Kweku Adoboli is truly sorry for what he did ... you know, losing $2.3 billion of his employer's (UBS-London) money in bad trades. I do believe that he's sorry. With his trial in London coming to a close, it is likely that he is going to be found guilty. After all, he does not dispute that what he did was wrong. What he does dispute is that there were enough people at UBS who knew what he was doing that he should not have to pay a price for his misdeed (aka prison).
Adoboli left his home in the west African country of Ghana and made his way to UBS after graduating from Nottingham University (UK) in 2003, according to the NY Times. For the next 8 years at UBS he went through numerous performance reviews and was supervised by people who saw fit to increase his responsibilities. The final 3 years (2008-2011) it is alleged that Adoboli was involved in covering up unauthorized trading positions that cost the bank billions. Perhaps his bad behavior was more 'on the job' training than UBS would like to admit.
While this was Adoboli's first brush with the law, it was not UBS's. James B. Stewart wrote an excellent piece on UBS recounting a number of its violations over the years ... it reads like a rap sheet. UBS traders are currently being investigated, along with a number of other banks' traders, for manipulating Libor rates.
In 2009, UBS obtained a deferred prosecution agreement for conspiring to defraud the US of tax revenue by creating more than 17,000 secret Swiss accounts. This week, Ex-UBS banker Christos Bagios pleaded guilty to helping US tax payers dodge taxes.
In May 2011, UBS admitted that its employees had repeatedly conspired to rig bids in the municipal bond derivatives market. In August, three UBS executives were convicted of that muni-bond rigging and sentenced to prison (a few years, so nothing bad), but it cost the bank a fine of $160 million.
In 2008, UBS agreed to reimburse clients $22.7 billion to settle charges that it defrauded customers who purchased auction-rate securities because of huge losses incurred by investors.
Fannie Mae and Freddie Mac have sued UBS for securities violations for making "materially false statements and omissions," associated with mortgage-backed securities during the financial crisis. Really, you must get the point by now...there are some issues at the bank.
So here is UBS, sending a parade of witnesses who are astonished and appalled at Kweku Adoboli's behavior. I just cannot buy it.
UK Prosecutor's told the jury that UBS sent out emails to its staff in 2008 warning them of the scandal by "rogue" trader Jerome Kerviel at Societe Generale, who lost more than $7 billion through his bank. While it was not proven that Adoboli read the missive, he most certainly should have read about it in any financial newspaper. Whether or not he knew of Kerviel in 2008, Adoboli soon started his own fail-proof trading strategy .... and UBS rewarded him for it. During his "rogue" years (2008-2012), he received bonuses for his stellar trades ... his salary rose tenfold from 2006-2010. His bonus in 2010 was $152,000, in 2011 it was $400,000. On paper he looked like a rising star.
But how much rope was UBS going to give Adoboli before he hung himself? Obviously, the answer has been revealed to be $2.3 billion worth.
While I'm sure there was, and is, a Compliance program at UBS, I would hardly call it effective if it only catches violators who send an email saying "Hey, I lost $2.3 billion and decided it best that I leave," as our Adoboli did in this case.
I happen to think our friend Kweku is guilty and a little prison time, emphasis on a little, might do him some good. However, if this is what a Compliance program looks like, banks would do better saving the money on training and should instead invest in Public Relations.
