Credit Suisse, Abu Dhabi fund calls probes, launch arbitration efforts to exit from $35M investment in Mongolian bank

Documents reviewed by Bloomberg News revealed that Credit Suisse Group AG and the sovereign wealth fund of Abu Dhabi has launched strategic steps to exit from its $35 million investment in Mongolia.

The investors, betting on the promise of the Central Asian country's $1.3 trillion mineral wealth, offered Golomt Bank LLC funds in convertible loans beginning 2007. Under the terms of the agreement, Credit Suisse and the Abu Dhabi Investment Council were set to obtain shares as part of a proposed initial public offering in one of the biggest lenders in Mongolia within five years of each deal. Moreover, the loan agreements, as reviewed by the news agency, required Golomt to provide audited financial statements promptly to the investors.

According to two sources who had knowledge of the bank and documents reviewed by Bloomberg news, the foreign investors, some members of the Golomt board and its chief executive officer discovered that there had defaulted payments as far as 2008 on debts to a Japanese trading company that were off-the-books. Golomt, in the first three months of last year, failed to produce a 2012 audit report as required in the loan agreements reached between Credit Suisse and the Abu Dhabi fund. The Golomt board reportedly commissioned PricewaterhouseCoopers LLP to conduct a probe, of which the accounting firm said bank managers had deleted over pertinent bank files, including records from the Swift interbank cash transfer system spanning from August 2007 to May 2008, and said that the perpetrators are still with the bank.

Golomt vice president Bolormaa Luvsandorj told Bloomberg in a January 28 email that the bank is financially sound, saying that its 2012 audit done late last year found no issues regarding Japanese company's complaints. Mongolian financial regulator Mongol Bank, according to chief Zoljargal Naidansuren, said Golomt is safe and sound, and that results of its separate probes were confidential in nature.

Both Credit Suisse and the Abu Dhabi fund has taken steps to recoup the loans they have extended to the bank, as Golomt is embroiled in other dubious investments and audits, Bloomberg said.

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Credit Suisse Group AG, Abu Dhabi Investment Council, Golomt Bank LLC

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