Legal Newsline

Monday, October 14, 2019

Judge dismisses fraud lawsuit against UBS AG

By John O'Brien | Oct 2, 2012


NEW YORK (Legal Newsline) - A federal judge has dismissed a class action lawsuit brought against UBS AG and several underwriters by a group that alleged fraud on the part of the financial services firm.

U.S. District Judge Richard Sullivan on Friday granted the defendants' motion to dismiss the case, which saw its first filing in 2007, in a 40-page opinion. UBS was alleged to have concealed its exposure to mortgage-related securities and auction-rate securities, as well as committing tax fraud.

The class consisted of those who purchased securities issued by UBS from Aug. 13, 2003 to Feb. 23, 2009.

"(T)he court finds that Plaintiffs have failed to plead scienter under the Exchange Act as to the mortgage-related securities and ARS frauds and materiality as to the alleged tax fraud," Sullivan wrote.

Sullivan noted that the plaintiffs' amended complaint spans 548 pages and includes 1,477 paragraphs.

Lead plaintiff for the case was the City of Pontiac Policemen's and Firemen's Retirement System. Other plaintiffs were the Teamsters Union Local 500 Severance Fund, the Council of the Borough of South Tyneside, the Oregon Public Employees Board and Alaska Laborers.

Firms representing the plaintiffs were: Topaz Kessler Meltzer & Check of Radnor, Pa.; Grant & Eisenhofer of New York; Motley Rice of Mt. Pleasant, S.C.; and Robbins Geller Rudman & Dowd of Melville, N.Y.

The plaintiffs alleged UBS concealed the truth about its mortgage-related securities portfolio by acquiring high concentrations of highly illiquid subprime and Alt-A mortgage-backed assets in contravention of UBS's risk management policy and public statements, manipulating risk measures and overvaluing its mortgage-related securities portfolio.

They also alleged UBS concealed its exposure in the auction-rate securities market, which crashed in 2008. In its 2007 annual report, UBS reported that it had acquired at least $5.9 billion in ARS. On May 6, 2008, UBS announced writedowns of $974 million on its ARS portfolio.

The final allegation concerned the company's Swiss-based cross-border private banking business. The U.S. government indicted former senior UBS banker Bradley Birkenfeld in 2008, charging him with tax fraud.

Birkenfeld had been giving information to the Department of Justice that resulted in $780 million in fines assessed to the company, more than 35,000 taxpayers participating in "amnesty" programs voluntarily repatriating their offshore accounts and the collection of over $5 billion in back taxes, fines and penalties.

Though Birkenfeld was sentenced to prison time, he was paid $104 million for his role as whistleblower in September.

The plaintiffs alleged UBS made several general, but false or misleading, statements about its overall and U.S.-based Wealth Management businesses that did not reveal the full scope of the misconduct.

From Legal Newsline: Reach John O'Brien at

Want to get notified whenever we write about ?

Sign-up Next time we write about , we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

More News