Kweku Adoboli’s Trial -Colleague used umbrella account
A colleague of the “rogue trader” accused of losing UBS $2.3 billion (£1.4 billion) has admitted for the first time that he also used a secret trading account to cover up large unhedged trades.
John Hughes, who was head of the exchange traded funds desk where Kweku Adoboli worked as a trader, told Southwark Crown Court that he had used the hidden fund, known as the umbrella, to make at least $500 million in trades which he disguised with fictitious hedges.
Mr. Hughes, who was dismissed by the bank for gross misconduct, made several of the transactions while Mr Adoboli was on holiday in Greece but told senior staff at UBS that “he hadn’t played a part in anything” when questioned in the aftermath of his colleague’s arrest, the jury was told.
Mr. Adoboli, 32, has pleaded not guilty to two charges of fraud and two of false accounting.
Cross-examining Mr. Adoboli’s former supervisor for the third day, defence lawyer Charles Sherrard QC said that Mr Hughes had gone to great efforts to distance himself from the umbrella fund when he realised that it had run up massive losses.
The barrister said that Mr. Hughes and the two other traders on the ETF desk had told Mr. Adoboli they would “disown him” if he carried out his plan to tell senior managers about the existence of the secret account.
Describing a meeting at All Bar One near the Swiss bank’s offices on September 12 last year, Mr. Sherrard said his client had “offered that he could…go himself and speak to management or you could all go together.”
“The three of you gallantly suggested he should go himself and you told him that you would disown him. I don’t remember,” Mr. Hughes replied.
The court heard extracts from a message Mr. Adoboli sent to his girlfriend later that evening in which he wrote: “I’m a little upset because the boys have sold me down the river. I can understand why because I gave them the free option”.
On September 14, hours before the University of Nottingham graduate was arrested, Mr. Hughes accompanied Mr. Adoboli out of the office and told him not to include him as a recipient in a “frank confession” sent to bosses, Mr. Sherrard said.
Later that night, as Mr. Adoboli was being questioned by lawyers at UBS’s London offices, Mr. Hughes went to the trader’s girlfriend’s house shortly before midnight.
“You went round to find out whether or not Mr. Adoboli had been saying anything to anyone else about you,” Mr. Sherrard said. Mr. Hughes said he couldn’t remember the incident.
The jury was shown evidence of at least five trades with a total value of $586.9 million, which Mr Hughes had covered with fictitious hedges and booked through the umbrella.
Mr. Sherrard asked the former trader why he had told UBS management that he “hadn’t played a part in anything” in the aftermath of his colleague’s arrest last year.
He said: “Do you accept that you fully both understood and participated in the method by which the profits of the umbrella were accrued? I think I have to, yes,” Mr. Hughes replied. Mr. Sherrard continued: “That’s very big of you given it’s taken a year to get to this point.”
He suggested that from early July, Mr. Hughes had realised that the desk was accruing large losses and began a “vanishing act”, staying out of the office when the desk’s New York-based manager paid a visit and taking a lengthy holiday.
“The evidence demonstrates that on September 14, had you been honest, you would have gone with Mr. Adoboli and helped explain…how the losses were achieved you and your team chose to leave him high and dry,” Mr. Sherrard said.
Giving testimony, Mr Hughes said he had never controlled the umbrella and a prosecuting lawyer read extracts from chat logs in which Mr. Adoboli gave his colleague inaccurate figures disguising its true size.
At one point, in early August, Mr. Adoboli told the head of the ETF desk that the umbrella was $5 million in profit when it had in fact run up losses of $500 million. The trial continues. Source: The Times
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