(Bloomberg) - Police raided Credit Suisse Group AG offices in Zurich and confiscated documents as part of an investigation into whether investors in funds it ran with Greensill Capital were misled, complicating efforts by the Swiss bank to move past the damaging scandal.
Last week’s search comes after a criminal complaint in April by Switzerland’s State Secretariat for Economic Affairs, or Seco, for violations of a law against unfair competition, which deals with issues such as false or misleading advertising. A spokesman for the public prosecutor in Zurich confirmed that proceedings had been opened against an “exponent” of Greensill as well as unknown persons.
While neither the bank nor current or former employees are persons of interest in the investigation, the “unknown persons” classification gives prosecutors looking into the matter more leeway to name more people or corporate entities as they progress with their investigation. Documents from Credit Suisse could help prosecutors determine whether the case is valid and who to prosecute.
“As part of an official procedure that is not directed against Credit Suisse, data have been secured,” a spokesperson for the bank said by email, adding the lender is fully cooperating with the probe. A spokesperson for the administrators of Greensill Capital declined to comment.
Investors in the $10 billion supply chain finance funds are still waiting for over $3 billion to be repaid, more than half a year after the money pools were frozen. The Swiss lender has shaken up its top management ranks, replaced asset management head Eric Varvel and removed the business from direct oversight of wealth management since it was forced to suspend the funds. Top executives including risk and compliance chief Lara Warner have left, while Chief Executive Officer Thomas Gottstein has held onto his role.
Earlier this year, Swiss banking regulator Finma also opened enforcement proceedings against the bank to look into the Greensill matter and the collapse of prime brokerage client Archegos Capital Management. Regulators in the US and the U.K. are also investigating the two matters at the Swiss bank and have requested documents from the bank, according to its most recent financial report.
Although Seco’s complaint is rooted in what is called “unfair competition,” it’s not related to antitrust matters, according to Patrik Ducrey, the director of the Swiss Competition Commission.
“This has nothing to do with the Cartel Act,” Ducrey said in a telephone interview. “This can be misleading information about a company or false information to convince buyers to buy an investment.”
Credit Suisse marketed its supply-chain finance funds as among the safest investments it offered, because the loans they held were backed by invoices usually paid in a matter of weeks. But as the strategy grew, they strayed from that pitch and much of the money was lent through Greensill against expected future invoices, for sales that were merely predicted.
Another issue that could be examined is whether notes in the funds had valid insurance policies, covering investors against defaults by Greensill’s borrowers. Tokio Marine, which provided insurance for most of the notes, has said the policies it extended to cover the securities in the funds may not have been valid in the first place and is looking into the matter.
The Greensill disaster and the collapse of Archegos have prompted a soul-searching at Credit Suisse that continues under new Chairman Antonio Horta-Osorio, who told investors last week that the bank is at a “critical juncture.”
Credit Suisse fell 0.3% at 2:17 p.m. in Zurich trading. Shares of the lender have lost more than 19% this year, the worst performer in a Bloomberg index of banks and financial services companies, which is up 26%.
NZZ am Sonntag reported on the raid at Credit Suisse earlier.
The new chairman has spent the last few months debating strategic options, with an expectation to finalize the long-term vision and mid-term plan by the end of the year. That plan will include “well-defined” financial targets as well as immediate priorities, he said.
Credit Suisse last month said it plans to pay back about $400 million to investors in supply-chain finance funds, the fifth such disbursement, taking the total amount returned to $6.3 billion. The bank has conducted an investigation into what happened with the Greensill-linked funds and is due to announce its findings soon.
“Greensill, Archegos, these are things that were I think under the watch of past management,” said David Herro of Harris Associates, one of Credit Suisse’s largest shareholders. “Numerous steps have been taken since then as a result of the new chairman coming.”
By Marion Halftermeyer, Hugo Miller and Corinne Gretler
