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Ex-UBS trader gets 7 years’ jail for $2.3 bln fraud

Biggest fraud in UK history; acquitted of 4 counts of false accounting
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First Published: Tue, Nov 20 2012. 05 48 PM IST
Adoboli was arrested in September 2011, and his trial started a year later. Photo: Stefan Wermuth/Reuters
Adoboli was arrested in September 2011, and his trial started a year later. Photo: Stefan Wermuth/Reuters
Updated: Wed, Nov 21 2012. 12 15 AM IST
London: Former UBS trader Kweku Adoboli was convicted and sentenced to seven years in jail on Tuesday for the biggest fraud in British history, which resulted in a loss of $2.3 billion for the Swiss bank.
Ghanaian-born Adoboli, 32, a senior trader on the Exchange Traded Funds (ETFs) desk at UBS’s investment banking arm in London, admitted trading far in excess of his authorised risk limits and making fictitious book entries to hide his true positions.
“The tragedy for you is that you had everything going for you,” the judge, Brian Keith, told Adoboli
“There is a strong streak of the gambler in you... You were arrogant enough to think that the bank’s rules for traders didn’t apply to you.”
Adoboli must serve half the sentence before being released on probation, and after taking into account the time already spent in custody could be out of prison in about two and a half years.
The prosecution had portrayed him as a reckless gambler who played God with UBS’s money in the arrogant belief that he had the magic touch, driven by a desire to be a star trader with a huge bonus to match.
His defence was that the bank had turned a blind eye to rule-bending as long as profits rolled in and that others knew what he was doing and did not disapprove.
He had pleaded not guilty to two charges of fraud by abuse of position covering the period from October 2008 to his arrest on 15 September 2011.
The jury returned a unanimous verdict of guilty on the main fraud count, holding him directly responsible for the $2.3 billion loss. It related to his unhedged, multi-billion-dollar trades in the summer of 2011.
During the 10-week trial, the court heard that his risk exposure had peaked at $12 billion on 8 August, 2011, while his desk’s authorised risk limit was $100 million intra-day and $50 million overnight.
The jury found him guilty by a majority of 9-1 on the other count of fraud, which related to unhedged, unauthorised trading in the period from October 2008 to May 2011.
To convict Adoboli of fraud, the jury had to be certain that he had intended to expose UBS to the risk of losses beyond what was normal for a trader.
He was acquitted on four counts of false accounting related to the fake entries he admitted making into UBS’s computer systems to hide his true positions, for which the jury needed to be certain that he had acted for personal financial gain.
Adoboli had always disputed the prosecution argument that he was driven by a desire for a bigger bonus.
“The amount of money involved was staggering, impacting hugely on the bank but also on their employees, shareholders and investors. This was not a victimless crime,” said Andrew Penhale, deputy head of fraud at the Crown Prosecution Service, after the verdict.
No embrace for father
Wearing a suit and tie, Adoboli stood in the glass dock at the back of the courtroom at Southwark Crown Court while the jury delivered their verdicts. His father John, who had travelled to Britain from Ghana to support his son throughout the lengthy trial, was seated directly behind the dock.
Adoboli bowed his head when the foreman of the jury gave the first verdict, which was on the main count of fraud. He was then taken into custody and returned later to hear the five other verdicts. He was not given an opportunity to leave the dock to embrace his father.
Adoboli revealed the losses to his managers in an email on 14 September, 2011, and was arrested in the early hours of the following day at UBS offices. His trial started a year later.
A swathe of top UBS executives including former chief executive Oswald Gruebel, have resigned, been sacked, or sidelined following the scandal, but the bank and its managers strongly denied encouraging traders to break the rules.
The bank has since slashed the size of its investment banking business, though the ETFs desk has survived.
UBS shares were down 1.5% at 14.28 francs at 1422 GMT, while the European banking sector index was down 1.4%. REUTERS
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First Published: Tue, Nov 20 2012. 05 48 PM IST