UBS Loses KWL Case as Judge Says Bank Wasn’t ‘Honest and Fair’
Nov. 4 (Bloomberg) — UBS AG lost a U.K. lawsuit over derivatives sold to Kommunale Wasserwerke Leipzig GmbH when a judge found the bank’s relationship with a firm advising the German water utility led to a conflict of interest.
Judge Stephen Males said a UBS employee had been aware of the conflict and knew the advisers at a Swiss consulting firm were dishonest. The consultants, Juergen Blatz and Berthold Senf, were convicted in 2011 by a German court of bribing a KWL executive in relation to the deal.
“Neither UBS nor KWL emerges with credit from this saga,” Males wrote in a 325-page decision. “For UBS it has been a case study in how not to conduct investment banking in an honest and fair way.”
UBS argued KWL owed about $140 million in a trial ending in July that saw mud-slinging from both sides including accounts of corruption, bribery and a party with strippers. The case is the latest over financial products that turned out to be costly for clients ranging from European municipal governments to Libya’s $60 billion sovereign wealth fund.
KWL can rescind the swap agreements, although it must make some payments to UBS under the terms of the collateralized-debt obligation trades, Males said.
The bank is “extremely disappointed” with the ruling and said it would appeal in an e-mailed statement. It said the judge had found UBS knew nothing about the “corrupt arrangement” between KWL and the Swiss consultancy that led to the bribe.
The transactions with UBS have been set aside, KWL’s lawyer Michael Barnett said in an interview. He said the ruling was a “slam dunk” for the German company, which provides water to the city of Leipzig.
The case is UBS AG v Kommunale Wasserwerke Leipzig GmbH, case no. 10-50, U.K. High Court of Justice, Queen’s Bench Division.
–With assistance from Jeremy Hodges and Andrea Gerlin in London and Aoife White in Brussels.
To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net Peter Chapman
