William Steward, a former accountant in product control for UBS AG (UBSN), said he began looking into trades by Kweku Adoboli in August 2011 after receiving a report of a $3.57 billion discrepancy.
Steward spent the next several weeks trying to clarify the discrepancy and received explanations from Adoboli that he had used “a shortcut while he was under pressure for time,” rather than booking every trade.
“It wasn’t very impressive, but it made sense,” Steward testified yesterday at a London court.
On a call with Steward on Aug. 24, 2011, Adoboli said he was dealing with clients and staffing issues.
“We had an annoying client which was taking up half my day, plus we had all these client meetings and the market was going crazy, plus I was like a man or two down pretty much every day,” Adoboli said, according to evidence presented at his trial. “The volumes are going through the roof and we’re struggling to keep up with, with all of the procedural stuff.”
Adoboli, 32, is charged with fraud and false accounting for allegedly causing Zurich-based UBS a $2.3 billion loss through unauthorized trading. Adoboli was arrested by police in September of last year after confessing to Steward in an e-mail to accruing losses during “the aggressive sell-off in the days of July and early August” as a result of the “escalation of the euro-zone crisis,” prosecutors said at the trial last week.
The former trader has denied the charges and his lawyers have said he is looking forward to providing the jury with his own account of what happened.
“What we were seeing is trades that were being entered that didn’t have another side to them” in August of last year, Steward said. It is “unusual, but not unknown” to have such a large trading amount that isn’t reconciled, he said.
The 12-member jury found it difficult to understand the evidence yesterday, according to the judge.
Prosecutor Sasha Wass told the jury that the issue for it to consider is whether Adoboli’s explanation to Steward about the trades “is a genuine explanation or not, or merely designed to confuse.”
The jurors “do not need to understand the transactions discussed,” she said.
A prosecutor said that Adoboli was in debt and had several spread-betting accounts in violation of the bank’s rules. The bank’s compliance department notified him that he should have flagged his personal trading to UBS beforehand, prosecutor Esther Schutzer-Weissmann said.
Adoboli’s personal bank accounts were mostly overdrawn and he had borrowed money from various short-term lenders, she said. At UBS, his pay rose from 40,500 pounds ($65,800) in 2005 to 360,000 pounds in 2010, including bonus, another prosecutor said at the opening day of his trial last week. He lost 123,000 pounds through his personal trading with IG Index in the year leading up to his arrest, Schutzer-Weissmann said.
Adoboli’s lawyers agreed not to challenge the information about his spread-betting and debts.
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