UBS defeats shareholders' U.S. appeal over mortgage losses, tax probe
By Jonathan Stempel
NEW YORK (Reuters) - A federal appeals court in New York rejected appeals by UBS AG shareholders seeking to hold the Swiss bank liable for their losses for having concealed its exposure to risky mortgage-backed securities and helping clients evade U.S. taxes.
Tuesday's decision by the 2nd U.S. Circuit Court of Appeals is the latest ruling to limit the reach of U.S. civil securities fraud laws, under a 2010 U.S. Supreme Court precedent that imposed a presumption against applying U.S. law to conduct outside the country.
Writing for a three-judge panel, Circuit Judge José Cabranes said that precedent, Morrison v. National Australia Bank, bars investors who buy foreign issuers' securities on foreign exchanges from pursuing U.S. fraud claims against those issuers, even if their securities are cross-listed on U.S. exchanges.
Gregory Castaldo, a Kessler Topaz Meltzer & Check partner representing the plaintiffs, did not immediately respond to requests for comment.
Robert Giuffra, a partner at Sullivan & Cromwell representing UBS, said in an email: "We're pleased with today's decision, which ends this litigation once and for all."
UBS from 2007 to 2009 took more than $48 billion of writedowns on residential mortgage-backed securities and collateralized debt obligations, and in 2009 reached a $780 million settlement with regulators to end a criminal tax probe.
The plaintiffs claimed that their UBS shares lost value because the bank concealed risks that led to these costs.
In September 2011, U.S. District Judge Richard Sullivan in Manhattan dismissed claims by foreign and domestic plaintiffs who bought UBS shares on foreign exchanges, and a year later dismissed all remaining claims. Continued...