Credit Suisse could owe $2 billion in National Century fraud: judge

Fri Jan 25, 2013 6:47pm EST
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By Jonathan Stempel

NEW YORK (Reuters) - Credit Suisse Group Inc CSGN.VX faces a potential $2 billion of exposure over fraud that occurred a decade ago at National Century Financial Enterprises, a result of a federal judge's determination on how to apportion responsibility.

Friday's decision by U.S. District Judge James Graham could expose the Swiss bank to hundreds of millions of dollars of added liability over the activities of Lance Poulsen, who co-founded National Century in 1990 and was its chief executive. He is now serving a 30-year prison term and is presumed insolvent.

The decision is also a victory for bondholders including the state of Arizona, AllianceBernstein Holding LP (AB.N: Quote), Lloyds TSB Bank Plc 48IY.L, MetLife Inc (MET.N: Quote), Allianz SE's (ALVG.DE: Quote) Pimco unit that accused Credit Suisse of deceiving it about the company and missing its estimated $2.9 billion fraud.

"Credit Suisse and Mr. Poulsen are the last remaining defendants in this very serious case, and we are confident that our clients will prevail at trial," Kathy Patrick, a lawyer for some of the bondholders, said in a telephone interview.

Jack Grone, a Credit Suisse spokesman, declined to comment. Harold Levison, who represents MetLife and Lloyds, did not immediately respond to a request for comment.

Patrick estimated that there are more than $1.5 billion of bondholder claims against Credit Suisse, the placement agent for many of National Century's notes.

But the payout could be augmented by interest that has accumulated in more than nine years of litigation.

According to a transcript of a January 7 court hearing, Graham said "there seems to be general agreement that if the plaintiffs succeed in this litigation, they would recover something in the range of almost $2 billion."   Continued...

A logo of Swiss bank Credit Suisse is seen on a building in Zurich, January 15, 2013. REUTERS/Michael Buholzer