* Ex-trader Adoboli convicted of two counts of fraud
* Acquitted of four counts of false accounting
* Adoboli trades caused loss of $2.3 billion
* Sought to show UBS had encouraged him to bend rules
By Estelle Shirbon
LONDON, Nov 20 Kweku Adoboli, convicted on
Tuesday of the biggest fraud in British history, was a star
trader at Swiss bank UBS until he admitted booking
fictitious deals to hide the losses.
In a bombshell email of Sept. 14, 2011, that owned up to the
losses, he didn't mention figures, but he had hidden short
positions in Eurostoxx and DAX index futures worth a staggering
After UBS frantically unwound the positions, the
third-biggest "rogue trading" scandal in history had lost it
"I will expect that questions will be asked as to why nobody
was aware of these trades," Adoboli wrote in the email. "I take
responsibility for my actions and the shitstorm that will now
ensue. I am deeply sorry to have left this mess for everyone and
to have put my bank and my colleagues at risk."
At his trial a year later for fraud and false accounting,
the story had changed.
Far from acting alone, he had "learnt his behaviour" from
other traders at a bank where bosses encouraged rule-bending in
pursuit of profits, and colleagues and line managers knew what
he was doing.
For eight gruelling days in the witness box, he was
confident and articulate. It was easy to see why, in happier
times, UBS picked him for their "Ascent" programme for future
He was also passionate.
"UBS was my family, and every single thing I did, every
single bit of effort I put into that organisation, was for the
benefit of the bank I was so proud to work for," he said on the
first morning, sobbing and thumping the box.
Such was his commitment, he said he had slept under his desk
on several occasions and even missed his grandmother's funeral.
Managers pushed him to take big risks, he said, railing at
"the machine" that singled him out for blame when all he had
done was try to make the profits they wanted.
Yassine Bouhara, then co-head of global equities, told him
in April 2011 "you do not know that you have pushed the
boundaries far enough until you get a slap on the back of the
"My slap on the wrist is this trial," said Adoboli. Bouhara
was among several senior managers including Chief Executive
Oswald Gruebel who resigned after Adoboli's arrest.
Adoboli said he had worked closely with the three other
traders on the Exchange Traded Funds (ETF) desk, and people in
accounts and trade support had known how he operated.
Prosecutor Sasha Wass dismissed him as a devious liar who
secretly gambled with the bank's money in the arrogant belief he
could make bigger profits and be a star trader.
Wass played the jury recordings of three phone calls between
Adoboli and back-office accountant Will Steward on Aug. 24,
2011. They heard Adoboli give long, complicated but false
explanations for accounting problems Steward queried.
The truth was that since late June he had made huge losses
on billions of dollars of secret trades, despite official risk
limits of $100 million intraday and $50 million overnight.
He flipped from a short to a long position on July 1, but it
went badly wrong as markets fell on worries about the euro zone
and the U.S. debt ceiling crisis.
"CAUGHT WITH HIS PANTS DOWN"
The concealed risk exposure from his trades had risen from
$1.5 billion on June 30 to a peak of $12 billion on Aug. 8.
He said he was "buying the dip" in the hope of a market
bounce under advice from colleague John Hughes, and burnout had
"de-sensitised" him to the numbers.
He admitted his book-keeping became messy, hence a growing
number of queries from the likes of Steward in the back office,
and he lied to buy time to recoup the losses.
But the big market move he needed never happened.
On Sept. 14, an increasingly anxious Steward asked Adoboli
for the names of the counterparties to some of the problem
trades. There were no counterparties.
"He was about to be caught with his pants down," prosecutor
He left the office and sent the bombshell email to Steward,
copying in his boss John DiBacco. He was called back in,
arriving at 3:45 p.m for meetings with managers and later
lawyers until the police were called after midnight. At 3:35
a.m. he was arrested.
He spent nine months in Wandsworth Prison until granted bail
in June 2012.
On the anniversary of the notorious email, Wass opened the
prosecution's case, painting Adoboli as a gambling addict on a
losing streak who kept increasing his bets in the desperate hope
his number would come up.
Despite an annual salary of 110,000 pounds ($175,000) and a
last bonus worth 250,000 pounds in cash and shares, he was
He lost 123,000 pounds on spread-betting in the year before
his arrest and took short-term loans from firms like Wonga.com
"You were not able to live on your enormous salary because
you could not stop yourself from gambling," Wass said.
Spread-betting, Adoboli countered, was common among City
traders, "like a taxi driver driving his own taxi home".
Though found guilty of fraud, the jury was to find him not
guilty of the four false accounting charges, for which they
needed to be certain he acted for personal financial gain.
The defence team produced transcripts of electronic chats
between Adoboli and others at UBS that they said showed he was
open about his methods and no questions were asked while he made
"Have you used the slush account?" asked a trader from
another desk, Darren Bailey, on March 23, 2011.
The defence said this was a reference to Adoboli's
"umbrella", an accounting trick he had developed since 2008 to
build up a hidden profit pool to smoothe out fluctuations.
Adoboli said Bailey was among many traders with such
systems, though Bailey said he was "genuinely shocked" by the
slush account chat and did not remember what it was about.
Several back-office staff were also confronted with chats
the defence said showed they knew about Adoboli's methods.
On April 26, 2011, Adoboli told back-office contractor
Johannes Zuidmeer he had made a "cosmetic adjustment" to a
booking. Zuidmeer did not question this. On Aug. 11, Zuidmeer
let Adoboli hold back $1 billion in losses so he could rectify a
"With the benefit of hindsight it looks serious," Zuidmeer
said, but he denied knowingly aiding Adoboli.
Wass said the chats were "meaningless, vague and ambiguous"
and spun to support a defence cooked up after Adoboli's arrest.
"UMBRELLA'S GOING TO GET US BOTH FIRED"
The defence's main target was Hughes, the other senior
trader on the ETF desk, who was sacked after Adoboli's arrest
for failing to adequately supervise him.
For three days, Hughes was confronted with dozens of chats
that showed he embraced the concept of the umbrella.
"All I can say is thank fuck for your umbrella," Hughes told
Adoboli in January 2011 when the desk had made losses.
But Wass said another chat from March showed Hughes may have
gone along with it, but he knew it was wrong.
"Your umbrella's going to get us both fired," it read.
Hughes mumbled and fiddled with his long blond hair as
lawyers struggled to get clear answers. The son of a builder, he
said he went into trading to make money and pay his debts.
He didn't take the job too seriously, leaving every day at
5pm. He ignored 17 requests from the compliance department to
complete training in supervisory duties.
Adoboli said all four of the desk traders, including Hughes,
met at a bar on the evening of Sept. 12 to decide who was going
to carry the can for the losses. When the meeting ended he
lamented in a text to his girlfriend that "the boys have sold me
down the river". UBS office records show all four left the
office together and returned an hour later that evening, but the
three said they had no memory of such a meeting.
On Sept. 14, when Adoboli texted his girlfriend during his
long night confessing to management, he told her: "There's a
problem with my story that I acted on my own. It just doesn't
His girlfriend texted back that he should not tell any
further lies to protect others.
Evidence showed Hughes booked several fictitious trades of
his own in June and July 2011, using the same method.
Acceptance of the umbrella by the "shambolic" and
"irresponsible" Hughes, said Wass, could not be presented as
approval by UBS management.
Adoboli's most recent line managers also took the stand.
Ron Greenidge, who supervised the desk until April 2011, was
sacked for failing to properly supervise Adoboli, but he
defended the bank, denying that management encouraged dubious
DiBacco, who took over supervision from Greenidge and was
also sacked, dismissed suggestions that he encouraged traders to
ignore rules as "crap".
The defence presented a June 23 email in which Adoboli told
DiBacco the trading position that day hit $200 million, making
$6 million profit.
"Thanks for the update. Well done," DiBacco replied. Seconds
later he sent another email: "When over $100 million and
certainly $200 million I need to know before not after ... If
the PnL (profit and loss) had gone the other way I don't want a
lot of crap coming down on you alone."
Adoboli said the first email showed management didn't care
about risk limits, and the second was a back-covering exercise.
DiBacco angrily denied it.
One question that arose repeatedly was why Adoboli acted as
he did when the case of Jerome Kerviel, a trader who lost $7
billion at French bank Societe Generale, was so fresh.
Adoboli said he and Kerviel were in trouble for one reason
only: losing money, the only unforgivable crime in banking.
"To think that he does exactly what Hughesy and I do,"
Adoboli mused in an email to friend Sarah Moore in 2008 after
the Kerviel story broke.
"Please don't let me read about you in the papers in the
same fashion," Moore responded.