the same day in April 2014, one of the people said. The former Credit Suisse relationship manager executed some of the transfers, the person said.

Gregoire Rey, a lawyer for one of the two TG Investment partners being investigated, who can only be identified as H., acknowledged the trades. “The purposes of the illegal transactions was not personal enrichment, nor was the fraud intended to trick people which included their friends and family, but instead to cover unexpected losses,” Rey said. TG Investment was at one point Credit Suisse’s third-largest external asset manager with about $2 billion euros under management, he added.

Ilir Cenko, a lawyer for the other TG partner, identified as A., did not return messages seeking comment.

Dogan, one of the plaintiffs, is a media executive whose family-controlled companies publish Turkish newspaper Hurriyet, which has been critical of Turkish President Recep Tayip Erdogan. Dogan’s real-estate assets include a pair of skyscrapers with Trump’s name on them. Under that deal, Dogan paid Trump $5 million for the naming rights, according to the Turkish newspaper Sabah. This is the only investment between the two men, according to a person familiar with the family. 

Transfers in and out of Dogan’s account were among those executed by the Credit Suisse relationship manager, including for trades involving the marble mining company, one person said.

Marc Hassberger, Dogan’s lawyer in Switzerland, declined to comment on the case.

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