Kweku Adoboli Trial Began Today

The trial of alleged UBS rogue trader Kweku Adoboli began
today in Southwark Crown Court.
Adoboli has denied four charges – two of false accounting and two of
fraud by abuse of position – relating to his trading activities from almost
exactly one year ago. I blogged
about his arrest last year here
and here.

I’m looking forward to the opportunity (hopefully) afforded
by the trial to learn about the facts surrounding this case. Compared to some other recent rogue
traders, I still feel that relatively little is known about Adoboli’s
motivations, relationships at the bank, and trades.

There is a good
article in today’s FT outlining the prosecutor’s opening arguments, and a
nice opinion piece from John Gapper yesterday (not explicitly tied to the
Adoboli case, though I think related) on how the financial incentive to behave
badly is likely to continue at banks in the face of recently-announced reforms
from Deutsche, Barclays, and others.
I can’t for the life of me find the comment online (plea to the FT: why
can’t you improve your search functionality??)

I will be back to unpack the prosecution’s arguments in some
more detail later. But for now, I
will simply say that the bulk of the facts alleged will do nothing to
rehabilitate UBS in the eyes of most critics, though it appears the
prosecutor’s goal is to paint UBS as a victim of Adoboli’s scheming.

For example, the prosecution has argued that Adoboli had
been hiding positions and falsifying records for nearly three years, that his
trades were so large and complex that they nearly destroyed UBS prior to being
unwound last year, that he used his knowledge of the back office to create
“slush funds” unknown to superiors, and that his pay increased dramatically
during this time period of hidden trades and false records from £65,000 in 2008
to £360,000 in 2010, while his bonus increased by more than 16 times to
£250,000. While these may be the
marks of a scheming, dishonest trader, they are also the mark of a bank with a
poor compliance system, incentive problems, supervisory issues, and – most
likely – risk culture issues that need to be examined in more detail.

Finally, I wanted to call attention to one
portion of the prosecutor’s opening statement:

She alleged his activities were “far
more deliberate than that of a mere rogue trader” because he “faked bookings.
He created false accounts and conducted himself as a master fraudster, deliberately
and systematically deceiving and defrauding the bank which was employing him.”
(emphasis mine)

Umm . . . no.
That’s pretty much the definition of a rogue trader.

(Photo: The Associated Press)

Prior Related Posts:

The
Rogue Trading KISS

When
$61bn Seemed Like Real Money

Denial:
It Ain’t Just A River In Egypt

It’s
The Stupid Culture

It’s
The Culture, Stupid

Kerviel’s
Fake Trades: Genius Or Copy Cat?

Kerviel’s
Fake Trades: The Anatomy of A Cover-Up

On
Warning Signs II: Follow The Money

On
Warning Signs: You Can’t Get There From Here