Credit Suisse to pay $400 million to end U.S. bond lawsuits
Credit Suisse Group AG has agreed to pay at least $400 million to settle lawsuits by investors over the Swiss bank's role in raising money for a healthcare financier that collapsed in a $2.9 billion fraud more than a decade ago.
The settlement averts a trial in Manhattan federal court that had been scheduled to begin in two weeks. It stems from the activities of National Century Financial Enterprises Inc, which filed for bankruptcy protection in November of 2002.
Investors accused Credit Suisse of selling National Century notes and defending their creditworthiness despite knowing that the company misused investor funds, and while missing red flags that National Century co-founder and Chief Executive Lance Poulsen masterminded the fraud.
"This agreement represents a full and final settlement in respect of this noteholder litigation against Credit Suisse," Credit Suisse said in a statement on Thursday.
Credit Suisse will pay $400 million to a group of plaintiffs that includes the state of Arizona, AllianceBernstein Holding LP and Allianz SE's Pimco unit, their lawyer Kathy Patrick of Gibbs & Bruns said in a phone interview.
The settlement also covers cases brought by Lloyds TSB Bank Plc <48IY.L> and MetLife Inc .
Investors who brought the lawsuits had bought National Century notes from 1998 to 2002.
Lloyds spokesman Ed Petter confirmed the settlement but not its terms. MetLife did not immediately respond to a request for comment. A lawyer for those companies, Harold Levinson of Kasowitz, Benson, Torres & Friedman, declined to comment.
Credit Suisse said the settlement will reduce its previously-reported fourth-quarter net profit by 134 million Swiss francs ($141 million), to 263 million Swiss francs from 397 million.
National Century had helped finance clinics and hospitals, and bought accounts receivable with money it got through the sale of notes, including notes that Credit Suisse helped sell.
But the U.S. Department of Justice said the Dublin, Ohio-based company misused investor money, funneled corporate funds to top executives, and lied to investors to hide its fraud.
Poulsen is serving a 30-year prison term following his 2008 conviction for fraud, conspiracy and money laundering. Several other former National Century executives were also convicted of crimes.
Jury selection in the investor suit had been scheduled to begin on March 28.
Credit Suisse in January lost its bid to be tried separately from Poulsen, who is considered insolvent.
Noteholders had previously reached other settlements over the collapse, including a 2006 accord with JPMorgan Chase & Co .
"We have recovered $1 billion of losses for our clients, when prior settlements are taken into account," Patrick said. "This represents nearly 80 cents on the dollar."
The cases, all in the U.S. District Court, Southern District of New York, are Crown Cork & Seal Co et al v. Credit Suisse First Boston Corp et al, No. 12-05803; Arizona v. Credit Suisse First Boston Corp et al, No. 12-05804; City of Chandler et al v. Bank One NA et al, No. 12-05805; Lloyds TSB Bank Plc v. Bank One NA et al, No. 12-07263; and Metropolitan Life Insurance Co et al v. Bank One et al, No. 12-07264.
(Reporting By Katharina Bart in Zurich and Nate Raymond in New York; Editing by Greg Mahlich and Tim Dobbyn)