A UBS banker allegedly hired strippers and went on a luxury safari with consultants advising on intricate swap deals that went sour at the start of the financial crisis.
In the latest lawsuit involving complex financial instruments, Kommunale Wasserwerke Leipzig (KWL), a German water supplier, claims Steve Bracy, a former UBS employee, had an “inappropriate” relationship with consultants at Swiss firm Value Partners while KWL negotiated a swap deal with the bank.
According to court documents, Mr Bracy allegedly arranged for four strippers to be paid $5,600 each (£3,325) and was also invited on a luxury safari with consultants Juergen Blatz and Berthold Senf. Both men were later convicted of bribery.
KWL argues the “inappropriate” relationship between the men created a conflict of interest that would render a swap deal, which exposed it to more than 300 million euros (£244m) of liability, invalid.
UBS, which is seeking $138 million from the utility as part of a credit protection agreement dating back to 2006, insists that it did not force KWL to take part in the transaction, and any blame should be placed on KWL former managing director, Klaus Heininger.
Mr Heininger was sentenced to four years and 11 months by Leipzig regional court on corruption charges, including taking bribes, breach of trust and falsifying financial statements in 2011.
“UBS considers the allegations made by KWL in the litigation that it is not obliged to make any payment to UBS to be unfounded,” the bank said.Reuse content