Massachusetts Files Suit Against UBS For ARS-Related Fraud
The State of Massachusetts has filed suit against financial giant UBS on the grounds of fraud in connection with the sale of auction rate securities (ARS) to its investor-clients. The Complaint alleges that UBS, knowing that the ARS market was imperiled as early as last August, urged brokers to mislead its clients into purchasing ARS from UBS’s own stockpile to reduce its own losses at the expense of its investors, based on false representations that ARS were cash-like and very liquid. The Complaint alleges that UBS’s global head of fixed
income distribution, David Shulman, was enmeshed in UBS’s
effort to sell off its inventory of ARS to its investors. In
August, as he was urging employees to push the ARS on UBS
clients, Shulman began selling his personal stake in the
securities, and by mid-December Schulman had sold his entire
position in the instruments. |
The Complaint also cites various urgent e-mail messages from UBS executives (including Shulman) to its broker/dealers urging them to push the sale of ARS to its investors. For example, in one e-mail message from August 2007, a UBS executive wrote, “We have encouraged” wealth management partners “to mobilize the troops internally to focus on value so that we can move more product through the system.” In another e-mail from December 2007, Shulman writes, “[w]e need to move this paper and have to explore all angles possible. …. we need to do this as quickly as possible. … please work on this priority.”
For a complete copy of this story in today’s New York Times, please click here.
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