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Interactive Timeline: Struggles at Swiss Banking Giant
Facundo Arrizabalaga/European Pressphoto AgencyKweku Adoboli, the former UBS trader, outside Southwark Crown Court in London last month.
LONDON — A former trader at UBS accused of causing a multibillion-dollar loss was “playing God” with the Swiss bank’s money, prosecutors told a jury here on Thursday.
During closing arguments in the eight-week court case, Sasha Wass, the lead prosecutor, said that Kweku M. Adoboli, a former UBS trader in London, had “arrogantly” sidestepped the firm’s rules and carried out risky trading activity from 2008 to 2011.
“There were no accidental losses. They were the result of planned, purposeful, unhedged trades,” Ms. Wass told the jury. “Mr. Adoboli is a gambler, not a legitimate investment banker.”
Mr. Adoboli, 32, is charged with six counts of fraud and false accounting in connection with a $2.3 billion loss at the Swiss bank. If convicted, he could face more than 10 years in prison. He has pleaded not guilty to the charges.
The defense is expected to give its closing argument on Friday, and the jury will begin deliberations early next week.
Mr. Adoboli was arrested in September 2011 after several people in the bank’s risk compliance unit raised concerns about his trading activity. Just hours before, Mr. Adoboli, an investment banker born in Ghana, had walked out of UBS after writing an e-mail to colleagues that said he had exposed the firm to potential multibillion-dollar losses, according to the prosecution.
The correspondence, which prosecutors called a “bombshell,” said Mr. Adoboli had acted alone. Later, he claimed that some of his colleagues had been aware of his actions, prosecutors said.
Over four years, Mr. Adoboli created fictitious trades to hide his trading losses and concealed his activities from colleagues, the prosecution said. UBS believed the reported risk of his activity totaled $1.5 million by mid-September 2011. In reality, prosecutors said, the financial risk was $8.1 billion.
In his defense, Mr. Adoboli has tried to show that the bank knew about his activities and encouraged him to continue the reckless behavior. But Ms. Wass told the jury on Thursday that the evidence did not indicate that UBS had known about his risky trades.
“His defense is, in effect, ridiculous,” Ms. Wass said. “It’s a fantastical suggestion that the bank knowingly approved what Mr. Adoboli was doing.”
During the trial, Mr. Adoboli conceded that he had hidden his actions through complex trades and misled UBS staff, though he denied that his activities were dishonest, the jury was told on Thursday. Under British law, the prosecution must prove that he acted dishonestly to justify a conviction.
Mr. Adoboli joined UBS shortly after graduating from Nottingham University in 2003. He worked his way up to the Delta One desk, a plain-vanilla version of derivatives trading. Traders in this division create investments that track specific financial assets, like a basket of company stocks.
After starting his speculative trading activity in 2008, Mr. Adoboli’s bonus and salary rose rapidly, the jury was told. In 2010, his bonus totaled £95,000, or $152,000, and it more than doubled to £250,000 the next year. His salary rose tenfold from 2006 to 2010, to £350,000, according to the prosecution.
To conceal his trades, Mr. Adoboli created separate accounts to hide the profits and losses from his unauthorized activities. In 2009, the so-called umbrella held $30 million, according to the prosecution.
“Like any gambler, Mr. Adoboli thought he had a winning hand,” Ms. Wass told the jury. “He was playing God with the bank’s money.”
While Mr. Adoboli contends that UBS’s management knew about his activities, the prosecution said the bank had repeatedly warned employees against unauthorized trades.
In 2008, UBS sent two e-mails to its staff in the wake of a trading scandal at the French bank Société Générale, where Jérôme Kerviel, a trader, was found to have generated more than $7 billion in losses. The e-mails warned employees about the illegal activity, according to the prosecution.
“The e-mails showed that UBS viewed the trades as dishonest and fraudulent,” Ms. Wass told the jury. “Mr. Adoboli conducted exactly the same type of trading activity as Jérôme Kerviel.”
Article source: http://dealbook.nytimes.com/2012/11/08/ex-ubs-trader-accused-of-playing-god-with-banks-money/?partner=rss&emc=rss
Bucks: Pew Feature Illustrates Banks’ Transaction Infractions
An arm of the Pew Charitable Trusts have been gaining some traction with its campaign to get banks to disclose fees associated with checking accounts in clear, simple language. One bank practice that Pew thinks is especially important for banks to clearly explain is the order in which they process transactions, which can affect the number of fees you pay if you overdraw your account.
To help illustrate the problem, Pew’s Safe Checking in the Electronic Age project has created an interactive feature, dubbed “Transaction Infraction.” The tool lets you toggle between two screens that show you how the way in which a bank orders your transactions can greatly increase the fees you will pay. (The example is taken from an actual court case, Gutierrez vs. Wells Fargo Bank).
On the first screen, you can see what happens when the 12 transactions were processed chronologically. Mr. Gutierrez ends up with a negative balance of about $45, and a single $22 fee.
On the second screen, you can see the order in which Wells Fargo actually processed the same transactions. The result is a negative balance of nearly $112, and four fees, totaling $88.
Banks have typically processed transactions in the order of the largest to the smallest, which can increase overdraft fees. But some banks are now switching to processing the smallest , or at least chronological order.
(Wells Fargo made changes last May to the way it processes some payments. Paper checks and automatic deductions — like pre-authorized monthly student loan payments — are still paid from high to low. But the bank processes A.T.M. withdrawals, debit card purchases and online bills chronologically, in the order received.)
Take a look at the tool and let us know what you think in the comments section.
Article source: http://feeds.nytimes.com/click.phdo?i=ebdea140ad1b5e0e97942a5162ac6b7e