x Abu Dhabi, UAEFriday 21 July 2017

New York court rejects ADCB bid to reopen fraud case against Credit Suisse

Involves unsuccessul restructuring of $40m investment vehicle in 2007.

ADCB’s original claim related to an offer made by Credit Suisse in 2007 to restructure ADCB’s $40m investment in Stanfield Victoria. Mona Al Marzooqi/ The National
ADCB’s original claim related to an offer made by Credit Suisse in 2007 to restructure ADCB’s $40m investment in Stanfield Victoria. Mona Al Marzooqi/ The National

Abu Dhabi Commercial Bank’s attempt to reopen its fraud claim against Credit Suisse, centring on an ill-fated restructuring of a US$40 million investment vehicle in 2007, has been turned down by a court in New York.

ADCB had sought to renew its prior motion against Credit Suisse, which was dismissed in August 2011, citing documents from a third party that had not been submitted the first time around.

The documents purportedly showed that Credit Suisse engaged in self-dealing (taking advantage of its position in the transaction to advance its own interest rather than the client’s) in executing the restructuring transaction, according to court filings.

The bank claimed the documents also highlighted “criminal indictments and a civil complaint in federal proceedings against several Credit Suisse bankers who allegedly engaged in a massive scheme involving mismarking and mispricing of assets similar to those involved in the restructuring transaction here.”

But the appellate division of the supreme court of the state of New York dismissed the bid on Tuesday, noting that the documents had not been produced by ADCB during the original proceedings, even though they were in the bank’s possession at the time.

“ADCB never made a request for additional time to review the documents before filing its opposition to defendant’s motion, nor did it raise these ‘new’ facts during oral argument on the motion two months later,” the court said in its decision.

The court acknowledged that the federal indictments and complaint showed new facts of mismarking and mispricing that ADCB was not aware of at the time the motion was being decided.

However, “the facts contained in the indictments and complaint do not show that the mismarking of assets affected the restructuring transaction”, said the court in its decision, describing ADCB’s contention to the contrary as “speculative”.

Both ADCB and Credit Suisse declined to comment on the decision.

ADCB’s original claim, filed in November 2010, related to an offer made by Credit Suisse in 2007 to restructure ADCB’s $40m investment in Stanfield Victoria, a structured investment vehicle (SIV).

The bank alleged that Credit Suisse failed to disclose conflicts of interest and “other material information” related to the restructured investment, called Farmington.

ADCB claimed it was also required to buy credit default swaps, a form of insurance against default, to protect Credit Suisse’s exposures to Farmington.

The rating agency Standard & Poor’s was also named in the suit, with ADCB claiming that S&P, meanwhile, is alleged to have given “inaccurate investment-grade ratings” to assets underlying the SIV.

Judge O Peter Sherwood ruled in August 2011 that Credit Suisse had fairly warned ADCB about the risks involved, dismissing the claim in its entirety. Sherwood also noted that S&P’s “allegedly inferior rating methodology” did not constitute fraud.

jeverington@thenational.ae