New York sues UBS, alleges auction-rate fraud
NEW YORK (Reuters) –
New York Attorney General Andrew Cuomo
filed a civil lawsuit on Thursday against UBS AG (UBSN.VX),
accusing the Swiss bank of deceptively steering customers into
auction-rate securities that this year became impossible to
cash out of amid the credit crunch.
The suit, filed in New York state court, accuses UBS of
deceptively selling auction-rate securities to customers as
UBS said in a statement it would “vigorously defend” itself
against the charges brought by Cuomo.
“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,” the Swiss bank said.
It said it will “vigorously defend ourselves against this
Cuomo also accused several senior UBS executives of
wrongdoing, saying subpoenaed e-mails detail how they dumped
$21 million in personal holdings as the auction-rate market
collapsed while still pushing securities to customers.
“UBS also continued the fraud after they knew the fraud was
revealed for what it was,” Cuomo said at a news conference.
“After the auctions were failing they continued to sell the
He said “UBS is not alone in this scheme, there are other
institutions which participated, but UBS is a major player.”
The lawsuit is expected to be the first in a series of
cases to arise from the state’s investigation into Wall
Street’s handling of the $330 billion auction-rate securities
The short-term investments, long touted as being as liquid
as cash, lost their value after brokers stopped supporting the
market in late January.
(Reporting by Joseph A. Giannone; writing by Martha
Graybow; editing by Jeffrey Benkoe, Phil Berlowitz)
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