* Kweku Adoboli's trial scheduled to open on Monday
* Former UBS trader accused of fraud, false accounting
* Swiss bank braced for examination of culture, practices
By Estelle Shirbon
LONDON, Sept 9 A former UBS trader
goes on trial in London this week in a case involving losses of
$2.3 billion that will subject the Swiss bank to an
"uncomfortable" examination of its culture and practices.
Investment banker Kweku Adoboli, who was arrested a year ago
when the huge losses came to light, has pleaded not guilty to
two charges of fraud and two of false accounting related to
disastrous trades that UBS says were unauthorised.
The episode marked a serious setback for UBS while it was
trying to recover from near collapse during the financial crisis
in 2008. In the aftermath, the bank made major changes in both
its staff and strategy that are still underway.
"Given how serious the consequences of the incident were, we
must assume that UBS's culture and practices will be examined
during the course of the trial," UBS chief executive Sergio
Ermotti told the bank's staff last week.
"As uncomfortable as the entire trial will be for UBS, it
will show us what the consequences are when misconduct occurs or
when individuals do not take their responsibilities seriously,"
he wrote in an internal message published on its website.
Adoboli, who worked on a trading desk at UBS's investment
banking arm in London, was arrested on Sept. 15, 2011, the day
UBS announced it had "discovered a loss due to unauthorised
trading". He remained in custody until June 8, when he was
released on bail.
If convicted, the 32-year-old Ghanaian faces a possible
10-year jail sentence. His criminal trial at Southwark Crown
Court starts on Monday and is expected to last about eight
weeks, although the early stages may largely concern procedural
It will be held before a jury, meaning that under English
law there are strict restrictions on what can be reported about
the case to avoid prejudicing the trial.
Adoboli is being prosecuted by the state Crown Prosecution
Service. UBS is not a party to the trial. This means that, like
the media, it will be restricted in what it can say about the
case, potentially posing a tricky public relations challenge.
Should any witness or lawyer criticise the actions of others
within the bank or its broader systems and practices before the
jury, the media will be free to report that but UBS will be
limited in what it can say to defend itself.
Individual witnesses will be called to testify, including
past and possibly present members of UBS staff, but the bank
will not be able to publish rapid and detailed responses.
In an effort to put its side across in a legally safe
manner, UBS has posted all the public and internal statements it
has made about the affair on a dedicated website,
British-educated Adoboli, the son of a retired United
Nations diplomat from Ghana, joined UBS in 2006. At the time of
the alleged offences, he was working on the Exchange Traded
Funds (ETFs) desk, part of the equities business within the UBS
ETFs are so-called Delta One products, derivatives that
closely track underlying securities and give holders exposure to
markets that are hard to access or are illiquid.
The court may not get to the core issues for some days. Jury
selection is likely to be time-consuming and proceedings could
be delayed by legal arguments.
The events UBS refers to as the "unauthorised trading
incident" had far-reaching consequences for the bank.
Oswald Gruebel, who had been brought out of retirement in
2009 to steer UBS through the financial crisis, resigned as
chief executive on Sept. 24, 2011, nine days after Adoboli's
arrest. He was replaced by Ermotti.
On Oct. 5, 2011, the bank announced that the two co-heads of
its global equities business had resigned. Another senior
manager also left and seven other staff in the division faced
disciplinary action. All have now left UBS.
Ermotti says UBS has improved internal monitoring and
controls to avoid any repeat of the events of September 2011.
The bank has scaled down some of its investment banking
activities and retreated to its traditional core business of
wealth management. With $1.554 trillion in assets, UBS is the
world's second-largest wealth manager after Bank of America,
according to wealth consultancy Scorpio Partnership.