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UBS

Boss of ‘rogue trader’ tells court of disbelief

The former boss of a UBS trader accused of losing the Swiss bank $2.3 billion in "rogue trades" told a London court on Wednesday of his disbelief at seeing a confessional email.

Published: 20 September 2012 09:28 CEST

Ronald Greenidge, who managed Kweku Adoboli from 2008 until April 2011, said he had no idea the trader had been using fake trades to hide his losses until presented with a "bombshell email" on September 14th last year.

In extracts of Adoboli's email presented to the court, the defendant explained that he had exceeded his trade limit through unauthorized deals and created fake "hedge" trades to hide his exposure to the market.

When asked what his immediate reaction was to the email, Greenidge said he thought "this can't be true."

"I could not believe someone I worked with at the time would do something like that," he added.

Greenidge, who no longer works for UBS, explained that he summoned Adoboli, 32, for an immediate meeting, at which he asked the London-based trader how he had built "phenomenally large" exposure "without alarm bells going off".

Adoboli explained that he had created fictitious trades while working on the bank's Exchange-Traded Fund desk and had given plausible explanations whenever quizzed by the bank's accountants, the court heard.

The defendant admitted during the meeting that he had been booking false deals since 2008, using abnormally long settlement dates to give him time to eventually settle the discrepancies, jurors at Southwark Crown Court heard.

Only when the market turned sharply against him in June 2011 was Adoboli unable to buy enough time to settle his account, although Greenidge revealed that the trader told him he had had a "brief window" to close his position.

Earlier, the accountant who uncovered the alleged "rogue trades" told of the panic which swept through the bank as the defendant's story unravelled.

Steward told the court that he informed Adoboli in a phone call that the bank had a "problem" if his counterparties did not pay up the money owed.

He also warned Adoboli that "everyone (at the bank) was getting very excited".

The trades were causing a "great deal of anxiety" in the back office, the part of the bank which ensures that traders' books balance, he said.

In fact, the court heard, there never was a counterparty as the trades were fictitious.

According to Steward, the bank's automatic warning system had failed to flag up the exposure to its credit risk management department.

The defence said the bank's accountants commonly created "dummy deals" similar to the ones used by Adoboli to hide his losses.

Steward argued that the UBS dummy deals were "absolutely not" the same as the fictitious deals allegedly carried out by Adoboli as they always had a genuine counterparty.

They "bore a bit of a resemblance to what he claimed he was up to, but not to what he was actually up to," Steward told the court.   

The trial has heard that Adoboli caused "chaos and disaster" at Switzerland's largest bank when he "gambled away" $2.3 billion in trades at its London offices.

Adoboli denies two charges of fraud and two of false accounting between 2008 and September last year.

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FRANCE

Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Published: 19 February 2019 09:10 CET
Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.