UBS ignored limits on profitable trades, Adoboli lawyer says

Kweku Adoboli’s lawyers said UBS AG had a culture that overlooked trading limits and other rules as long as employees made money.

Adoboli lawyer Charles Sherrard said the bank became “more aggressive in terms of its desire to make profits” in 2011, while cross-examining one of Adoboli’s former bosses at a fraud trial in London today.

“The culture, practice at the bank you were working for, didn’t matter as long as you were making money,” Sherrard said to Ron Greenidge, who oversaw UBS’s exchange-traded-funds desk until April of last year.

Adoboli, 32, is on trial charged with fraud and false accounting over unauthorized trades that lost $2.3 billion. Adoboli admitted he risked $5 billion on Standard & Poor’s 500 futures and a further $3.75 billion in the German futures market, Greenidge said in testimony yesterday.

Risk limits for the bank’s ETF desk were agreed on orally and could be exceeded, Greenidge said. The only written risk limits were “at a very high level,” Greenidge testified.

Greenidge, who worked at UBS for 19 years, said today he was dismissed for gross misconduct because of Adoboli’s trades. He said he felt the bank was making him a scapegoat.

Adoboli has denied the charges against him and the former trader’s lawyers have said he is looking forward to providing the jury with his own account of what happened.

Balancing Act

Sherrard read out Adoboli’s performance reviews from 2009 written by Greenidge, which said the trader needed a better balance between work and other activities. Greenidge said Adoboli was a “great ambassador for the ETF product” and had outstanding performance that year.

Greenidge, who said he had daily contact with Adoboli after he became a trader in 2006, was one of the first people to meet with him last year on the day he confessed to hiding trades. At the Sept. 14, 2011, meeting, Adoboli said his first fictitious trade was made in October 2008, Greenidge testified yesterday.

The culture at UBS changed with the arrival from Deutsche Bank of Yassine Bouhara in 2010 as the co-head of equities, Sherrard said. Bouhara is no longer at the bank.

“The very nature of the bank became more aggressive in terms of its desire to make profit,” Sherrard said to Greenidge. “The mantra was coming from above was revenue, revenue, revenue.”

Changed Focus

Greenidge conceded the focus had changed.

“My interaction with the people who came in from Deutsche Bank was somewhat limited, but the culture that they seemed to add was different,” he said. “The message that was coming down to me was still reputation, reputation, reputation.”

Adoboli “had a brief window” in which to recoup his losses and didn’t take it, Greenidge testified yesterday.

William Steward, a former accountant in product control for UBS, said previously he began looking into Adoboli’s trades in August 2011 after receiving a report of a $3.57 billion discrepancy. Steward said he believed Adoboli’s initial explanations that he hadn’t had time to book all of his trades.

Adoboli was arrested on Sept. 15, 2011, after confessing to Steward in an e-mail to accruing losses during “the aggressive sell-off” in July and early August resulting from the “escalation of the euro-zone crisis,” prosecutors have said.

Greenidge said that from 2008 until April 2011, he never received a flag in his daily risk report for the ETF desk for any of Adoboli’s trades.

www.bloomberg.com

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