A judge gave a withering condemnation of the banking practices of UBS London in a judgment handed down yesterday in a case involving a grimly familiar cast of alleged luxury safari trips and strippers laid on for clients.
The bank had claimed the German water supplier Kommunale Wasserwerke Leipzig owed it about $140m (£87m) for complex contracts.
The company refused to pay, saying UBS had done the trades after the bank’s then-employee Steven Bracy struck up an “inappropriate” relationship with employees at the Swiss consultancy advising the utility on the deal.
It is the latest in a string of High Court cases involving municipal utilities claiming to have been duped by sophisticated bankers into buying inappropriate financial products in the run-up to the financial crisis.
This case was given added spice by the fact that two partners at the Swiss consultancy and the managing director of KWL, Klaus Heininger, are in prison for corruption.
UBS lost the legal battle, with Justice Males declaring: “For UBS it has been a case study in how not to conduct investment banking in an honest and fair way.”
He said: “It is to be hoped that the events described belong to a bygone era. As most of the main participants have moved on, and many of them are no longer employed in the industry, there is room to believe that to be so.”
He added: “It is apparent… that for many years KWL was run by a criminal who was able to plunder the company for his personal gain.”
But he found that the proposed deal was “tainted” by the conflict of interest of the Swiss consultants and that Mr Bracy had been aware the partners there were corrupt.
He dismissed UBS’s claims for losses on its hedging contracts. UBS, which was represented by Lord Falconer, said it was “extremely disappointed” with the ruling and would seek to appeal.
It pointed out that the court had found KWL’s managing director took a bribe from the Swiss consultancy, that the utility’s supervisory board had failed to do enough to prevent such activity and that UBS knew nothing of that corrupt arrangement.Reuse content