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UBS

Teary UBS ‘rogue trader’ gives evidence

Kweku Adoboli, the UBS trader accused of losing $2.3 billion, broke down in tears on Friday as he took to the witness stand for the first time at his trial in London.

Published: 26 October 2012 17:04 CEST
Teary UBS 'rogue trader' gives evidence
Photo: Martin Abegglen

Before entering the witness box at Southwark Crown Court, Adoboli was charged with two further counts of false accounting, to which he pleaded not guilty.

He choked up and wiped his eyes with a handkerchief when his lawyer noted that his father, a Ghanaian former United Nations official, had been at the court to support him since his trial began on September 10th.

Adoboli, 32, stands accused of faking hedge deals by inventing clients, leaving Switzerland's biggest bank exposed to huge losses when the market turned against him.

In addition to the new charges, he also denies two charges of fraud and two charges of false accounting in the period between October 2008 and September last year.

"This is the first opportunity you have had to give evidence on oath," his lawyer Paul Garlick told him.

Wearing a dark suit, white shirt and a red tie, Adoboli confirmed his name, date of birth and place of birth in the Ghanaian capital Accra.

He described his early life, moving from Ghana to Jerusalem, then Damascus, Ghana and Israel again due to his father's work.

He became emotional and wiped tears from his eyes as his lawyer said his father had been in the courtroom throughout his trial to support him.

After recovering his composure, Adoboli explained that to end the disruption of moving from country to country, he was sent to a Quaker boarding school in England and then attended a university in England.

While there he secured an internship with UBS, which then offered him a job.

After working in settlements and trade support, he joined the exchange traded funds (ETF) desk in September 2006, working under desk chief Mike Foster and alongside trader John Hughes.
   "The business was growing so rapidly and the book was so big and so complex
the two of them just couldn't do it on their own," he said.

Under Foster, profits grew from $5 million in 2005 to $65 million in 2007. When he left that year, it was a "huge blow".

That left Hughes as the senior trader, with just Adoboli alongside him.

Adoboli said it seemed "crazy" that a 26-year-old with five years' experience was in charge of a $50 billion book but "that's how it was".

"We wanted to make sure we could build something we were proud of," he said, breaking down in tears again.

"I did all of the client trading, all of the risk management of the book."

He said the two of them reported to a new line manager, but he "didn't have any experience of how an ETF desk works. To be honest, no one did apart from myself and John.

"After about six months, they realized, to be fair, we were struggling."

A "babysitter" was brought in to manage them, but he was made redundant in 2008, with a young trade assistant going at the same time, in the midst of the global financial meltdown.

"The markets had gone into the crisis that we are ultimately still in. We needed help," Adoboli said.

He said he would work from 6am until 9pm or sometimes later.

"On two occasions, I actually slept under the desk," he said.

"It didn't get any easier. The hours just got longer."

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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”.