scandals

DealBook: A Top UBS Executive Is to Depart

February 12, 2013 by NewsMaker Leave a Comment

Carsten Kengeter, the former head of the investment banking unit at UBS.

Carsten Kengeter, the former head of UBS‘s investment bank, has been on the outs at the Swiss banking giant for some time. On Tuesday, the bank announced that he was resigning.

Mr. Kengeter has been head of the bank’s noncore division, which oversees the assets that the bank is hoping to unload as it tries to exit high-risk banking activities.

But when he was running the investment bank, Kweku M. Adoboli, a trader in the London office, was accused of authorized trading that led to a $2.3 billion loss for the bank. Mr. Adoboli was eventually found guilty of fraud and sentenced to seven years in prison.

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The trading loss raised serious questions about the firm’s oversight and led to the resignation of Oswald J. Grübel, the chief executive of UBS. Also during Mr. Kengeter’s time at the investment bank, UBS became ensnared in an investigation into the manipulation of the London interbank offered rate, or Libor, the benchmark global interest rate.

The bank did not force out Mr. Kengeter at the time, but the scandals damaged his reputation and UBS eventually reassigned him to run UBS’s noncore division.

“I want to thank Carsten for his many contributions to UBS during his four years with UBS, including his three years as C.E.O. of the investment bank, and I wish him the best for his future endeavors,” the chief executive of UBS, Sergio P. Ermotti, wrote in an e-mail to bank employees.

Andrea Orcel will continue to run UBS’s investment bank, Mr. Kengeter’s old job, and the bank named Sam Molinaro to head UBS’s noncore division. Mr. Molinaro is a former top Bear Stearns executive. He joined UBS in early 2012 and will report to Mr. Ermotti, according to the internal memo.

UBS is refashioning itself in the wake of the financial crisis, drastically scaling back riskier businesses like fixed-income trading. The bank announced plans in 2012 to cut about 10,000 jobs, many of those in its investment bank.

Below is a copy of the e-mail from Mr. Ermotti:

Following the successful transfer of our Non-Core portfolio assets into the CorporateCenter earlier this year, Carsten Kengeter will be leaving UBS after a short transition. He will continue to provide advice to UBS on the wind-down of the Non-Core portfolio over the coming months.

I want to thank Carsten for his many contributions to UBS during his four years with UBS, including his three years as CEO of the Investment Bank, and I wish him the best for his future endeavors.

I am pleased to announce that Sam Molinaro will take on the role of Head of Non-Core and Legacy Portfolio, with immediate effect, reporting directly to me. Sam joined UBS in March 2012 as COO of the Investment Bank and was most recently COO of Non-Core and Legacy Portfolio.

Sam brings extensive industry experience from his time at Bear Stearns where he was CFO and then COO. Before joining UBS, he worked in several advisory roles and was CEO and Chairman of Braver Stern Securities. He was instrumental in the set-up and transfer of the Non-Core unit at UBS and I am confident that, with his appointment, we will continue the effective execution of our strategy in this area.

Please join me in congratulating Sam and wishing him every success in his new role.

Yours,

Sergio P. Ermotti

Article source: http://dealbook.nytimes.com/2013/02/12/a-top-ubs-executive-to-depart/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: e mail, global interest, scandals

DealBook: Barclays to Cut 3,700 Jobs in Overhaul

February 12, 2013 by NewsMaker Leave a Comment

Neil Hall/ReutersThe Barclays headquarters in London. The bank plans to close several business units.

8:13 a.m. | Updated

LONDON – Barclays announced a major restructuring that will eliminate 3,700 jobs and close several business units, as the bank reported a big loss in the fourth quarter of 2012.

The overhaul of its operations comes after a series of scandals at the bank, including the manipulation of benchmark interest rates, which led to the resignation of the firm’s former chief executive, Robert E. Diamond Jr.

In a bid to reduce its exposure to risky trading activity, Barclays plans to close a number of operations in Europe and Asia, including a tax-planning unit that has been criticized for tarnishing the firm’s reputation.

“There will be no going back to the old way of doing things,” the chief executive, Antony P. Jenkins, told reporters at a news conference in London on Tuesday. “We will never be in a position again of rewarding people for activities inconsistent with our values.”

Despite the revamp of its operations and a new emphasis on values, the bank plans to retain the majority of its investment banking unit, particularly its operations in Britain and the United States. The division generated roughly 60 percent of the bank’s adjusted pretax profit in 2012.

Barclays will close four business divisions, while another 17 units will either be closed, sold or pared back in response to subdued market activity, Mr. Jenkins said. In total, the expected layoffs across the bank’s operations represent around 3 percent of the firm’s global work force.

The investment banking division is to be among the hardest hit, where about 1,800 employees are expected to be laid off. The job cuts will primarily fall on the bank’s Asian and European equities divisions, as well as its agricultural commodities trading operations. Almost 90 percent of the reductions already have been made, according to Christopher G. Lucas, the bank’s departing chief financial officer.

Mr. Jenkins refused to comment specifically on the position of Rich Ricci, the head of Barclays investment banking, whose name has surfaced in the inquiry into the bank’s role in the rate-rigging scandal.

“No one can predict the future, but I am confident in the team around me,” Mr. Jenkins said. “Who knows what could happen in a year’s time.”

The restructuring plan includes an additional 1,900 job cuts in the bank’s European retail and business banking unit, where Barclays plans to close roughly 30 percent of its Continental branch network.

The reductions have been focused in areas where Barclays does not compete globally with other international banks or where the firm could experience reputational damage like the recent rate-rigging scandal and the inappropriate sales of loan insurance to customers.

“Not much of this is surprising,” said Ian Gordon, a banking analyst at Investec in London. “They are not removing any of the material activities from the investment bank.”

The recent scandals that have engulfed the bank weighed down the firm’s fourth-quarter earnings.

Barclays posted a net loss of £835 million ($1.3 billion) in the last three months of 2012, compared with a profit of £356 million in the period a year earlier.
The results were hampered by the need to set aside additional capital to compensate costumers who were inappropriately sold loan insurance and for small businesses that were improperly sold complex interest-rate hedging products. Barclays also took a charge against the value of its own debt.

Excluding the adjustments, the bank’s pretax profit for the fourth quarter would have been £1.1 billion, almost double the amount in the period a year earlier.
For 2012, the bank reported an annual net loss of £1 billion, compared with a £3 billion profit for 2011. The annual loss resulted from provisions to cover legal costs related to the rate-rigging scandal and other improper activities.

The bank added that it would reduce annual costs by around 10 percent, to £16.8 billion, by 2015. Its share price rose almost 6 percent in afternoon trading in London on Tuesday.

Barclays said it had reduced bonuses across its operations by 16 percent for 2012, compared with the previous year. In its investment banking division, total bonuses fell 20 percent, with the average bonus in the unit standing at £54,100, a 17 percent reduction, according to a company statement.

The bank added that it had cut compensation awards because of risks facing several business units, including the rate-rigging scandal.

In a settlement with American and British authorities in June, Barclays agreed to pay fines totaling $450 million after some of its traders manipulated the London interbank offered rate, or Libor, for financial gain. Some of the firm’s managers also altered the rate to portray the bank in a healthier financial position than it actually was.

The investment banking division reported a pretax profit of £858 million in the fourth quarter, compared with a pretax profit of £267 million in the fourth quarter of 2011. Pretax profit at the bank’s retail and business banking unit rose 17 percent, to £732 million, while pretax profit in its corporate banking division almost tripled, to £107 million.

Mr. Jenkins acknowledged that some of the firm’s past actions had fallen short. He added that the investment banking division would remain at the heart of the firm’s future operations, though wrongdoing would not be tolerated.

“The old ways weren’t the right way to behave nor did they deliver the right results,” Mr. Jenkins said. “Individuals must take responsibility for their own behavior.”

Article source: http://dealbook.nytimes.com/2013/02/12/barclays-to-cut-3700-jobs-in-restructuring-overhaul/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: agricultural commodities, european equities, scandals

DealBook: Amid Bank’s Legal Problems, Barclays C.E.O. Gives Up Bonus

February 1, 2013 by NewsMaker Leave a Comment

Lucas Jackson/ReutersAntony Jenkins, chief of Barclays.

LONDON – Antony P. Jenkins, the new chief executive of Barclays, said on Friday that he would not accept a bonus as the British bank struggles to rebuild its reputation after a series of recent scandals.

The announcement comes as British regulators investigate new allegations that Barclays failed to properly disclose to shareholders a loan to a group of Qatari investors that gave the British bank a cash infusion during the financial crisis, according to a person with direct knowledge of the matter, who spoke on the condition of anonymity because he was not authorized to speak publicly.

Last year, the bank disclosed that British and American authorities were investigating the legality of the payments related to the $7.1 billion cash injection to Qatar Holding, the sovereign wealth fund.

Mr. Jenkins is dealing with a spate of legal headaches.

In June, Barclays agreed to pay a $450 million settlement with United States and British regulators over rate manipulation. The case forced a number of the bank’s top executives to resign, including the chief executive at the time, Robert. E. Diamond Jr.

The British firm has also set aside $3.2 billion to cover legal costs related to the inappropriately selling of insurance to consumers. British authorities recently told the bank that it must review the sale of certain interest-rate hedging products after 90 percent of a sample of the complex instruments were found to have been sold improperly. Analysts say the investigation may lead to millions of dollars of new legal costs.

In light of the controversy surrounding the bank, Mr. Jenkins said he did not want to be considered for a bonus that could have totaled up to $4.3 million, adding that many of the problems engulfing the bank were of its own making. The Barclays chief’s annual salary is $1.7 million.

“I think it only right that I bear an appropriate degree of accountability for those matters,” Mr. Jenkins said in a statement. “It would be wrong for me to receive a bonus for 2012.”

A spokesman for Barclays declined to comment about the investigation into potential wrongdoing connected to the loan to Qatari investors.

By forgoing his bonus, Mr. Jenkins contrasts with his predecessor. Mr. Diamond was in line for a $4.3 million bonus in deferred shares for 2011 despite criticism about his handling of the bank’s performance. Faced with mounting opposition, Mr. Diamond and Chris Lucas, the bank’s finance director, eventually agreed to receive only half of the 2011 deferred stock bonus if the British bank failed to reach a number of its financial targets.

Barclays, which will unveil a major overhaul of its operations when it reports earnings on Feb. 12, is expected to slash up to 2,000 jobs in its investment bank in an effort to reduce its exposure to risky trading activity, according to two people with direct knowledge of the matter.

As part of the changes, the British bank has hired Hector Sants, the former chief of the Financial Services Authority, the British regulator, as its new head of compliance.

Mr. Jenkins, who previously ran Barclays’ consumer banking business, told employees earlier this month that they should leave the bank if they were not willing to help rebuild the firm’s reputation.

“My message to those people is simple,” Mr. Jenkins wrote in an internal note obtained by DealBook. “Barclays is not the place for you. The rules have changed.”

Article source: http://dealbook.nytimes.com/2013/02/01/amid-banks-legal-problems-barclays-c-e-o-gives-up-bonus/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: financial crisis, robert e diamond, scandals

A Hacker Tells All

August 14, 2011 by NewsMaker Leave a Comment

While he excelled at infiltrating computer systems from a keyboard and had a sharp memory for numbers, “Ghost in the Wires” (written with William L. Simon) really showcases another of Mitnick’s skills: social engineering, or what he describes as “the casual or calculated manipulation of people to influence them to do things they would not ordinarily do.” By doing his research and impersonating authority figures over the phone or by e-mail, Mitnick found he could persuade just about anybody — programmers, technicians, even the nice lady at the Social Security Administration — to give him the things he wanted, like passwords, computer chips and personal information about F.B.I. informants on his tail. “People, as I had learned at a very young age, are just too trusting,” he writes.

It’s this element to his story that makes “Ghost in the Wires” read like a contemporary über-geeky thriller. Many of today’s computer viruses and identity-theft scams — and even the recent phone-hacking scandals of certain newspapers — depend on social engineering mixed with a misuse of technology to dupe the unsuspecting. In that regard, Mitnick’s memoir also serves as a wake-up call for anyone trying to keep personal information private. (Out of prison since 2000, Mitnick now works as a security consultant.)

Kevin Mitnick grew up as an only child of divorced parents, moving frequently in the Los Angeles area. He was something of a loner, and his early pursuits included studying magic tricks and ham radio. When he was 12, the revelation that he could ride the local bus system free with a $15 punch and books of half-used blank transfer tickets fished out of a Dumpster behind the bus depot gave him a sense of what he could do (legal or otherwise) if he put his mind to it. Even if one is unfamiliar with Mitnick’s life story, it’s kind of obvious where he’s heading here, and it’s far beyond the bus routes around San Bernardino County.

In high school, Mitnick developed an obsession with the inner workings of the telephone company’s switches and circuits, a hobby known as “phone phreaking” (and one that was shared by the future Apple founders, Steve Jobs and Steve Wozniak, in their own formative years).

By the time he was 17, in 1981, Mitnick was happily spending his time on things like persuading a Pacific Telephone employee to give him Lucille Ball’s home number and burrowing into different corporate computer systems. It was also at the age of 17 that he had his first run-in with the authorities for his activities. Thus began a nearly 20-year cat-and-mouse game with law enforcement that makes up much of the book.

Driven by curiosity and compulsion (“There’s always something that’s more challenging and fun to hack”), Mitnick spent most of his young adulthood pilfering proprietary code from technology companies like Sun Microsystems and Novell, partly so he could look for bugs and security holes to use to his advantage, and partly for the thrill of the hunt. He also spent plenty of time making free calls on his hacked cellphone and going to the gym. As the authorities began to close in on him in 1992, he created several false identities, and went on the run until he was finally nailed in February 1995.

When not recounting his clever exploits, Mitnick devotes chunks of the book to defiantly rebutting myths that became attached to him — for example, that he had hacked into government computer systems. (He does, however, admit to eavesdropping on the National Security Agency’s telephone calls.)

With its caper ’n’ chase pacing, “Ghost in the Wires” is fairly entertaining, although the prose can veer into pulpy melodrama: “I had to move now. I had to get a new identity now. I had to get the hell out of my apartment now!”

Like many memoirists, Mitnick clearly relishes the chance to have his say all these years later. He mocks some of the more incredible accusations leveled at him by the authorities: that he had repeatedly turned off the phone service of the actress Kristy McNichol, and that he could “whistle into a telephone and launch a nuclear missile from Norad.” (Mitnick surmises that the federal prosecutor who made the latter claim probably mixed him up with Matthew Broderick’s youthful computer enthusiast in the 1983 cold-war thriller “WarGames.”)

Mitnick’s sense of humor is evident as he recounts his adventures. When his ingenious combination of a radio scanner and software alerted him to F.B.I. agents’ cellphones in the area, he cheekily had a box of doughnuts waiting for them when they raided his apartment.

For those interested in computer history, “Ghost in the Wires” is a nostalgia trip to the quaint old days before hacking (and hackers) turned so malicious and financially motivated. Unlike computer criminals today, Mitnick ignored the credit card numbers he stumbled across in his pursuit of code. He writes: “Anyone who loves to play chess knows that it’s enough to defeat your opponent. You don’t have to loot his kingdom or seize his assets to make it worthwhile.” He summed up his personal motive to the former Wall Street trader Ivan Boesky when they were both in prison: “I didn’t do it for the money; I did it for the entertainment.”

J. D. Biersdorfer is the production editor of the Book Review and writes the QA computer column for The Times.

Article source: http://feeds.nytimes.com/click.phdo?i=373bf47d18f2d96767ebaabcc884cb27

Filed Under: Business News Tagged With: informants, local bus, scandals