A former colleague of accused UBS "rogue trader" Kweku Adoboli admitted in court on Monday he had taken part in some of the illicit accounting of which Adoboli stands accused.
But John Hughes, who worked closely with Adoboli on the Exchange Traded Funds (ETFs) desk in London, denied staging an elaborate "vanishing act" to ensure that only Adoboli would take the blame when losses mounted.
Continue Reading Below
Adoboli, 32, was arrested on September 15, 2011 and is now on trial for fraud and false accounting that cost UBS $2.3 billion. He has pleaded not guilty.
Hughes, 30, was dismissed for gross misconduct weeks after Adoboli's arrest. He has not been charged with anything and was in court to give evidence at Adoboli's trial.
The prosecution says Adoboli was a "master fraudster" who hid his activities from colleagues, while the defense argues that others were involved and that management turned a blind eye as long as the ETFs desk was making profits.
Much of Hughes's three-day grilling by defense lawyer Charles Sherrard was centered on the "umbrella", an illicit accounting device used by Adoboli to mask his true trading positions.
"You accept that you fully both understood and participated in the methods by which profits were accrued in the umbrella?" Sherrard asked Hughes as he wound up the marathon cross-examination.
"Yes, I have to, given the evidence," Hughes said.
Sherrard put it to Hughes that all four traders from the ETFs desk knew what was going on and they had met up on the evening of September 12, 2011, to discuss what to do about spiraling losses.
Hughes said he had no memory of the meeting, which Sherrard said took place at the All Bar One pub near UBS offices in the City of London. It was there, said Sherrard, that Adoboli's three fellow traders told him he should carry the can alone.
"I'm a little upset because the boys have sold me down the river," Adoboli later said in a text to his girlfriend, which was read out in court.
His troubles came out into the open on September 14, 2011, when he sent an email to UBS members of staff in which he admitted hiding unhedged trades by making fictitious entries into the books.
Hours later, while Adoboli was answering questions from management, lawyers and eventually the police, Sherrard said Hughes went to visit Adoboli's girlfriend.
"You went round to find out whether or not Mr Adoboli had been saying anything to anyone about you. You were worried about you, just you," Sherrard said.
Hughes said he had no memory of such a visit.
Sherrard accused Hughes of having begun his "vanishing act" in early August, when it started to dawn on him that the trading positions being hidden in the umbrella could lead to disastrous losses.
He cited an exchange on a chat system between the two men that month when Adoboli said to Hughes: "I'm really sorry chief. Really sorry." Hughes responded: "Relax, and not on chat."
Hughes denied that he had "jumped at the chance" of a client visit to Zurich that month to distance himself from what was happening on the ETFs desk and had later made up an excuse about renewing his passport to avoid a meeting with the desk's line manager, John DiBacco.
Prosecutor Sasha Wass, re-examining Hughes after Sherrard had finished with him, challenged the notion that Hughes had known exactly what was going on with the umbrella and had had some control over it.
She said that only Adoboli had known how much money was in the umbrella at any given time and that he had lied to Hughes about that. In one of four examples she gave, Adoboli had told Hughes on July 14, 2011, that the umbrella was $49 million in profit when the real position was $150 million in losses.
The trial continues on Tuesday when Hughes will conclude giving evidence.
(Editing by Mark Potter)