September 27, 2012 / 2:32 PM / 6 years ago

Accused UBS rogue trader did not act alone: lawyer

LONDON (Reuters) - The lawyer for accused UBS UBSN.VX rogue trader Kweku Adoboli said he did not act alone but learned his behavior from colleagues at the Swiss bank who later “stabbed him in the back”.

Former UBS trader Kweku Adoboli arrives at Southwark Crown Court in London September 20, 2012. REUTERS/Stefan Wermuth

Adoboli, 32, denies charges of fraud and false accounting that cost UBS $2.3 billion

His lawyer, Charles Sherrard, told Southwark Crown Court on Thursday that Adoboli’s three colleagues on the Exchange Traded Funds desk had actively taken part in some of the fraudulent behavior of which he is accused.

Sherrard made the comments as he began cross-examining John Hughes, who along with Adoboli was a senior trader on the four-man desk.

The other two traders, who were more junior, are due to give evidence after Hughes.

Prosecutors say Adoboli was an “out of control” rogue trader who had abused the bank’s trust in him for personal gain.

His defense team have argued UBS turned a blind eye to rule-breaking as long as it made the bank money.

Sherrard read out a transcript of a chat between the two men, dated January 4, 2011, in which Hughes instructed Adoboli to book some profits made in late 2010 as if they had been made in early 2011.

“If you can, 2010 P and L (profit and loss account) as low as possible,” Hughes told Adoboli.

“OK sir,” Adoboli replied.

“Not a daft amount,” Hughes said.

Sherrard put it to Hughes that the aim was to make it look as if the desk had already significantly boosted its 2011 profits.

“It was a manipulation of the figures,” Sherrard told Hughes, who replied: “Yes.”

Hughes said that every year he would seek to take advantage of a window of opportunity around the New Year, when some markets were closed, to make the desk’s performance look better.

Sherrard asked him whether this was behavior that he had learned from others within UBS.

“Come to think of it, it probably was, yes,” Hughes said.

The court previously heard testimony from former bosses of Adoboli that they were unaware of the trader’s activities until he confessed to unauthorized deals the day before his arrest on September 15, 2011.


Sherrard said to Hughes, “Your team changed from being the four musketeers to three musketeers, who decided just before he (Adoboli) confessed, collectively and individually, to stab him in the back, leaving him to bleed on the prison floor.”

This case involved “learnt behavior”, the lawyer said. “There were other secret books at UBS, perhaps there still are, being used to suppress profits and data.”

A long section of the cross-examination centered on the so-called “umbrella”, an illicit account that the prosecution argues was invented and used by Adoboli to smooth out excessive profits and losses he was making through unauthorized, unhedged trading.

Sherrard said there were two purposes to the umbrella. One was to store a certain amount of profit to have at the ready to offset mounting costs that the desk was facing. The other was to have a buffer that would give the traders on the Exchange Traded Funds desk confidence to trade because it could limit their losses.

Hughes said at the witness stand that he knew about the umbrella and believed the first purpose spelt out by Sherrard was Adoboli’s original intention when he created it.

Hughes at one point rejected a suggestion by Sherrard that he saw himself as “one of the casualties” of the case because he had been dismissed from UBS for gross misconduct.

“I don’t see myself as a casualty. I fully deserved to be dismissed,” Hughes told the court.

The trial continues.

editing by Jane Baird

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