UBS to Pay $1.5 Billion as Japanese Unit Admits to Rigging Rates
By David Stout | December 19, 2012 1:20 pm

The international bank UBS AG has agreed to pay penalties totaling some $1.5 billion and confess its Japanese subsidiary’s role in an interest-rigging scheme that was “epic in scale” and affected a wide range of loans, including home mortgages and money borrowed by college students, the Department of Justice said on Wednesday.

UBS Securities Japan Co. Ltd., a unit of the Switzerland-based UBS AG, will plead guilty to felony wire fraud and admit its role in manipulating the London Interbank Offered Rate, or Libor, the DOJ announced.

Attorney General Eric Holder

The admissions by UBS, which were expected, are viewed as a signal by the DOJ that it intends to crack down more harshly on mischief by banks, an impressions reinforced by the comments of Attorney General Eric Holder, who underscored the DOJ’s “firm commitment to investigating and prosecuting such conduct,” and those of other DOJ officials. Two individuals, one from England and the other from Switzerland, were also charged.

The $1.5 billion includes $100 million to be paid by the Japanese unit, $400 million to be paid by the parent company and other $1 billion in regulatory penalties and disgorgements.

“By causing UBS and other financial institutions to spread false and misleading information about Libor, the alleged conspirators we’ve charged — along with others at UBS — manipulated the benchmark interest rate upon which many transactions and consumer financial products are based,” Holder said. “They defrauded the company’s counter parties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves.”

“UBS manipulated one of the cornerstone interest rates in our global financial system,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “The scheme alleged is epic in scale, involving people who have walked the halls of some of the most powerful banks in the world.”

The individual suspects, former UBS traders Thomas Hayes, 33, of Britain, and Roger Darin, 41, of Switzerland, were charged with conspiracy and  other charges in a complaint in federal court in Manhattan. The two are accused of a long-running and elaborate operation to manipulate Libor rates. (Even seemingly minuscule Libor rate changes can eventually yield millions of dollars.)

The UBS settlement comes just after that with HSBC, which involved money-laundering. That settlement, which amounted to just under $2 billion, was denounced as a mere “slap on the wrist” by Eliot Spitzer, former New York governor and Attorney General,  as reported by Main Justice. The comments by Holder, Breuer and other officials in connection with the UBS case are an attempt to show that the DOJ is willing to go after huge banking institutions involved in mischief, as well as lesser wrongdoers.

As noted by The New York Times, UBS is eager to put the scandal behind it and cited its cooperation in resolving the case. “We are pleased that the authorities gave us credit for the important and positive changes we have already made,” UBS chairman Axel Weber, said in a statement. “I have zero tolerance for inappropriate and unethical behavior of any of our staff.”

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One Comment

  1. Insider says:

    During his confirmation hearings to becaome Attorney General, Eric Holder vowed to recuse himself from any matters concerning UBS as Attorney General because UBS was a former client of his. Bloomberg now reports that Holder cast the deciding vote on how to deal with UBS in this matter. So, who’s the bigger fraud? Holder or UBS?