Credit Suisse officials, KPMG beat US lawsuit over bank’s demise

By Thomson Reuters Feb 15, 2024 | 10:22 AM

By Jonathan Stempel

NEW YORK (Reuters) – Dozens of former Credit Suisse officials and the auditor KPMG won the dismissal of a U.S. shareholder lawsuit claiming they allowed 20 years of “continuous mismanagement” that led to the Swiss bank’s demise and takeover by UBS.

In a 92-page decision released on Thursday, U.S. District Judge Colleen McMahon in Manhattan said accusations that the defendants allowed the improper “plunder” of Credit Suisse did not support racketeering claims in the proposed class action.

She also dismissed a claim brought under Swiss law, saying it might best be pursued in Switzerland’s courts.

The defendants included 29 onetime Credit Suisse executives and directors and four Credit Suisse units, as well as KPMG and 11 individuals there.

Shareholders led by Gregory Stevenson and Nicole Lawtone-Bowles said Credit Suisse’s “corrupt culture” and materially deficient internal controls led to an “endless train” of scandals and investigations, and more than $30 billion of losses, write-offs and regulatory penalties.

They said the misconduct caused the price of Credit Suisse’s American depositary shares to plunge from $33.84 in 2013 to $2.01 on March 17, 2023, the last trading day before UBS agreed to buy Credit Suisse in a $3 billion fire sale.

KPMG was accused of “active complicity,” with its New York offices being “all but part of” Credit Suisse’s nearby offices, before PricewaterhouseCoopers became the bank’s auditor in 2020.

But the judge said claims that mismanagement caused a stock price to fall cannot be addressed in a civil lawsuit under a federal anti-racketeering law. “Those claims belong to the corporation, not its stockholders,” she said.

Lawyers for the shareholders did not immediately respond to requests for comment. UBS declined to comment. KPMG, its lawyers and lawyers for the Credit Suisse defendants did not immediately respond to requests for comment.

Many lawsuits have been filed in the United States and Switzerland over Credit Suisse’s demise.

These included claims on behalf of holders of about 16 billion Swiss francs ($18.2 billion) of bonds that Swiss regulators unexpectedly wrote down to zero.

The cases are Stevenson v Thornburgh et al, U.S. District Court, Southern District of New York, No. 23-04458, and Lawtone-Bowles v Thornburgh et al in the same court, No. 23-04813.

(Reporting by Jonathan Stempel in New York; Additional reporting by Noele Illien in Zurich; editing by Jonathan Oatis)