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UBS

UBS trader jailed seven years in UK’s top fraud

UBS trader Kweku Adoboli, who gambled away $2.3 billion of the Swiss bank's money, was sentenced to seven years in prison on Tuesday for Britain's biggest ever fraud.

UBS trader jailed seven years in UK's top fraud
Photo: MonteCarlo Generator

"There is a strong streak of the gambler in you," judge Brian Keith told the Ghanaian-born banker, 32, who was convicted of two counts of fraud.

"You were arrogant to think the bank's rules for traders did not apply to you."

The trader was found guilty of fraud by a jury at Southwark Crown Court earlier in the day but cleared of four charges of false accounting.

"The tragedy for you is that you had everything going for you," Keith said.

"Your fall from grace as a result of these convictions is spectacular."

The judge said Adoboli would serve half his sentence before being released on licence.

Adoboli wiped away tears as he was sentenced.

He had admitted the losses but denied any wrongdoing.

During the two-month trial he claimed senior managers were fully aware of his activities and encouraged him to take risks to make profits for UBS.
  
But prosecutors said that in a bid to boost his bonuses and chances of promotion, Adoboli exceeded his trading limits, failed to hedge trades and faked records to cover his tracks between 2008 and 2011.

The tactics initially paid off — prosecutors said he earned $90 million for UBS and its clients by May 2011 and the bank rewarded him with huge bonus increases, rising from £15,000 in 2008 to £250,000 in 2010.

But as the financial crisis took hold, Adoboli's deals went bad.

The court heard had that at one point he was at risk of causing the bank losses of $12 billion.

"The amount of money involved was staggering, impacting hugely on the bank but also on their employees, shareholders and investors," said Andrew Penhale, deputy head of fraud at the Crown Prosecution Service.

"This was not a victimless crime."

'Behind the facade lay a trader out of control'

 "We are glad that the criminal proceedings have reached a conclusion and thank the police and the UK authorities for their professional handling of this case," a UBS spokesman said.

"We have no further comment."
  
Adoboli's arrest in September wiped 10 percent off the bank's share price.

The privately educated son of a former United Nations official, Adoboli wept regularly during the trial, telling jurors he had dedicated his adult life to the bank and viewed his colleagues as "family".

After completing an internship at UBS while at university in England, he went to work for the bank full-time following his graduation in 2003.

He joined its exchange traded funds desk in 2006, dealing with funds that rise and fall in value depending on the performance of the markets they track.

By 2007, he and another more senior trader were managing a portfolio worth $50 billion.

It might seem "crazy" that traders with just a few years' experience were in charge of such a huge portfolio, Adoboli told the jury, but "that's how it was".

"We were these two kids trying to make it work," he added.

The discrepancies in Adoboli's trading activities eventually aroused the suspicion of his colleagues.

On September 14th a back office accountant received an email in which Adoboli confessed that UBS was exposed to colossal losses resulting from his unauthorized trades.
 
 "I am deeply sorry to have left this mess for everyone and to have put my bank and my colleagues at risk," Adoboli wrote.

He was hauled in for questioning and arrested at the bank in the early hours of the next morning.

The case has drawn comparisons to Jerome Kerviel, the French trader who lost the Société Générale bank 4.9 billion euros ($6.3 billion) in 2008, and British rogue trader Nick Leeson, who caused the collapse of Barings Bank in 1995.

"This was the UK's biggest fraud committed by one of the most sophisticated fraudsters the City of London Police has ever come across," said Detective Chief Inspector Perry Stokes, who led the investigation against Adoboli.

"To all those around him Kweku Adoboli appeared to be a man on the make whose career prospects and future earnings were taking off," he added.

"But behind this facade lay a trader who was running completely out of control and exposing UBS to huge financial risks on a daily basis."

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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.

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”.