One employee.
The trial of former UBS employee, Kweku Adoboli begins in London today, providing another example of how a violation of one employee has the potential to impact an entire company. The trial is expected to last eight weeks with the potential to expose the UBS company culture and business practices. Both current and former employees will testify as the company is expected to be scrutinized. UBS is not on trial and will not be able to respond to the testimonies during the trial.
Unauthorized Trading.
Adoboli was arrested a year ago when over $2 billion in losses came to light. He has pleaded not guilty to two charges of fraud and two of false accounting related to disastrous trades that UBS says were unauthorized. Adoboli, who worked on a trading desk at UBS’s investment banking arm in London, was arrested on Sept. 15, 2011, the day UBS announced it had “discovered a loss due to unauthorized trading”. If convicted, the 32-year-old Ghanaian faces a possible 10-year jail sentence. British-educated Adoboli, the son of a retired United Nations diplomat from Ghana, joined UBS in 2006. At the time of the alleged offences, he was working on the Exchange Traded Funds (ETFs) desk, part of the equities business within the UBS investment bank.
Website Posting.
Consequences.
“Given how serious the consequences of the incident were, we must assume that UBS’s culture and practices will be examined during the course of the trial,” UBS chief executive Sergio Ermotti told the bank’s staff last week. “As uncomfortable as the entire trial will be for UBS, it will show us what the consequences are when misconduct occurs or when individuals do not take their responsibilities seriously,” he wrote in an internal message published on its website.
Executive Exodus.
The fallout has already begun in the aftermath of the arrest. The bank made major changes in both its staff and strategy that are still underway. Oswald Gruebel, who had been brought out of retirement in 2009 to steer UBS through the financial crisis, resigned as chief executive on Sept. 24, 2011, nine days after Adoboli’s arrest. He was replaced by Ermotti. On Oct. 5, 2011, the bank announced that the two co-heads of its global equities business had resigned. Another senior manager also left and seven other staff in the division faced disciplinary action. All have now left UBS. Ermotti says UBS has improved internal monitoring and controls to avoid any repeat of the events of September 2011.
Reputation Damage.
Not only have many USB employees lost their jobs from the “Unauthorized Trading”, the bank also scaled down some of its investment banking activities and retreated to its traditional core business of wealth management which inevitably will have impact to shareholders, current employees and clients. The damage to the reputation of UBS is yet to transpire.