[ by Howard Haykin ]

At the London trial of former UBS "Rogue" trader, Kweku Adoboli, the defense attorney used his cross-examination of a prosecution witness to say that the bank had a culture that overlooked trading limits and other rules as long as employees made money.  Defense attorney Charles Sherrard continued his cross-examination of one of Adoboli’s former bosses, by pointing out that UBS became “more aggressive in terms of its desire to make profits” in 2011.  He did so, while citing e-mails from Adoboli telling managers about positions he had that exceeded trading limits.

"This is the first UBS example where culture, the practice at the bank you were working for, the risk limits didn’t matter as long as you were making money," Sherrard said to Ron Greenidge, who oversaw UBS’s ETF desk until April of last year.

Adoboli, 32, stands trial on fraud and false accounting charges relating to unauthorized trades that lost UBS around $2.3 billion.  Adoboli admitted he risked $5 billion on S&P 500 futures and another $3.75 billion in the German futures market shortly before being arrested, Greenidge said in testimony yesterday.  Risk limits for the bank’s ETF desk were agreed on orally and could be exceeded, Greenidge said - the only written risk limits were "at a very high level," Greenidge testified.

Greenidge, a 19-year veteran at UBS, testified that he himself had been dismissed for gross misconduct ... because of Adoboli’s trades - adding that the bank was making him a scapegoat, because he had no knowledge of the fictitious trades or of an internal account at UBS allegedly created by Adoboli. 

The defense lawyer then introduced some performance reviews on his client.  He introduced his client's 2009 performance reviews from Greenidge that, among other things, said which said Adoboli  needed to work less.  Greenidge also said Adoboli was a "great ambassador for the ETF product" and had outstanding performance that year.

In a peer review, one of Adoboli’s former colleagues on the Delta One trading desk, John Hughes said said that Adoboli was "great with clients" and was "certainly the good cop of the ETF team."  His only criticism was that "too many people take his good nature for granted."

Fictitious Trades. Greenidge testified he had daily contact with Adoboli after he became a trader in 2006 - and noted that he was one of the first people to meet with Adoboli on 9/14/11, the day he confessed to hiding trades.  At the meeting, Adoboli supposedly said his first fictitious trade was made in October 2008. 

Greenidge conceded a statement by the defense attorney, that the culture at UBS changed with the arrival from Deutsche Bank of Yassine Bouhara in 2010 - who served as co-head of equities.  Bouhara is no longer at the bank. 

Sherrard said to Greenidge: "The very nature of the bank became more aggressive in terms of its desire to make profit. The mantra was coming from above was revenue, revenue, revenue."   Greenidge conceded the focus had changed.

Greenidge continued: "My interaction with the people who came in from Deutsche Bank was somewhat limited, but the culture that they seemed to add was different.  The message that was coming down to me was still reputation, reputation, reputation."

Lawyer Returned to His Original Premise. UBS would have turned a blind eye to the fake trades if Adoboli had made money.  But Greenidge refused to be pigeon-holed and disagreed with the lawyer's statement, adding that Adoboli would have been fired regardless of the profit or loss if the fictitious trades were discovered.

For further details, go to:  [Bloomberg, 9/20/12].