In the recent judgment in the "Tuna Bonds Scandal", the Republic of Mozambique won its $3.1 billion lawsuit at London's High Court against UAE shipbuilder Privinvest for allegedly paying over $200 million in bribes to, inter alia, Mozambican officials and key Credit Suisse bankers from 2013 to 2016.
Moore’s South African debt advisory team was engaged by the Republic of Mozambique to advise on the commercial aspects of the various bank loans, as well as the legality and appropriateness of the conduct of the various lenders in making the various loans.
Nick Job from the South African Moore debt advisory team then took the role as lead banking expert witness in the UK based trial which took place earlier this year.
The UK court held in July 2024 that Mozambique is entitled to payments of just over $825 million from the Privinvest group, plus an indemnity in relation to $1.5 billion it is liable to pay back to the lenders, less around $420 million already recovered through settlements with the lenders.
The judgement marks a significant victory in the fight against large scale fraud and corruption that has plagued Africa for decades and underscores the importance of integrity and accountability in international finance. It further demonstrates how standing up for what is right can lead to substantial legal and moral victories, and Moore was delighted to play a role in this successful outcome.
Background of the Tuna Bonds Scandal
At its core, the scandal involved loans exceeding $2 billion made by Credit Suisse, VBS and other banks to three Mozambique government owned companies, ostensibly to finance a new large scale government owned tuna fishing project where the ships, radar and security equipment worth $2.1 billion was provided by Privinvest.
As the tuna fishing project appeared not to be commercially viable in its own right, the lenders arranged for the Republic of Mozambique government provide guarantees through its Finance Minister, Manuel Chang.
The first of the loans would have defaulted almost immediately, but for further loans that were needed to pay the interest on the initial loans. The loans were repeatedly restructured and increased by the banks so as not to appear in default. At a certain point when large scale losses to the banks appeared inevitable, Credit Suisse made the decision to sell some of its loans to US and UK investors in the form of a bond, without disclosing any of the relevant background. This led to Credit Suisse Securities (Europe) Limited pleading guilty to conspiracy to commit wire fraud in October 2021 and receiving fines and penalties from US and UK authorities of $475 million.
It was also discovered that three of Credit Suisse’s senior bankers who worked on these loans had received over $40 million in bribes from Privinvest. In 2019 all three of these bankers pleaded guilty to either conspiracy to commit wire fraud or conspiracy to commit money laundering.
The loans were further structured in SPV’s to bypass the International Monetary Fund's (IMF) non-concessional borrowing limits in place on Mozambique. When the government debt came to light in 2016, the IMF temporarily halted donor support on which Mozambique was highly reliant, triggering a currency collapse, defaults and financial turmoil.
The Republic of Mozambique, acting through its Attorney General, pursued legal action against Credit Suisse, Privinvest, and several individuals to hold them accountable for the financial losses and damage caused to the country and its people.
Settlements and Judgments
On the eve of the UK trial this year, and shortly after receiving the Moore expert opinions, settlements were reached by Mozambique with Credit Suisse and other banks involved in the loans. These settlements included compromises made by lenders on the lending terms in excess of $400 million. Notwithstanding the settlement, the UK court judgment highlighted the lack of appropriate due diligence by the banks in relation to a series of red flags indicating that the transactions may have been tainted by fraud and corruption.
Mozambique has set a precedent for other emerging market nations, showing that it is possible to fight corruption and achieve justice, even against formidable opponents. This landmark judgment not only restores financial integrity to Mozambique but also sends a strong message to the global community about the importance of ethical conduct in business. The case highlights the need for continued efforts to combat corruption in emerging markets and underscores the critical role of international cooperation in promoting transparency and accountability worldwide.
Moore’s South African debt advisory team is proud to have played a role in assisting Mozambique with this milestone victory.
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