| NEW YORK
NEW YORK Dec 13 U.S. securities laws have their
limits and do not justify making UBS AG liable to
shareholders for touting its ability to control risk even as it
harbored a rogue trader who caused $2.3 billion of losses, a
federal judge ruled on Friday.
U.S. District Judge Katherine Forrest in Manhattan threw out
a lawsuit seeking to hold the Swiss bank responsible for
shareholder losses stemming from revelations about unauthorized
and fictitious trades made by former UBS trader Kweku Adoboli.
Adoboli, a British trader born in Ghana, was convicted in
November 2012 of fraud and sentenced to seven years in prison.
He admitted at trial to making his trades to hide his risk
exposures, but said he was trying to make money for the bank.
Plaintiffs led by two pension funds in Elmsford, New York,
claimed that before Adoboli's trades were revealed on Sept. 15,
2011, UBS officials including then-Chief Executive Oswald
Gruebel had misled investors by frequently touting the bank's
internal controls and "disciplined" risk culture.
They said UBS "incentivized" traders to take high risks and
didn't properly monitor activity, and should be responsible to
shareholders for the more than 10 percent decline in its stock
price after Adoboli's trades became known.
In a sharply worded decision, Forrest said securities laws
do not require banks to be "prescient or omniscient," such that
UBS should be liable for what "at most" reflected "internal
management issues" and "competing incentives."
The judge, who presided this summer at the civil fraud trial
of former Goldman Sachs Group Inc vice president Fabrice
Tourre, said banks' close ties to recent financial events does
not mean they should always be liable when things go wrong.
"Over the past several years, it has been ever so easy to
make banks the target of lawsuits alleging securities fraud:
what banks said, how those statements failed to match up to what
happened, and who did or should have known," she wrote. "One
might think of the tired but appropriate phrase 'shooting fish
in a barrel.'
"But the securities laws have limits; and it is the
responsibility of the courts to ensure that those limits are
enforced, and that lawsuits which cannot withstand the most
basic scrutiny find their way into whatever great beyond awaits
suits dismissed for failure to state a claim," she wrote.
The lead plaintiffs are the Westchester Teamsters Pension
Fund and Teamsters Local 456 Annuity Fund in Elmsford, New York.
Tor Gronborg, a partner at Robbins Geller Rudman & Dowd who
represents them, declined to comment.
UBS spokeswoman Megan Stinson said the bank is pleased with
The case, which names a different plaintiff, is C.D.T.S. No.
1 & A.T.U. Local 132 Pension Plan v. UBS AG et al, U.S. District
Court, Southern District of New York, No. 12-4924.