Tuna Bond scandal
In 2012, while preparing to leave Credit Suisse to start his own firm, Pearse became the lead banker on a series of loans for Mozambique. The deal involved financing provided by Credit Suisse and the Russian bank VTB to a Lebanese shipbuilding company, Privinvest, for the development of a state-owned tuna fishing fleet and maritime security infrastructure. [4]
In February 2013, during a meeting in Maputo, Mozambique, a Privinvest executive, Jean Boustani, offered Pearse a kickback. If Pearse could arrange for Credit Suisse to reduce its arrangement fees by $11 million, half of the savings ($5.5 million) would be paid to Pearse to help fund his new business venture. Pearse accepted the offer. [4]
After leaving Credit Suisse, Pearse established a company in the United Arab Emirates called Palomar Capital, which was bankrolled by Privinvest. Over the next several years, Privinvest funneled approximately $45 million in kickbacks to Pearse. Other Credit Suisse bankers, including Detelina Subeva and Surjan Singh, also received illicit payments. [4]
In total, approximately $2 billion was raised through these loans. However, it was later revealed by the DOJ that at least $200 million of this amount was diverted as bribes and kickbacks to bankers, government officials, and others. The projects largely failed to materialize, and much of the debt was not properly disclosed by the Mozambican government. [4]
In 2016, when Mozambique defaulted on the loan repayments, the full scale of the hidden debt became public. In response, the International Monetary Fund and the World Bank froze their support, triggering a sovereign debt crisis that crippled the country's economy. A subsequent study estimated the scandal resulted in the loss of an entire year's economic output for Mozambique and pushed two million people into poverty. [4]
Arrest and guilty plea
Although an initial investigation by the UK's Financial Conduct Authority concluded without action, the US Department of Justice took up the case, arguing it had jurisdiction because the loans were marketed to American investors. On 3 January 2019, Pearse was arrested at his home in Kent, England, on a US warrant for conspiracy and wire fraud. [4]
Faced with extradition and a lengthy legal battle, and after learning his former colleague and romantic partner Detelina Subeva intended to cooperate, Pearse decided to plead guilty. In July 2019, he formally pleaded guilty to one count of conspiracy to commit wire fraud and agreed to cooperate fully with US prosecutors. [4]
Government witness
Pearse became a star witness for the DOJ, providing extensive details about the mechanics of the fraud. His testimony, which prosecutors described as the "Rosetta Stone" for understanding the scandal, was critical in several high-profile cases. He testified against Jean Boustani in a 2019 trial in Brooklyn; however, Boustani was ultimately acquitted on jurisdictional grounds. Pearse's cooperation was also vital in securing the 2023 conviction of Mozambique’s former finance minister, Manuel Chang, for conspiracy to commit wire fraud and money laundering. [4]
During this period, Pearse's life was upended. His cooperation led to the public revelation of his affair with Subeva, which ended his marriage. With his assets frozen, he lost his home and savings, taking up manual labor jobs, including starting a garbage collection business called "Waste Not," to support himself while awaiting sentencing. [4]
Sentencing
On 6 March 2024, Pearse appeared for sentencing before US District Judge Nicholas Garaufis in Brooklyn. Facing a maximum of 13 years in prison, his defense argued for leniency based on his profound cooperation and the severe personal consequences he had already faced. The prosecution acknowledged his indispensable role in uncovering the fraud. [4]
In his statement to the court, Pearse expressed deep remorse, stating, "I had the opportunity to say ‘no’, at every turn. But instead I said 'yes'." [4]
Judge Garaufis sentenced Pearse to time served, effectively meaning no further prison time. [5] In a highly unusual move, the judge left the bench to shake Pearse's hand and wish him luck, noting that it was a time for Pearse and his family to "come back and embrace." [4]
