Kweku Adoboli, the former UBS AG trader, could have lost the bank as much as $12 billion through unauthorized, “unhedged investments,” prosecutors said.
“The scale of Mr. Adoboli’s gambling was so large and so unchecked he could have quite easily approached and even exceeded the limits of the bank’s resources,” Sasha Wass told the 12-person jury at the beginning of a London criminal trial Sept. 14. “One only has to imagine doubling the loss that he made of $2.3 billion a few more times to see that he was putting the very existence of the bank at risk.”
Adoboli, 32, exceeded his trading limits and invented hedges to conceal losses of $2.3 billion from his managers, Wass said, to increase his bonus and status at the bank. His pay rose from 40,500 pounds ($65,600) in 2005 to 360,000 pounds, including bonus, in 2010, she said.
The former trader is charged with falsifying records on exchange-traded fund transactions and other documents needed for accounting purposes as early as October 2008. Prosecutors also charged him with fraud for abusing his senior trader position.
“Adoboli’s motive was to increase his bonus, his status within the bank, his job prospects and his ego,” Wass said. Adoboli worked for the Zurich-based investment bank’s Delta One desk, which handles trades for clients -- or risks the bank’s own money -- typically by speculating on a basket of securities. The loss, which came from trading in Standard & Poor’s 500, DAX and EuroStoxx index futures, didn’t affect any client positions, according to UBS.
When he could no longer hide his losses, Wass said, Adoboli sent a “bombshell e-mail” one year ago Sept. 14 to William Steward, a chartered accountant working in UBS’s London back office. He left the bank’s office at 1:30 p.m., claiming he had a doctor’s appointment and sent the message an hour later.
He described how he accrued 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.” He was called back to the bank to meet with managers and explain.
“I am deeply sorry to have left this mess for everyone and to have put my bank and my colleagues at risk,” Adoboli wrote.
In the U.K., fraud charges carry a maximum sentence of 10 years in jail, and seven years for false accounting. Adoboli, facing two counts of each, has denied the allegations.
Held in Wandsworth prison in southwest London after his arrest on Sept. 15, Adoboli was granted bail and released June
13. He is staying with a friend in the British capital, his lawyer has said. As part of his bail conditions, he has a curfew and has surrendered his Ghanaian passport.
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Evershed To Open Office in Beijing in December
Eversheds LLP received a license to practice in Beijing and will open an office in December, initially headed by Asia managing partner Nick Seddon.
The office will be the firm’s fourth in the Asia Pacific region after opening outposts in Shanghai, Singapore and Hong Kong.
Eversheds expects to add additional senior attorneys who will provide clients with full corporate legal services and focus on both inward and outward foreign direct investments.
“Asia has been a strategic market for us and our clients for many years. The license to practice in Beijing is a big step in our ongoing growth strategy in Asia and we look forward to building on the success of our other offices in the region,” Seddon said in a statement.
Eversheds has 45 offices in 28 countries in Europe, Asia, the Middle East and Africa.
Deferred Prosecutions Boost Compliance, Justice Official Says
Lanny Breuer, chief of the U.S. Justice Department’s criminal division, defended his agency’s increased use of deferred-prosecution agreements, saying they had “a transformative effect on particular companies and, more generally, on corporate culture across the globe.”
The agreements have “become a mainstay of white-collar criminal law enforcement,” Breuer, who was co-chairman of the white-collar defense and investigations practice group at Covington & Burling LLP before joining the Justice Department, said in a speech before the New York City Bar Association Sept. 13, according to a copy of his prepared remarks. “The result has been, unequivocally, far greater accountability for corporate wrongdoing -- and a sea change in corporate compliance efforts.”
Before the deferred prosecution emerged as a useful tool in the 1990s, “prosecutors faced a stark choice when they encountered a corporation that had engaged in misconduct -- either indict, or walk away,” said Breuer, 54.
Avoiding indictment doesn’t mean a company escapes accountability, he said. Companies also must prove they are “serious about compliance,” if they want to avoid pleading guilty or having charges brought.
The agreements give prosecutors flexibility when differentiating between the actions of a “rogue employee and a rotten corporation,” he said.
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Rothstein Firm Lawyer Lippman Gets Three Years in Prison
Steven Lippman, a former attorney in the law firm of convicted Ponzi schemer Scott Rothstein who admitted helping the firm make illegal campaign contributions, was sentenced to three years in prison.
Lippman, 50, pleaded guilty in May to conspiracy to violate banking, election and tax laws. He said he helped Rothstein’s now-defunct law firm, Rothstein, Rosenfeldt & Adler, illegally “bundle” contributions to Republican John McCain’s losing campaign in 2008 against President Barack Obama. The firm was the largest contributor to McCain’s campaign.
Lippman also was fined $15,000 Sept. 14 in federal court in Fort Lauderdale, Florida, and ordered to pay $179,000 in restitution. He told U.S. District Judge James I. Cohn that he was “horrified” by his actions. He said he was taken in by the charms of Rothstein, who is serving 50 years in prison for running a $1.2 billion Ponzi scheme.
“The first mistake I made was an error in judgment regarding Scott Rothstein,” Lippman said. “I not only failed to ask the right questions, I agreed to do things that were wrong. Yes, he played me like a fool, but at the end of the day, I should have said no. That’s my fault.”
Cohn said he wasn’t swayed by letters that friends and family members wrote on Lippman’s behalf, or by the three people who testified for him. He said he gave Lippman some credit for amending four years of tax returns to show income that he had not initially reported to the Internal Revenue Service. Lippman changed the returns before he was charged criminally.
“Without question Mr. Lippman is an accomplished lawyer,” Cohn said. “He has a strong work ethic. He’s a good family man, and he’s helped a lot of people. But, also without question, Mr. Lippman is a very intelligent man. As such, he knew the legal requirements.”
The length of the sentence was less than the government asked for and more than the defense sought.
Lippman’s attorney, Bruce Zimet, sought a sentence of no more than 18 months. He said Rothstein conned Lippman into moving money through his bank account and making illegal campaign donations.
Assistant U.S. Attorney Lawrence LaVecchio questioned how such an accomplished attorney could have been conned so easily.
“In the first half of this hearing we hear that he’s a brilliant attorney,” he said. “In the second half of the hearing, I hear he’s a veritable idiot who is easily manipulated into committing these acts.”
Rothstein pleaded guilty in 2010 to racketeering, money laundering and wire fraud.
The case is U.S. v. Lippman, 12-cr-60078, U.S. District Court, Southern District of Florida (Fort Lauderdale).
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Norton Rose Advises RBC on $2.5 Billion Five-Year Covered Bonds
Norton Rose Canada LLP advised Royal Bank of Canada, the nation’s largest lender, in their sale of $2.5 billion of five-year covered bonds. The deal was the first-ever issue of covered bonds registered with the U.S. Securities and Exchange Commission, the firm said in a statement.
Senior partner Andrew Fleming and partner Eric Reither, assisted in-house counsel Erin Dion and Joseph Hillier in advising the bank. The Norton Rose team also includes partners Peter Noble on corporate finance and securities and Adrienne Oliver on tax.
The 1.2 percent notes priced to yield 51.3 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.
Covered bonds are typically backed by mortgages or public-sector loans. The collateral underlying the debt remains with the borrower, which also guarantees the bonds.
RBC issued $1.5 billion of covered debt in April 2010, selling 3.125 percent, five-year securities to yield 30 basis points more than mid-swaps, data compiled by Bloomberg show.
Morgan Stanley, RBC and Royal Bank of Scotland Group Plc managed the sale for Toronto-based RBC, data compiled by Bloomberg show.
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FirstMerit Agrees to Buy Citizens Republic for $952 Million
Jones Day LLP is advising FirstMerit Corp., the Akron, Ohio-based lender, who agreed to acquire Citizens Republic Bancorp Inc. for about $952 million in stock to expand into Michigan and Wisconsin. Dykema Gossett PLLC is representing Citizens Republic. Sullivan & Cromwell LLP represents J.P. Morgan Securities LLC in its capacity as financial adviser to Citizens Republic.
The Jones Day deal team was led by Cleveland mergers and acquisitions partners Lyle Ganske and Peter Izanec.
Dykema’s attorneys included members: Rex E. Schlaybaugh, Jr., D. Richard McDonald, Mark A. Metz, Margaret Adams Hunter, and Steven E. Grob.
The S&C New York-based team includes financial institutions mergers and acquisitions partner Mitchell Eitel and senior chairman H. Rodgin Cohen.
Citizens’ investors will receive 1.37 shares of FirstMerit common stock in exchange for each of their shares, the banks said Sept. 13 in a statement. The deal values Citizens 18 percent higher than the Sept. 12 closing price, or about $23.51 per share.
FirstMerit expects to repay Flint, Michigan-based Citizens’s $345 million of Troubled Asset Relief Program preferred stock, including $45 million of deferred dividends. The move helps FirstMerit expand into Wisconsin and Michigan and strengthens its presence in northeast Ohio, according to the statement. The deal is almost twice the price of FirstMerit’s second-largest acquisition, according to data compiled by Bloomberg.
FirstMerit, run by Chief Executive Officer Paul Greig, will have $24 billion in assets, $15 billion in loans and $19 billion in deposits after the transaction, according to the statement.
The deal, which is expected to be completed in the second quarter of 2013, will be 7.5 percent accretive to FirstMerit earnings in 2014, the bank said. FirstMerit will appoint two Citizens directors to its board.
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Goodwin Procter Hires Assistant to the Solicitor General
William M. Jay, former Assistant to the Solicitor General, has joined Goodwin Procter LLP’s litigation department in Washington as a partner in the appellate litigation practice.
Jay has argued 11 cases in the Supreme Court and briefed 20 cases on the merits and more than 150 cases at the certiorari stage, the firm said. At Goodwin, he will focus on representing clients in appeals before federal and state appellate courts and the U.S. Supreme Court, as well as advising trial court level clients on an appellate perspective.
He was U.S. Supreme Court Justice Antonin Scalia’s law clerk to from 2004-2005. After that, he worked as special counsel to the U.S. Senate Committee on the Judiciary during its consideration of Chief Justice Roberts’ nomination.
Goodwin Procter’s has lawyers in nine offices in the U.S., Hong Kong, and London.
Two Regulatory Partners Join Haynes and Boone in New York
Haynes and Boone LLP has added two lateral partners, Daren Domina and Madelyn Calabrese, to the investment funds and private equity practice group in New York. Both were previously at Katten Muchin Rosenman LLP.
Both Domina and Calabrese advise broker-dealers and registered and unregistered investment advisers on a range of registration, regulatory, compliance and inspection/enforcement matters, including regulatory issues relating to private investment funds.
Haynes and Boone has more than 525 attorneys with offices in Texas, New York, California, Washington, Mexico City and Moscow.
Nelson Mullins Hires Health-Care Partner in Raleigh
Health-care attorney Sean A. Timmons has joined Nelson Mullins Riley & Scarborough LLP’s health-care practice group and is based in the Raleigh, North Carolina, office. He was previously at Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP.
Timmons assists clients with corporate transactions between and among health-care providers, including assisting with joint ventures, advising health-care providers and entities on acquisition transactions and on the formation of business entities and medical practice buyins and buyouts.
Nelson Mullins has more than 430 attorneys and government relations professionals with 13 U.S. offices.