UPDATE 8-UBS trader jailed for 7 years in $2.3 bln fraud

Estelle Shirbon
Reuters Middle East

* Adoboli convicted of fraud, acquitted of false accounting

* Case is biggest fraud in British history

* Ex-trader likely to serve about 2-1/2 years in jail

* Trial exposed failures at UBS, risk-loving traders

LONDON, Nov 20 (Reuters) - UBS trader Kweku

Adoboli was jailed for seven years on Tuesday for the biggest

fraud in British history, which cost the Swiss bank $2.3


The 32-year-old had admitted trading far in excess of

authorised risk limits and booking fictitious trades to hide his

true positions, but said everything he did was to make profits

for UBS and was in line with the bank's culture.

He wept in the dock as his lawyer asked the judge to show

clemency, describing his Ghanaian-born client as a sensitive,

hard-working young man who had tried too hard to do well.

"The tragedy for you is that you had everything going for

you," judge Brian Keith told Adoboli, citing his English private

school education, his intelligence and natural charm.

"Your fall from grace as a result of these convictions is

spectacular," said the judge. "You were arrogant enough to think

that the bank's rules for traders didn't apply to you."

The prosecution had accused Adoboli of playing God with

UBS's money in the belief that he had the magic touch, driven by

a desire to be a star trader with a huge bonus to match.

The Adoboli affair and the failures it revealed at UBS,

where back-office staff queried some offsetting trades for weeks

without realising that they were fictitious, were the latest

stain on the reputation of the investment banking industry.

The trial exposed a trading room culture where young men in

their 20s relished the rush of dealing in hundreds of millions

of dollars, bantering about "putting your balls on the table" by

exposing their employer to enormous risk.

UBS's share price fell by more than 10 percent on the day of

Adoboli's arrest. Oswald Gruebel later resigned as chief

executive and others quit or were pushed out as a result of the

scandal, which damaged the bank's efforts to recover from near

collapse during the global financial crisis of 2008.

Tom Naratil, the bank's chief financial officer, told the

court during the trial that Adoboli's losses had precipitated

some job cuts and led to smaller bonuses for remaining staff.

UBS has now axed 10,000 jobs and plans to wind down much of

its investment bank. It says that is not linked to the Adoboli

case, but bank sources say it would not have happened without

the management shake-up caused by the rogue trading scandal.


Adoboli was in the enclosed glass dock at the rear of the

court throughout Tuesday's proceedings. He looked grave but

composed, bowing his head when he heard a first guilty verdict.

His father John, a retired United Nations official who came

from Ghana to support his son throughout the 10-week trial, sat

in the public seats just behind. The judge denied a request from

the defence to let Adoboli, who had been free on bail, to sit

with his family before his final sentencing.

Once it was handed down, Adoboli was led away by police.

The ex-trader will serve half of his seven-year term before

being released on licence. Taking into account time already

spent in custody and on bail subject to a curfew, he could be

out of prison in about two and a half years.

Defence counsel Charles Sherrard had pleaded for a lighter

sentence, arguing that Adoboli's trading losses were less than

those caused by Jerome Kerviel of France's Societe Generale, who

received only a three-year jail sentence in Paris in 2010. The

judge, however, made no reference to that case in his remarks.

"There is a strong streak of the gambler in you, borne out

by your personal trading," the judge said, referring to the fact

that Adoboli had lost well over 100,000 pounds ($159,100) of his

own money on gambling and was broke when arrested.

During the trial, the court heard that the risk exposure

from his trading at UBS had peaked at $12 billion on Aug. 8,

2011, a number described by the judge as "unbelievable".

His desk's authorised risk limit was $100 million intra-day

and $50 million overnight at the time.

"The amount of money involved was staggering, impacting

hugely on the bank but also on their employees, shareholders and

investors. This was not a victimless crime," said Andrew Penhale

of the Crown Prosecution Service after the verdict.

Police in London's City financial district called Adoboli

"one of the most sophisticated fraudsters" they had come across.


Adoboli had pleaded not guilty to two charges of fraud by

abuse of position and four of false accounting covering the

period from October 2008 to his arrest on Sept. 15, 2011.

The jury returned a unanimous verdict of guilty on the main

fraud count, holding him directly responsible for the $2.3

billion loss. That count related to unhedged,

multi-billion-dollar trades in the summer of 2011 that led to

the losses.

The jury found Adoboli guilty by a majority of 9-1 on the

other count of fraud, which covered the period from October 2008

to May 2011 during which no losses were alleged.

The judge said the conviction on that count was important

because it showed that all his unhedged, unauthorised trading

was fraudulent, not just the later deals that lost money.

Adoboli was acquitted on the four counts of false accounting

related to the fake entries he admitted making into UBS's

computer systems to hide his true positions. To convict him of

those charges, the jury needed to be certain that his primary

motive had been personal financial gain.

Adoboli had always disputed the prosecution argument that he

was driven by a desire for a bigger bonus, presenting himself as

a dedicated UBS employee whose motivation at all times was to do

his best for a bank he considered his family.

"I suspect that the only reason why the jury acquitted you

on the four counts of false accounting is that they were not

sure that you booked the fictitious trades predominantly to make

a financial gain for yourself," the judge told Adoboli.

"The fictitious hedging trades you booked remain part of the

picture of what your fraudulent trading involved."

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