Ex-Mozambique Minister Faces US Trial in Tuna-Bond Bribe Case

This content was published on July 15, 2024 - 13:00

4 minutes

(Bloomberg) — Mozambique’s former Finance Minister Manuel Chang faces a criminal trial on Monday in New York over his role in a $2 billion bond fraud scandal that embroiled Credit Suisse Group AG and created a financial crisis in the east African nation.

Federal prosecutors allege Chang was among the corrupt officials who conspired with Credit Suisse bankers to take Mozambique deeper into debt with loans starting in 2013 for dubious maritime projects, including shipyards, ships to combat piracy and a tuna fishing fleet.

Mozambique later defaulted on the bond meant to guarantee the loans, and prosecutors claim at least half a billion dollars was looted. The so-called tuna bond scandal spawned bribery and corruption cases on three continents and also led to the imprisonment of the son of a former Mozambique president.

Chang allegedly pocketed $5 million in bribes and facilitated the laundering of $200 million in money funneled to Mozambican officials. The fraud also caused “a severe financial crisis” in the country, according to prosecutors in the office of Brooklyn US Attorney Breon Peace.

Flight Risk

The former minister, who has pleaded not guilty, has been in US custody since he was extradited a year ago from South Africa, where he was arrested in 2018 at the request of federal prosecutors. US District Judge Nicholas Garaufis determined there was a risk he would flee because the US doesn’t have an extradition treaty with Mozambique.

Chang, who is charged with wire-fraud conspiracy and engaging in a money-laundering scheme, faces as long as 30 years in prison if convicted of the wire fraud scheme.

The former minister’s lawyers called the indictment “fatally flawed in numerous respects,” including that “there is simply no conduct that Mr. Chang is alleged to have engaged in that had any connection whatsoever to the United States,” according to a court filing.

Prosecutors in June agreed to drop one charge of conspiracy to commit securities fraud, saying they wanted to streamline their case. The trial is expected to last five weeks, according to the US.

In 2021, Credit Suisse paid almost $475 million to resolve multiple investigations — including in the US — for its role in the bond scandal. It was one of several major legal and financial setbacks the Swiss bank faced in the years leading up to its collapse.

Other prosecutions tied to the case have had mixed results. While a Credit Suisse unit and three former bankers pleaded guilty to related charges, a salesman at shipbuilder Privinvest Group, Jean Boustani, was acquitted by a Brooklyn jury in 2019. He’d been accused of funneling $200 million in illicit payments to Mozambican officials, including Chang, to win business for the maritime projects.

Chang’s trial is expected to include testimony from former Credit Suisse banker Andrew Pearse, who admitted he got at least $45 million for his role in arranging the loans and was the government’s star witness in the earlier case. Pearse testified he took bribes in part to finance travel with a subordinate with whom he was having a secret love affair.

The scandal also rocked the economy of Mozambique, one of the world’s poorest countries, just as it was preparing to reap the riches of a massive offshore natural gas discovery.

Mozambique earlier this month agreed to pay creditors including VTB Capital Plc and Banco Comercial Português SA $220 million in a settlement tied to the tuna bond scandal.

The case is US v. Chang, 18-cr-681, US District Court, Eastern District of New York (Brooklyn).

–With assistance from Matthew Hill.