Kweku Adoboli, the former UBS AG (UBSN) trader on trial over a $2.3 billion trading loss, said his girlfriend encouraged him to confess his losses to managers while another trader on his desk told him to flee the country.
Adoboli, 32, “lost control” over his trading decisions in July of last year after pressure from senior managers prompted him to change his strategy and bet the markets would improve, he said yesterday during his third day on the stand. He and his girlfriend broke up for two weeks, he said, with stress mounting and his losses accelerating. After they reunited, she told him he must ask for help.
“In the end, she was the strength, she was the person who said to me, ‘Look Kwek, if you can’t fix this, you need to tell someone,’” Adoboli said. “She said ‘Look, this is going to kill you, you can’t keep fighting this battle, you’re clearly not winning.’”
Adoboli, on trial in London accused of fraud and false accounting, was arrested last year for allegedly hiding the risk of his trades by booking fake hedges. He said he was trying to recoup the losses on his own while waiting for the senior trader on the desk, John Hughes, to return from vacation.
When they realized the extent of the losses on Aug. 11, Adoboli said Hughes advised him to fly to Ghana, where he is from, and send an e-mail from there explaining the trades to managers at the Swiss bank.
“Of course, I could’ve run away,” he said. “It’s not the way I’m built.”
Sasha Wass, the prosecutor in the case, told Adoboli he was an “accomplished liar” regarding the explanations he gave in a phone call with the UBS accountant to whom he later sent an e-mail on Sept. 14, 2011, explaining his off-book trading. Adoboli said his e-mail was entirely correct except for the claim other people weren’t involved in hiding trades.
Adoboli said the explanation he gave in the call to the accountant, Will Steward, was mostly correct, except he lied and said the trades were for clients. Wass said Adoboli also lied about the risk exposure to the bank.
Adoboli also testified the losses wouldn’t have happened if he hadn’t bowed to pressure from Hughes and other senior traders to take a bullish position and hadn’t been repeatedly told by management to take on more risk. He said previously top managers, including investment-bank co-head Carsten Kengeter, pressured him to change trading positions.
“We pushed the boundaries,” Adoboli said. “We found that boundary. We found the edge. We fell off. I got arrested.”
The profit and loss rate generated by the exchange-traded funds desk in London on which he worked couldn’t have the risk profile it reported, Adoboli said. In messages from two managers in late June, he said the desk was told it didn’t need to make clear the amount of risk it was taking.
“In the end, the reason I’m most sad is because these losses weren’t the result of dishonest or fraudulent behavior,” he said. “These losses were the result of a group of traders who were asked to do too much with too little resources in a market that was too volatile.”
The jury, through a note passed to the judge, asked for Adoboli to explain why the desk didn’t tell managers what they were doing. Adoboli said his bosses didn’t care what they did, as long as they made money.
The desk’s manager until April 2011, Ron Greenidge, “really didn’t understand the complexity of our products,” so the importance of Hughes was heightened, Adoboli said. His next supervisor, John DiBacco, was based in New York “so unable to manage us real-time.”
The Swiss bank’s rules and oversight were “aspirational,” Adoboli said. “They say they have these policies, but at the same time, they’re engaged in Libor, they’re engaged in tax evasion, they’re engaged in massive losses in subprime.”
Adoboli said he lied to his manager and people in trade support in August and September of last year about the nature of the transactions and the losses. He told them the trades were for clients so he could “buy time” to fix his mistakes.
Adoboli said he met with the others on his desk -- Hughes, Simon Taylor and Christophe Bertrand -- at a bar near their office on Sept. 12, 2011, to discuss what to do about the losses. The others decided he should take the blame, he said.
“They decided that I should go forward on my own because that was the best way to make sure the desk could continue in its form,” Adoboli said. “I knew I was going to lose my job anyway, I had already resigned myself to that, so fair enough.”
His coworkers denied the meeting when they testified.
Exit logs from the bank show the four left within minutes of each other that day. Adoboli said his lawyers asked for surveillance camera footage from the entrance of UBS, and were told by the bank that it was no longer available.
In text messages with his girlfriend that evening, he told her that he was “upset because the boys have sold me down the river.”
On the morning of Sept. 14, the day he confessed to the losses, Adoboli went to St. Mary’s church near the UBS office to pray, he said. Around midday Adoboli went outside with Hughes and told him he was going to confess and would say no one else on the desk knew what he was doing.
“He said, ‘I’m really sorry Kwek, but tomorrow we’re going to disown you,’” Adoboli said.
In the U.K., fraud charges carry a maximum sentence of 10 years in jail, and seven years for false accounting.
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