Former UBS exec will give up $6M bonus to settle insider trading rap
NEW YORK -- The former chief lawyer for UBS's investment bank has agreed to pay $6.5 million to settle an allegation that he dumped his investments in auction-rate securities after getting a company e-mail warning that the market was in trouble, state officials said Tuesday.
New York Attorney General Andrew Cuomo said the payment would resolve an insider trading investigation of David Aufhauser, who recently resigned as general counsel at the bank.
As part of the deal, Aufhauser will give up a $6 million bonus that he had been scheduled to receive from UBS, Switzerland's biggest bank. The state will get the money instead. He will also pay a $500,000 civil penalty.
Aufhauser will not face criminal charges and he is not required to admit any wrongdoing.
A spokesman for Aufhauser, Tom Johnson, said in a statement that his client was pleased to have settled the matter and that the transaction "resulted in absolutely no personal profit and did not involve any public investors."
He added that a UBS inquiry had concluded earlier this year that Aufhauser's transactions were lawful.
The $330 billion auction-rate market involved the buying and selling of securities backed by low-risk forms of debt like municipal bonds and student loans. The instruments were generally considered to be as liquid as cash and as safe as a money market, but the auction process failed last winter because of the turmoil in the credit markets.
State investigators accused Aufhauser of selling off about $250,000 of his personal holdings in auction-rate securities in December 2007, at a time when executives at UBS were beginning to talk about the possibility of a collapse.
According to the attorney general's office, Aufhauser opened an e-mail from the company's chief risk officer regarding the market's problems on Dec. 14 as he rode the Amtrak Acela train from New York to Washington.
By the time the train reached the station, Aufhauser had forwarded the e-mail to other attorneys and sent a message to his personal investment adviser about his own auction-rate certificates. "I want to get out of arcs. Let's talk Monday," the e-mail said.
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