backOn February 14, 2024, Judge Colleen McMahon of the United States District Court for the Southern District of New York dismissed RICO class-action claims against U.S.-based affiliates of Credit Suisse, certain Credit Suisse officers and directors, Credit Suisse’s purported auditor, KPMG LLP, and certain KPMG LLP employees, partners, and related individuals. “Needing a hook to get into federal court, knowing that there were already multiple Credit Suisse securities fraud cases pending,” the plaintiffs, who were shareholders of the bank, alleged a twenty-year scheme of mismanagement by Credit Suisse, in which KPMG LLP, Credit Suisse’s purported auditor and accountant, was involved in managing Credit Suisse’s businesses, its internal accounting and financial controls, and its worldwide legal, regulatory, and compliance controls. The plaintiffs claimed the alleged misconduct caused the price of Credit Suisse's shares to decline in value from $33.84 in 2013 to $2.01 on March 17, 2023.
The Court found that the Complaint “refers only generically to the ‘KPMG’ brand” and that KPMG LLP did not conduct the relevant audits of Credit Suisse. Moreover, the court found that “none of the allegations against the KPMG RICO Defendants [a subset of the KPMG individuals named in the complaint] involves criminal conduct,” and that plaintiffs failed to plead that KPMG LLP or the KPMG RICO defendants engaged in any acts of racketeering activity. The Court dismissed the plaintiffs’ RICO claims with prejudice and without leave to replead, holding that the plaintiffs (i) lacked standing to bring their RICO claims, (ii) failed to state a claim since they failed to adequately allege a RICO enterprise, and (iii) failed to adequately allege the involvement of KPMG LLP in any acts of racketeering activity. Lastly, the judge found that the Private Securities Litigation Reform Act bars the shareholders’ RICO claims for the diminution in the value of their investment.
The judge also conditionally dismissed the plaintiffs' Swiss law claims, alleging the mismanagement of Credit Suisse and breaches of various statutory duties, on forum non conveniens grounds, but granted the plaintiffs leave to file an amended complaint for this count.
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. A copy of the Order is attached here.