Leniency Denied, UBS Unit Admits Guilt in Rate Case
Leniency Denied, UBS Unit Admits Guilt in Rate Case
UBS on Wednesday became the first big global bank in more than two decades to have a subsidiary plead guilty to fraud.
UBS, the Swiss bank, scrambled until the last minute to avoid that fate. A week ago, in a bid for leniency over interest-rate manipulation, the bank’s chairman traveled to Washington to plead his case to the Justice Department, according to people briefed on the matter. Knowing the long odds, the chairman, Axel Weber, asked the criminal division for a lighter punishment.
But the government did not budge. With support from Attorney General Eric H. Holder Jr., the agency’s criminal division decided the bank’s actions were simply too egregious, people briefed on the matter said.
On Wednesday, UBS announced it would plead guilty to one count of felony wire fraud as part of a broader settlement. With federal prosecutors, British, Swiss and American regulators secured about $1.5 billion in fines, more than triple the only other rate-rigging case, against Barclays. The Justice Department also filed criminal charges against two former UBS traders.
The guilty plea and the individual charges provide the Justice Department with a long-awaited case to prove it is taking a hard line against financial wrongdoing.
Since the financial crisis, the government has faced criticism that it has not brought significant criminal actions. The money-laundering case against HSBC, which averted indictment when it agreed instead last week to pay $1.9 billion, raised more concerns that the world’s largest and most interconnected banks were too big to indict.
With UBS, prosecutors wanted to send a warning.