Credit Suisse Group AG (CSGN) was ruled by a judge to be liable for all damages that could be awarded to noteholders suing the bank over fraud at National Century Financial Enterprises Inc., a figure investors’ lawyers put at more than $2 billion.
U.S. District Judge James Graham said yesterday that because New York law governs apportionment of fault in the case, Credit Suisse will be liable for 100 percent of former Chief Executive Officer Lance Poulsen’s share of damages.
“If the jury finds at trial that Credit Suisse and Poulsen each committed fraud that caused plaintiff’s losses, then under New York law Credit Suisse will be liable, as to plaintiffs, for 100 percent of Poulsen’s share,” Graham said.
Noteholders claim the bank, the placement agent, knew or should have known of a $2.9 billion fraud that led to National Century’s collapse in 2002. Ten executives of the Dublin, Ohio- based health-care financer were convicted of crimes, including Poulsen, who is serving 30 years in prison.
Kathy Patrick, an attorney for investors, said a trial is scheduled for April.
“Our clients are eagerly looking forward to presenting this case to a jury,” she said in a phone interview. “We will ask the jury to hold both Credit Suisse and Poulsen responsible for the $1.5 billion in damages the plaintiffs have suffered as a result of their investment in NSFE-related investments.”
Interest would drive the damages to more than $2 billion, Patrick said.
Credit Suisse argued that the share of liability assigned to Poulsen, presumed insolvent, should be divided among the bank and other defendants that settled with noteholders, according to Graham’s ruling.
Katherine Herring, a spokeswoman in New York for Zurich- based Credit Suisse, didn’t immediately respond to a voice-mail message after regular business hours yesterday seeking comment on the ruling.
The case is Crown Cork & Seal v. Credit Suisse, 12-5803, U.S. District Court, Southern District of New York (Manhattan).
Bloomberg
