Lawyer Named in UBS Case; Auction-Rate Probe of Citigroup, Too

Securities Law

Lawyer Named in UBS Case; Auction-Rate Probe of Citigroup, Too

Posted Aug 1, 2008, 02:36 pm CST
By Martha Neil

A high-level lawyer at UBS AG is reportedly at the center of the New York attorney general's civil investigation of the Swiss bank's sale of auction-rate securities.

Although David Aufhauser, general counsel for the UBS investment banking unit, isn't named, he is "Executive A" in a lawsuit filed by Attorney General Andrew Cuomo against the bank, an unnamed source tells Reuters.

"The complaint, filed last week in New York City, alleges that he and six other UBS executives sold $21 million of their personal holdings in auction-rate securities in the months leading up to the market's collapse, based on unique inside knowledge of the problems in the market," reports the Wall Street Journal (sub. req.) in an earlier article today which also identifies Aufhauser as Executive A, relying on unnamed "people familiar with the matter."

He was formerly a general counsel of the U.S. Treasury Department.

"UBS last week said it conducted an internal probe of alleged sales of personal holdings of auction-rate debt by its executives and found no wrongdoing," writes Reuters.

Meanwhile, Citigroup Inc. is being investigated by the U.S. Securities and Exchange Commission and three states, including New York, over its role in selling the securities, which were reportedly promoted as being easily liquidated, reports Bloomberg News.

And in New York, Cuomo says he will sue Citigroup if the bank doesn't settle his claims of fraud and document destruction, the news agency says.

Related coverage:

ABAJournal.com: "N.Y. Suit Claims UBS Defrauded Investors in Auction-Rate Securities"

ABAJournal.com: "Worried About Class Action Damages, Banks Block Private Auction-Rate Sales"

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