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(Bloomberg) -- Patrice Lescaudron, the former Credit Suisse Group AG banker on trial for taking money from the accounts of wealthy clients, found phony Excel spreadsheets were the easiest way to keep customers in the dark about the fraud in their accounts.
Lescaudron has admitted to falsifying trades and then distributing false statements to cover mounting losses, primarily by taking money out of the accounts of Bidzina Ivanishvili, the former prime minister of Georgia. His scheme went undiscovered until a massive wrong-way bet on a Californian drugmaker unraveled in September 2015.
The Frenchman spent Thursday afternoon on the witness stand in the Geneva court answering increasingly tense questions from his victims’ lawyers that prompted presiding judge Alexandra Banna to suspend proceedings for 20 minutes to address one line of questioning.
“When exactly did you begin lying” to Olga Korbatova, a Russian client of Lescaudron’s who made her fortune in the soft-drinks business, asked her lawyer Marc Hassberger.
“As soon as I started to make Excel statements, I don’t know when that was exactly,” the 54-year-old Lescaudron said. “These were statements that I sent to Dream,” he said referring to Korbatova’s investment company. “And I started them when there was a gap in value that I wanted to compensate with a transfer from Mr. Ivanishvili.”
A tearful Korbatova had earlier told the court that she was shocked when she learned of Lescaudron’s fraud for the first time in 2015.
She said she had “absolute” confidence in the bank and Lescaudron, who had offered to help find investors for her biotech startup.
“I trusted Credit Suisse,” she said, “because it was Credit Suisse.”
Before the lunch break, Lescaudron’s boss told the court that he had no idea how Lescaudron’s deceit hadn’t been detected before the crime spiraled out of control.
Basile Samarine, head of Credit Suisse’s Russia-CIS wealth management department between 2006 and 2010, said Wednesday that Lescaudron was seen as a “star,” once he took over the accounts belonging to Russian financier and former senator Vitaly Malkin and Ivanishvili.
Lescaudron, who had no banking experience prior to joining Credit Suisse in 2004, was seen as the only banker on the lender’s Russia desk with the knowledge to take over important accounts, Samarine said. Lescaudron was viewed as having “honesty and integrity” by Credit Suisse brass in Zurich.
He was in regular contact with both the bank’s investment banking division and its “Ultra High Net Worth” unit, reserved for the bank’s richest clients, Samarine said.
Lescaudron, who faces as much as 10 years in prison, has admitted that in early 2009 he began fraudulently tinkering with Ivanishvili’s money. The billionaire Georgian reckoned the stock market had hit bottom and wanted to move $600 million of bond holdings into shares through Credit Suisse’s Singapore office.
A month later, Lescaudron found out that Ivanishvili had missed out on a major rally because his colleagues in Asia never made the shift, so he decided to make up for the lost money by forging orders to buy stocks he thought were undervalued. Some trades were so successful, he said, that he was able to move some of the proceeds to other clients’ accounts to make up for losses elsewhere.
‘I Don’t Know’
Maurice Harari, Ivanishvili’s lawyer, asked Samarine if he could recall a conversation with Lescaudron about those early losses. Samarine said he could not, stressing that he was in charge of logistics for the Russia desk, not compliance.
Samarine was then asked how these early sub-accounts could go undetected.
“I don’t know,” he replied.
There had been an internal audit of Lescaudron’s accounts before Samarine left the bank in late 2010, but they revealed nothing, he said.
“Why did the control mechanisms not work?” asked Christian Luescher, the lawyer for Malkin, a business partner of Ivanishvili’s.
“I can’t explain it,” Samarine replied.
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