UBS Lawyer to Pay $6.5M to Settle Auction-Rate Securities Case
The general counsel of UBS’s investment bank has agreed to pay $6.5 million in order to settle a claim of insider trading involving auction-rate securities.
The settlement was reached yesterday between former senior UBS executive David Aufhauser, 57, and the New York attorney general’s office. Last August, as the New York attorney general Andrew Cuomo investigated UBS’s sale of auction-rate securities, Aufhauser resigned.
Cuomo’s office sued UBS for insider trading, alleging that several senior executives traded $21 million worth of auction-rate securities knowing the market was about to collapse.
Aufhauser is notable not only because he was a top executive at UBS but he was also the highest ranking in-house lawyer at the Treasury Department and served on the Justice Department’s corporate fraud task force.
Aufhauser will give up a $6 million bonus he was to receive from UBS and will pay a $500,000 penalty. In addition, he is barred from working in the securities industry for two years and may not work as an attorney for two years.
In a news release from the New York attorney general’s office, Andrew Cuomo stated:
“While thousands of UBS customers were kept in the dark as the auction rate market began to collapse, David Aufhauser, one of the company’s top executives, acquired insider information and quietly dumped his personal holdings of auction rate securities.”
Auction-rate securities are municipal or corporate debt securities or preferred stocks that pay interest at rates set through periodic auctions. The instruments typically have long-term maturity dates or no maturity date.
In mid-February, the auctions for the investment instruments failed. That meant investors were unable to sell their securities. To this day, auction-rate securities investors find themselves owning frozen assets.
On May 8, Carey & Danis filed a class action lawsuit in the U.S. District Court for the Southern District of New York on behalf of persons who purchased auction rate securities from UBS AG (NYSE: UBS), UBS Securities LLC and UBS Financial Services Inc. between May 8, 2003 and Feb. 13, 2008 and who continued to hold the securities as of Feb. 13, 2008.
Auction-rate securities investors who wish to discuss their rights against any broker-dealer may contact Carey & Danis toll-free at 800-721-2519 or fill out our online contact form
