November 29, 2021

DealBook: Adoboli, Ex-UBS Trader, Called Scapegoat for Bank’s Woes

Kweku M. Adoboli, a former UBS trader whose risky trades resulted in a multibillion-dollar loss, claims the bank knew of and encouraged his actions.Carl Court/Agence France-Presse — Getty ImagesKweku M. Adoboli, a former UBS trader whose risky trades resulted in a multibillion-dollar loss, claims the bank knew of and encouraged his actions.

LONDON — Kweku M. Adoboli, a former UBS trader in London, was cast by the defense in closing arguments on Friday as the scapegoat for a multibillion-dollar loss at the Swiss bank.

Charles Sherrard, Mr. Adoboli’s lawyer, told the jury that the bank’s management had singled out his client after a series of scandals and missteps at UBS. “He has had to bare the brunt about what has been going on at UBS,” Mr. Sherrard told the jury. “He has been blamed for redundancies, the share price fall and reputational damage.”

Mr. Adoboli, 32, is charged with six counts of fraud and false accounting in connection with a $2.3 billion loss at the bank. If convicted, he could face more than 10 years in prison. He has pleaded not guilty to the charges. The case should go to the jury early next week.

Over the course of the trial, the prosecution portrayed Mr. Adoboli as an “arrogant” investment banker who sidestepped the rules when it suited him. On Thursday, Sasha Wass, the lead prosecutor, called him a “gambler” who was “playing God” with the bank’s money.

The defense argued that the allegations represented a “character assassination,” which failed to highlight the role of the management of UBS in condoning his trading activity. Mr. Sherrard added that the bank’s actions were representative of an industry driven solely to make money, an industry that puts enormous pressure on traders to make profits.

“Senior management are never to blame,” Mr. Sherrard said.

UBS is not a defendant in the case, and is not permitted to comment on criminal cases, according to British law.

During almost five hours of closing arguments on Friday, the defense rebutted accusations that Mr. Adoboli acted alone to create false trades and hide losses from 2008 to 2011. Mr. Sherrard told the jury that several layers of management knew about the activities, but they did not stop Mr. Adoboli because he was earning profits.

Mr. Adoboli joined UBS in 2003 and rose quickly to work on the Delta One desk, a plain-vanilla version of derivatives trading. Traders in the unit create investments that track specific financial assets, like a basket of company stocks.

He is accused of creating false trades to hide his losses, according to prosecutors. They claimed that Mr. Adoboli created separate accounts, which he called his “umbrella,” to mask the profits and losses from his unauthorized activities.

The defense said Mr. Adoboli’s activities were well known in the bank. His supervisors, according to the defense, condoned the actions because they proved to be profitable.

Mr. Adoboli’s team earned $8.8 million in 2010, Mr. Sherrard said. That figure rose to $52 million for just the second quarter of 2011. In a single day, the unit posted a $6 million profit, he said.

“The next level of supervisors knew much of what he was doing,” Mr. Sherrard said. “For almost three years, everyone basked in his glory.”

While Mr. Sherrard acknowledged that his client had lied to UBS officials, he said Mr. Adoboli had been buying time to recoup his losses. The former trader also initially said he was solely to blame to protect his colleagues, his lawyer claimed.

Later, Mr. Adoboli said others at UBS had been aware of his actions. Mr. Sherrard also told the jury that members of his client’s team used the so-called umbrella to cover up their trading activity.

The prosecutors are “trying to desperately portray this man as a rogue trader,” his lawyer said. “The minute you see that the whole desk was working as a team,” the prosecution’s case falls apart, Mr. Sherrard added.

The defense similarly countered claims that Mr. Adoboli had gambled with the bank’s money for personal gain. Mr. Sherrard read excerpts from the former trader’s UBS evaluations, which portrayed him as hard-working, humble team player. He added that these glowing reviews debunked accusations that he was driven by profit.

“The notion is absurd,” Mr. Sherrard said.

Article source:

Judge Rules Stanford Competent to Stand Trial

U.S. District Judge David Hittner’s decision came after a nearly three-day competency hearing for the disgraced financier. The trial is set for Jan. 23. Hittner said he will rule next week on a request from Stanford’s attorneys to delay the trial until April.

“We’re disappointed. We hope he gets healthy,” Ali Fazel, one of Stanford’s attorneys said after the ruling.

Prosecutors declined to comment. A gag order is preventing attorneys from discussing the case.

Stanford had been declared incompetent in January due to an anti-anxiety drug addiction he developed while jailed in Houston. He spent more than eight months at a federal prison hospital in Butner, N.C., getting treatment for his addiction and being evaluated to determine if he had any long-term effects from being injured in a September 2009 jail fight.

A forensic psychologist who helped treat Stanford at the prison hospital testified the financier is now competent, can think clearly after being taken off the drug and has not suffered brain damage from the jail fight.

Doctors at the prison hospital and prosecutors accused Stanford of faking symptoms of amnesia. He says he can’t remember all events in his life prior to the prison fight.

During closing arguments after testimony in the hearing had concluded earlier Thursday, prosecutor Gregg Costa said Stanford was exaggerating or faking memory loss and 14 other disorders the financier’s medical experts had diagnosed him with in an attempt to “game the system” and avoid trial for a $7 billion fraud.

“He wants to con his way out of this case the same way he conned investors for 20 years. Your honor, don’t let him con his way out of this case,” Costa said.

But four medical experts who testified on Stanford’s behalf, including a neurologist and two forensic psychiatrists, said the financier suffered a traumatic brain injury in the jail fight that left him with severe memory loss and unable to think or communicate clearly.

“Every expert that has seen him says there is something wrong with him,” Fazel said during closing arguments. “He wants to fight the case. He just wants to be able to help his lawyers. He is not running away from anything.”

Stanford’s medical experts said his brain injury, along with a major depressive disorder and post-traumatic stress disorder from the jail fight, has left him unable to assist his defense attorneys and to be ready for trial.

Those experts also testified that his treatment for other medical conditions, including heart and liver problems, complicated his brain injury and memory loss.

Stanford and three former executives of his now-defunct Stanford Financial Group are accused of orchestrating a colossal pyramid scheme that advised clients from 113 countries to invest more than $7 billion in certificates of deposit, or CDs, at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns.

Authorities say Stanford and the executives fabricated the bank’s records, bribed Antiguan regulators with investors’ money from a secret Swiss bank account and misused funds to pay for Stanford’s lavish lifestyle.

Stanford became a billionaire whose financial empire stretched across the U.S., the Caribbean and Latin America. His attorneys say he ran a legitimate business. He has been jailed since he was indicted in June 2009 by a federal grand jury in Houston, where his companies were headquartered.

He faces 14 counts, including wire and mail fraud.

Earlier Thursday, a prison official at the Houston federal detention center, where Stanford is being held, told Hittner doctors at the facility had become concerned Stanford might be suicidal after one of the financier’s medical experts had testified about such concerns.

The official said doctors examined Stanford Wednesday evening and determined he is not suicidal but will continue to evaluate him.

Article source:

DealBook: Prosecutors Describe ‘Devastating Proof’ of Rajaratnam’s Guilt

Raj Rajaratnam, right, and his lawyer, John Dowd.Spencer Platt/Getty Images Raj Rajaratnam, right, and his lawyer, John Dowd.

A prosecutor accused Raj Rajaratnam in court on Wednesday of conspiring with a network of friends and employees to gain access to sensitive information and earn millions of dollars in illegal profits from insider trading.

As the government began closing arguments in Mr. Rajaratnam’s trial, a prosecutor, Reed Brodsky, laid out what he described as “devastating proof of the defendant’s guilt.”

Mr. Rajaratnam engaged in “a game to be the best in a highly competitive industry and conquer the stock market at the expense of the law and the average, ordinary investor.”

Mr. Brodsky wasted little time before trumpeting what he called “the most powerful evidence of defendant’s guilt — his own voice.” The government has played more than 40 secretly recorded telephone conversations between Mr. Rajaratnam and his supposed accomplices during the trial.

“The tapes provided devastating evidence of defendant’s crime in real time,” said Mr. Brodsky, standing behind a lectern positioned directly in front of the 12 jurors and 4 alternates.

“Let’s go to the tape,” said Mr. Brodsky, echoing Warner Wolf, the New York sports announcer.

The Galleon networkAzam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network.

During the first two hours of closing the government replayed several audiotapes of Mr. Rajaratnam swapping confidential information with tipsters. Mr. Brodsky told the jury that he would not be able to play all of the recorded conversations, but encouraged them to listen to as many of them as they wanted to during their deliberations.

“So yesterday they agreed on, at least they’ve shaken hands,” said Anil Kumar, a former McKinsey Company executive who has pleaded guilty, on one of the tapes played Wednesday. “Um, so I think you can now just buy.”

Mr. Brodsky struck a confident tone during closing. He told the jury that he would not be able to review all of the evidence related to Mr. Rajaratnam’s scheme “or else we’d be here for days.” He challenged Mr. Rajaratnam’s defense lawyers to explain away certain incriminating statements made by their client. He mocked the defense’s argument that Mr. Rajaratnam only traded on news articles, analyst reports and news releases.

“Absurd,” he said.

The government’s closing argument is expected to consume most of Wednesday’s court session. The defense will follow with its closing argument, and the government then gets the final word in rebuttal. The jury could get the case as soon as Thursday.

Mr. Brodsky, a clean-cut Matthew Broderick-type dressed in a dark suit, white shirt and repp tie, appealed to the working-class New York jury by repeatedly contrasting Mr. Rajaratnam, a billionaire, with the “average, ordinary investor.”

“The defendant knew tomorrow’s news today, and that mean big money,” Mr. Brodsky said. It was information “the average, ordinary investor didn’t know and couldn’t find out.”

As it did during the trial, the government also focused on evidence of Mr. Rajaratnam scheming to cover up his supposed crimes. Mr. Brodsky posted a transcript of Mr. Rajaratnam coaching colleagues on how to create an “e-mail trail” to make it appear that he was buying stock for legitimate reasons. He showed the jury a conversation during which Mr. Rajaratnam discussed confidential information with another fund manager and then instructed her to “buy and sell, and buy and sell” to create a flurry of trading activity around establishing a stock position to make it more difficult to detect insider trading.

Mr. Brodsky also preemptively addressed several of Mr. Rajaratnam’s defenses. After taking the jury through a series of trades that Mr. Rajaratnam made in October 2008 based on inside information from Mr. Kumar about Advanced Micro Devices, Mr. Brodsky acknowledged that Mr. Rajaratnam lost money on these tips, despite their accuracy.

“The reason why the defendant lost money is the same reason why millions of investors lost money,” Mr. Brodsky said. “A.M.D. announced the deal at the time of one of greatest financial collapses in American history. You don’t need to make money in order to be guilty of the crime of insider trading.”

Article source: