Securities Law
N.Y. Suit Claims UBS Defrauded Investors in Auction-Rate Securities
Posted Jul 25, 2008, 08:35 am CST
By Debra Cassens Weiss
The New York attorney general has filed a securities fraud suit against UBS AG that claims the bank sold auction-rate securities to investors based on false claims that they were as liquid as cash.
The suit filed by Attorney General Andrew Cuomo claims the bank misled more than 50,000 customers, costing them $20 billion, the Washington Post reports. The suit asks the bank to reimburse investors for the securities’ total value, estimated at more than $37 billion.
The securities, sold at weekly auctions, are backed by financial instruments such as student loans, municipal bonds or subprime-mortgage debt, the Wall Street Journal reports (sub. req.). The suit claims UBS continued to push the securities even as the market began to collapse and bank executives lost confidence in the instruments, the New York Times reports. Seven bank executives unloaded $21 million in their own holdings, the suit says.
The New York allegations are similar to those lodged in lawsuits by Massachusetts and private investors.
The bank issued a statement saying it will vigorously defend the complaint. "It is frustrating that the New York attorney general has filed this complaint while we have been fully engaged in good-faith negotiations with his office to bring liquidity to our clients holding auction-rate securities," the statement said.
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