I chose an article from the Financial Times that is based on a man by the name of Kweku Adoboli, a former trader based in London. Adoboli was accused of fraudulently gambling away $2. 3 billion from the Swiss bank, UBS. According to his LinkedIn profile, from 2006 to 2011, he worked at USB’s Equity Trading division as a trade support analyst in the London office. In August 2011, a back office accountant at UBS started asking Adoboli questions once he realized that a $3. 57 billion “break” did not balance on the books.
The accountant spent the next six weeks trying to investigate the discrepancy and emailed and called Adoboli, who was then a trader on the exchange traded funds desk at UBS. After further investigation, Adoboli was arrested last September and charged with fraud by abuse of position and false accounting. His trial began just a few weeks ago. Once on trial, Adoboli’s defense team asked the back office accountant whether it was unusual for a “break” to involve that amount of money. “It is unusual but not unknown,” he told the court.
The former trader gave explanations including that he had booked internal future trades rather than exchange traded funds because he was “very busy”. But according to the accountant, if Adoboli booked the correct trades, they would be seen by the outside world and he’d spend a lot more time calculating the price and have to book a lot more detail than internal trades. The defendant retorted that this was a temporary solution where he was short of time to make the books look balanced and eventually put the right trade in.
After some additional court room banter, the prosecution presented the court with evidence that on September 14, 2011, the account demanded the names of the counterparties for the trades by Adoboli. Shortly thereafter, the accountant received an email from Adoboli confessing that the trades he was seeking clarification on were not real trades at all. The trial continues and the defendant still pleads not guilty.
I chose this article because I was shocked that even with an overwhelming amount of evidence; the former trader has decided to plead not guilty to the charges of fraud by abuse of position and false accounting. The article states that if Adoboli had booked the correct trades, they would be seen by the outside world and he’d spend a lot more time calculating the price and have to book a lot more detail than internal trades. Even if his excuse was true, on being “very busy”, he had plenty of time during questioning to go back and remedy the situation.
It also does not help his case that he sent an email to the accountant confessing that the trades were not real trades. The world of Finance and Accounting is still new to me, but I feel as if there is an overwhelming amount of evidence to prove that Kweku Adoboli is guilty and should be sentenced for fraud by abuse of position and false accounting. Putting myself in Adoboli’s shoes and assuming that the trades were not real, I have to wonder what the heck was going through his head when he made the decision to risk his career. 3. 57 billion is a lot of money to go missing. Did he feel that the accounting team was incompetent and would never miss it? I am also curious as to why internal auditors did not catch this risky trade. It seems that UBS has some work to do in terms of corporate governance on their trade transactions. Perhaps Adoboli was taking advantage of the system, knowing that internal auditors wouldn’t catch this. Or maybe he was in cahoots with someone in auditing, who agreed to help him hide these transactions.
It will be interesting to see if any other UBS employee names emerge during the trial. I am sure that this kind of thing happens on a daily basis around the world, but I find it hard to believe that someone could be that stupid. Playing a devil’s advocate role, I can’t help but wonder if Kweku Adoboli is innocent. Maybe he was completely overwhelmed and overworked and just forgot to go back and rectify the situation. Could he really have assumed or hoped that the trades would go ignored and everything would have worked out just fine?
I guess it’s up to jury to decide. Whether he is guilty or not, I have a new found respect for accountants, especially the one that caught onto Adoboli’s fraudulent trades. I imagine that it can be difficult to catch every single transaction and line item and balance accounting books perfectly when you are dealing with such a large organization. And when situations such as this one arise, it brings on a lot of uncomfortable conversations with employees, corporate executives, the law and worst of all, unwelcome attention from the press.
In conclusion, I am really looking forward to learning more about financial markets and trading in this course so I can re-evaluate the evidence to see if I would change my opinion. Now that I am informed of this trial, I will be sure to continue to follow its media coverage. If I had to guess, I would say that he will be found guilty and sentenced. I’d hate to be one of the jurors on this case making the decision, as the sentence could put Adoboli away for at least ten years.