Credit Suisse put together securities that then were bought by four tame offshore investment companies which in turn sold them on to BES customers through BES branches.
All well and good except the securities that were bundled up and sold by Credit Suisse were made up of investments in the failing Espírito Santo empire.
A report this weekend in the Wall Street Journal lays bare the financial machinations that served BES Chief Executive Ricardo Salgado (pictured) so well, as his conglomerate of failing businesses started to slide beneath the waves.
Most BES banking customers will have had no idea that the securities they were buying were backed by shaky or high risk BES Group companies and subsidiaries and that their investments often served to prop up a failing business.
Credit Suisse has declined to comment.
Portuguese regulators investigating BES Group and its subsidiaries so far have targeted four offshore investment companies who resold securities to BES customers with the involvement of Credit Suisse.
Three of the companies are based in Jersey (Top Renda, EuroAforro Investments and Poupanca Plus Investments) and one is in the British Virgin Islands (EG Premium).
Credit Suisse arranged the deals, underwrote the securities, paid the companies' audit fees and even handled the admin.
All four offshore companies are in fact controlled by the Swiss company Eurofin Holding SA, which was partly owned by Espírito Santo until 2009 and maintains ties through family members.
The ultimate owners of the companies under Eurofin are unknown and protected by secrecy laws but the company clams that it had not sold investments to BES customers.
The four companies have sold BES paper for years but always in amounts cunningly pitched below a disclosure limit so there was no legal requirement under Portuguese law for a prospectus detailing the composition of the securities.
Had there been it would have become clear that BES customers were in fact buying BES Group company securities but BES branch managers told their unwitting customers that the investments were as safe as deposits but with increased returns, not that they were in effect buying BES Group paper.
Credit Suisse has agreements dating back at least a decade with two of the four offshore companies and the bank’s role in paying the operating expenses and audit fees of what are in effect its own customers is somewhat irregular.
The Bank of Portugal boss Carlos Costa insisted in late July 2014 that BES must buy back much of these investments foisted on its own unwitting customers.
This obligation hit the bank for €1.25 billion and is directly related to the beginning of the end of the Espírito Santo empire.
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