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Diamond, Dimon’s Early Risks Made Them Better: Adoboli

Updated on
Former UBS AG trader Kweku Adoboli
Former UBS AG trader Kweku Adoboli wrote in an e-mail, “The more senior you are the easier it is to avoid getting slammed to the wall.” Photographer: Chris Ratcliffe/Bloomberg

Kweku Adoboli, the former UBS AG trader jailed over losing $2.3 billion, said financial leaders including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and former Barclays Plc CEO Bob Diamond were better at making money because of risks taken earlier in their careers.

Adoboli, who was jailed Nov. 20 for causing the largest unauthorized trading loss in British history, said in an e-mail exchange with Bloomberg News that Dimon, Diamond and Yassine Bouhara, the former co-head of global equities at UBS, all lost large amounts of money at some point in their careers.

“The more senior you are the easier it is to avoid getting slammed to the wall,” Adoboli wrote in a Nov. 14 e-mail. “Funny thing is though, losing money seems to make you better at making money. Perhaps that’s why traders who lose money always get rehired, as long as they still have their risk appetite.”

Judge Brian Keith called Adoboli “profoundly un-self-conscious” of his failings and said he had a “strong streak of the gambler” in him when he sentenced the 32-year-old to seven years in jail for fraud. He was cleared of four counts of false accounting. Keith said he must serve at least half of the sentence, minus 349 days from the time he spent in Wandsworth prison after his arrest last year, and on curfew before trial.

As he left court on Nov. 13, Adoboli said it wasn’t fair he was being prosecuted, while a trader at Goldman Sachs Group Inc. in the U.S., who concealed an $8.3 billion position, wasn’t prosecuted and was later hired by Morgan Stanley.

CFTC Lawsuit

Goldman Sachs lost $118 million on the position taken in 2007 by Matthew Marshall Taylor, who was sued by the Commodity Futures Trading Commission. The CFTC is seeking a penalty of $130,000, or triple Taylor’s monetary gain for each violation, whichever is higher. Taylor’s lawyer, Ross Intelisano, has said his client denies the allegations.

In another unauthorized trading case, the former head of a desk in UBS’s London wealth-management unit was fined by U.K. regulators and banned from working in the industry. The bank paid an 8 million-pound ($12.8 million) fine in 2009 and agreed to reimburse customers $42.4 million over the losses. The trader was never prosecuted.

“To be fair these things happen all the time to varying scales,” Adoboli wrote Nov. 14. “Ah well. I’m not bitter.”

Adoboli was accused in his London trial of exceeding his trading limits and hiding the risk by booking fake hedges. He confessed to causing the losses before his arrest in September 2011, saying he risked $5 billion on Standard & Poor’s 500 futures and $3.75 billion in the German futures market.

‘A Miracle’

Anthony Silverman of Stockwell Group, an external spokesman for Diamond since his departure from Barclays, declined to comment on any losses the banker incurred earlier in his career. A JPMorgan spokesman didn’t respond to an e-mail seeking comment from Dimon on Adoboli’s statements. A message sent to Bouhara via his page on the LinkedIn Corp. networking service didn’t receive an immediate response. It couldn’t be confirmed whether the men had substantial losses earlier in their careers.

At the trial that began in September, Adoboli said all he did was to benefit the bank. During the trial, in a conversation outside the courthouse by the Thames River, Adoboli said that while he wanted a “happy ending” to his story, he would “need a miracle to get it.” He broke down in tears several times on the stand, once when his lawyers played a UBS promotional video.

Adoboli didn’t expect to be arrested when he confessed to causing the losses, his lawyer, Tim Harris, said. He may not have been prosecuted if he hadn’t lied to bank officials by saying his colleagues weren’t involved, Harris said.

The Limelight

Adoboli testified that in UBS “Ascent” -- an internal program he took part in for employees the bank deemed to be future leaders -- they were told that if they saw a “stage laid bare,” they should “step into the limelight.”

He said that was what he was doing when he created an account to hold hidden profits in an effort to cover what he estimated was $40 million a year of costs to run the exchange-traded-funds desk on which he worked.

“Sometimes in order to achieve something, you have to experiment,” Adoboli testified on Oct. 31. “You have to try, and if you achieve, you share. So in 2009, I changed the way we profited. Once that was achieved, I told everyone about it.”

In the e-mail, Adoboli said “cynicism is my daily bread. It’s such a shame what all this has done to my heart.”

In an early October e-mail to Bloomberg, he said he was “doing my best to keep my head up, but it’s not easy.”

Adoboli ‘Tragedy’

In sentencing Adoboli after the two-month trial, the judge said the “tragedy” was he had everything going for him.

“You are highly intelligent,” Keith told him. “You are plainly very articulate. As I told the jury, you appear to have a considerable amount of charm.”

In asking the judge for leniency, another of Adoboli’s lawyers, Charles Sherrard, said his client had already been punished enough by spending nine months in prison after his arrest, and losing any chance of working in finance again.

“One of the events that struck a chord was on New Year’s Eve,” Sherrard said. “There he was, having to deal with imprisonment, and at a quarter to midnight, the cheers rang out in Wandsworth because his name was on the news as one of the key players of 2011. That wasn’t something that filled him with joy.”

Adoboli is back in Wandsworth awaiting a transfer to another facility, his lawyer, Tim Harris, said. He is unlikely to appeal the verdict.

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