What A Crap Week For Credit Suisse
Credit Suisse, those Swiss finance guys who do just about everything finance-y, have had a ton of bad form this week – one of their traders goes on the run, then they have to settle out of court for facilitating a hedge fund fraud, and finally it looks like they’re getting very little money back on various dodgy ski resort loans they greedily made.
So first of all there’s Julian Tzolov, a New York-based Credit Suisse broker who last year put $1bn of investors’ money into risky mortgage-backed securities instead of the federally-backed student loans he said he was putting it into. Tzolov resigned from the bank and quietly went back to his native Bulgaria as the wheels fell off, but when he was charged he dutifully came back Stateside. He was put under house arrest and electronically tagged as part of his bail, but maybe some Fed forgot to put some fresh batteries in, because Tzolov managed to sneak off undetected. He was declared a fugitive last Friday. It’s international manhunt time!
Since then the friends who posted their homes as collateral for his $3m bail have seen them get seized by the authorities. “Everything should be forfeited… They’re going to lose everything”, said ruthless judge Jack Weinstein. Doesn’t look like they’ll be sending Julian a Christmas card this year.
The feds looking for him should be heartened by a piece on Bloomberg, which is one of those WTF off-the-leash things they occasionally run. Entitled “White-Collar Fugitives Foiled by Bad Plans, Weakness”, they interview Dog The Bounty Hunter for his wisdom on fugitives: “a white-collar criminal has never seen the dark side, so when he enters that realm, he is lost”. Meanwhile Donald Davidoff, a Harvard neuropsychologist, said that white collar crims are narcissists who, once they realise that their status has dried up with their new life as a fugitive, often turn themselves in. To be fair, this Tzolov fellow looks like he’s in it for the long haul though. Plus that bald pate is perfect for wig attachment.
Credit Suisse also had to enter into a settlement yesterday with the receiver of Lancer Group, a fraudulent hedge fund that falsely inflated the value of its assets, according to FIN Alternatives. The receiver, Marty Steinberg, accused Credit Suisse of facilitating the fraud and sued them for nearly a million bucks, which a judge overruled, but allowed Marty to refile the claim; Credit Suisse went from saying they’d defend the charges to rolling over and paying Steinberg the arbitrary-seeming sum of $320,550.63. Still, they haven’t come out of it as badly as Lancer themselves – founder Michael Lauer was fined $62m and faces criminal charges, as do four other employees.
But Credit Suisse’s woes continue as they’re still trying to claw back money from loans they made to a range of luxury ski resorts that went bankrupt, loans that in one case had their terms decided on the flip of a coin. They also issued loans to people who couldn’t possibly pay everything back, and just raked in the fees; the judge described their actions as “naked greed”. Well, it’s come back to haunt them, as they’re likely to only make 25 cents in the dollar back on a $375m loan to the Yellowstone Club that went south, plus likely complete losses on a $310m and $250m loan for other ski resorts. This week private equity group CrossHarbor finally took the Yellowstone Club over after months of protest from Credit Suisse.
A company that hires fraudulent brokers, facilitates fraudulent hedge funds, and deals in rapacious loans? Someone start the PR-gloss machine, and quick!
Posted by Ben Beaumont-Thomas in Hot Money | June 10, 2009 1:23PM |