Adoboli Says UBS Machine Scared Potential Witnesses Away

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Former UBS Trader Kweku Adoboli
Former UBS trader Kweku Adoboli testified today his intentions were never dishonest because senior management at UBS ’s investment bank were telling traders to “push the boundaries” to generate more profits. Photographer: Chris Ratcliffe/Bloomberg

Kweku Adoboli, the former UBS AG trader on trial over a $2.3 billion loss, said he hasn’t been able to find any current or former UBS employees to testify on his behalf because they fear the bank.

“People have been in touch and said we’d like to help you but we can’t,” Adoboli told a court on his fourth day of testimony. “Across the industry, there is no one who’s been willing to stand up to the machine.”

Adoboli, 32, pointed to the area in the London courtroom next to prosecutors that has been reserved for UBS officials. Nine lawyers and two public relations officials were present today on behalf of the bank. Some have passed notes to the prosecutors during the trial, he said.

“You see the machine that is amassed against me,” Adoboli said, pointing at them. “All of these people, along with the police, along with the Crown Prosecution Service.”

The former trader is charged with falsifying records on exchange-traded-fund transactions and other documents as early as October 2008 and keeping a slush fund of profits from unbooked trades that he used to cover the desk’s costs. Adoboli has pleaded not guilty to two counts of fraud and four counts of false accounting.

Prosecutor Sasha Wass told Adoboli today that he is just like Jerome Kerviel, the former Societe Generale trader convicted of causing a 4.9 billion-euro ($6.35 billion) trading loss in 2008. Kerviel and Adoboli worked on the same type of desk doing proprietary trading, traded the same products and were both booking fake hedges to hide their risk, she said.

Ignoring Warnings

“I experienced the same thing” as Kerviel, Adoboli said. “Not because I’m a rogue trader, not because I’m a fraudster, not because I’m a criminal, but because I went in pursuit of the goals set by the organization and the only way we could reach those goals was by ignoring” warnings from management such as the e-mails the bank sent after Kerviel’s loss was discovered.

Adoboli said he followed the case closely and his “deep belief” is that Societe Generale pushed Kerviel too hard and it ended in “catastrophe.” He said it’s “impossible” the French bank wasn’t aware of Kerviel’s trades.

Adoboli said that no one at UBS questioned the ETF desk’s trading mechanisms until they were losing money. He admitted lying to at least eight co-workers shortly before he confessed to causing the losses in September of last year. He did so because he wanted to “buy time” and have a chance to recoup the losses.

“It is a long list of people who only asked questions after our trading methodologies were loss-making,” Adoboli said.

Pushing Boundaries

He testified today his intentions were never dishonest and that senior management at UBS’s investment bank were telling traders to “push the boundaries” to generate more profits.

“In pursuit of the profits that our leadership were asking us to pursue, we had to increase our risk,” Adoboli said. “The risk exposure was naked, or unhedged, and the point behind it was to make a profit from the likely market move. Now it may have been unhedged, it doesn’t mean it was unresearched.”

Wass said Adoboli treated UBS as his own personal bank, ignored the rules, and gambled recklessly with the bank’s money. She said it was “absolutely nonsense” the Swiss lender would instruct traders to exceed risk limits.

“You played God with the bank,” Wass said. “Your motivation, Mr. Adoboli, was all about you, your reputation, your ego, your desire to be a star trader.’

Adoboli said he was taking larger and larger positions in the summer of 2011 as a result of burnout and the stress of changing his stance from bearish to bullish under pressure from management. He said others knew about his transactions, including John Hughes, the senior trader on the desk.

“My trading activity itself characterizes the state of my mind in that period,” he said. “I believe doubling down is a mischaracterization of what we were doing. We were buying the dip -- it was what was encouraged by John Hughes -- it was encouraged by traders all across the trading floor.”

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