Corporate & Securities Law

UBS e-mails show conflicts with auction-rate clients.  UBS was attempting to liquidate an $11 billion "albatross" of auction-rate bonds by selling the debt to individual investors as the market for the securities started to collapse, according to company e-mails.

While executives at the Zurich-based bank identified the hazards of auction-rate securities in August, they simultaneously began to "mobilize the troops," holding more than a dozen conference calls with salesmen and giving them new marketing materials to promote the bonds, according to e-mails from David Shulman, the head of UBS's municipal securities group.  "The pressure is on to move inventory," he said in an August 30th note.

The e-mails between Shulman and UBS executives were disclosed in a lawsuit filed last week by Massachusetts securities regulator William Galvin, who claimed the bank committed fraud by selling the bonds as the equivalent of money market securities without disclosing to investors that the $330 billion market was lurching toward a breakdown.  Investors who own the bonds now can't get their money.

According to Galvin, "The thing that is most amazing to me is what a comprehensive and deliberate strategy this was by UBS.  They wanted to reduce their inventory, so they decided to gear up their sales campaign using cash-like arguments deliberately."

SNSFE has followed this crisis and continues to investigate claims against UBS, as well as claims against other sellers of auction-rate securities.  Those who have invested should feel free to contact lawyers at SNSFE.

Sources:  Bloomberg; The New York Times