Posted by Cognito on Mon, Oct 01 2012

All Posts by Cognito

Cognito update on UBS rogue trader trial

Over the last few months Cognito has been following a case of particular relevance to a number of our clients. The trial of Kweku Adoboli, the UBS rogue trader that is on trial for charges of fraud and false accounting that cost the bank $2.3billion, at Southwark Crown Court. On Thursday 27th September, John Hughes, Adoboli’s trading partner and Director of ETF trading at the time, was on the stand being questioned by the defence. The case has received heavy media coverage so it was no surprise to see journalists from Reuters, The Economist, The Times and The Telegraph amongst others in court to cover the latest developments.

The defence proposed to demonstrate that Adoboli was not acting alone and his team were aware of his actions. Throughout the morning’s procedure highlighted the risk culture prevalent in UBS, the supervisory responsibilities of the head of desk which were not efficiently carried out, and the collective decisions made within the team on the desk.

Some of the most interesting points from what when on in court this morning:

  • Hughes talked about the ‘Umbrella’, Adoboli’s illicit account set aside for catering for unexpected and unnecessary costs. The defence argued that Hughes was well aware of the ‘umbrella’ tactic and suggested individuals on other desks were using the same practice. Knowledge of this was denied by Hughes. Read more from  Reuter’s:
  • Hughes described UBS’ supervision as ‘loose’, whilst an accurate description he admitted it was a ‘pretty damning’ way to describe it for the bank. He said that his desk didn’t allow for a decent level of supervision as UBS didn’t invest in the technology for it.
  • Hughes appeared unwilling to accept responsibility for the supervision of Adoboli, denying he was officially head of desk saying that it was a ‘joint role’. The defence pointed out that everybody else regarded him as head of desk.
  • The court read out a series of text messages in which Adoboli discussed his positions and very high risks to which Hughes would not reprimand but encourage him. On one occasion Adoboli told Hughes that he “flipped the book three times”  in a day (changed position). Hughes admitted that it was too risky a thing to do but couldn’t explain why he didn’t discourage Adoboli from doing it when he told him about it.

To read more about  today’s trial, the latest from Billy Kenber at The Times gives an insightful account of the proceedings:

Or to  catch up on the proceedings from earlier this week, The Economist provides a good summary from Tuesday’s session:

Banking, Finance,
comments powered by Disqus
Back to top