John Hughes, who worked with Kweku Adoboli on the UBS AG (UBSN) ETF desk and didn’t alert management to a secret account Adoboli had where he hid profits to cover future losses, testified his firing was fair.
“I don’t see myself as a casualty,” Hughes said at his former co-worker’s London fraud trial today. “I think I fully deserved to be dismissed.”
Hughes testified earlier this week that Adoboli told him in January 2011 he had a secret account he called his umbrella, which Hughes believed was profits from unbooked trades Adoboli later used to cover losses. Prosecutors say he called it his umbrella because it would protect him “on a rainy day.”
Adoboli’s lawyer, Charles Sherrard, said today that Hughes had made his own off-book trades, knew of the umbrella account and “at times controlled it.” Adoboli’s actions were “learned behavior,” Sherrard said. Hughes was fired for gross misconduct after Adoboli was arrested in September last year.
Prosecutors have charged Adoboli with fraud and false accounting tied to unauthorized trades on which UBS lost $2.3 billion. The former trader admitted hours before his arrest that he had risked $5 billion on Standard & Poor’s 500 futures and a further $3.75 billion in the German futures market, a former manager testified. Adoboli has pleaded not guilty.
Two of Adoboli’s former managers, Ron Greenidge and John DiBacco, testified separately last week that they thought they were unfairly fired because of the trading loss.
‘Thrown to Lions’
Hughes, who worked with Adoboli to manage a trading book as large as $15 billion, threw his co-worker “to the lions” when he was arrested, Sherrard said. There were at least four other accounts within UBS similar to Adoboli’s umbrella, the lawyer said. Hughes denied knowing about any besides Adoboli’s.
Sherrard showed evidence he said proved Hughes was aware of the umbrella account for longer than he said and knew it had been used before. He cited an electronic message in which Adoboli said he needed to “take the buffer out again,” and that use of the word “again” was revealing.
“We’re not writing novels here; it could be a slang term,” Hughes said. “Just use of the word ‘again’ doesn’t mean I knew about it for months.”
Sherrard said they sometimes referred to the umbrella account as ’Rihanna’ after the musician who has a hit song of the same name.
In an e-mail, Hughes told Adoboli, “I love you and loathe you equal measure.” Hughes told Sherrard that he meant he was happy Adoboli made money on the trades while unhappy about the situation.
Hughes denied a suggestion by Sherrard that he saw a spreadsheet of the fake trades.
Adoboli was “a really nice guy,” Hughes said, and a more “cavalier” trader than he was.
“I honestly loved him, and to a certain extent I do still now,” Hughes said.
Hughes lost his shares in UBS that were given to him as part of his compensation when he was fired, he said. Sherrard asked if he was upset about losing them.
“Let’s not go overboard,” Hughes said. “They are UBS shares. The stock performance hasn’t been great over the last couple years.”
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