Cuomo
NEW YORK (Legal Newsline) - New York Attorney General Andrew Cuomo on Thursday charged Swiss banker UBS with multi-billion dollar consumer and securities fraud.
Cuomo says the company sold and marketed auction rates securities as safe and cash-equivalent, though they eventually became liquidity risks when the auction rate securities market faltered. UBS customer are holding more than $25 billion in risky investments as a result, Cuomo said.
"Not only is UBS guilty of committing a flagrant breach of trust between the bank and its customers, its top executives jumped ship as soon as the securities market started to collapse, leaving thousands of customers holding the bag," Cuomo said.
"Today we bring the first nationwide lawsuit against UBS, seeking to recover billions of dollars for customers and sending a resounding message to the rest of the industry that this type of deceptive behavior will not be tolerated."
Auction rate securities are bonds in which the rates are determined by an auction. Cuomo says UBS noticed the market for them collapsing, and top executives sold off $21 million in personal holdings in them.
USB had more than 50,000 auction rate securities customers as of February, including more than 7,000 New Yorkers.
On Feb. 13, UBS stopped supporting its auctions and customers could not get access to the money they had invested, Cuomo said.
"It is frustrating that the New York Attorney General has filed this complaint while we have been fully engaged in good faith negotiations with his office to bring liquidity to our clients holding auction rate securities," USB said in a statement.
Cuomo's complaint can be viewed here. It was filed in the Supreme Court of New York, New York County, and seeks to have UBS buy back auction rate securities, disgorgement of ill-gotten gains and injunctions from further violations of the state's Martin Act.
From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.