Trial Starts for UBS Execs Accused of Fraud

     MANHATTAN (CN) – Three former Swiss bank executives faced a jury for the first time Monday on charges that they abused the bidding process on various municipal contracts across the United States, starting in 2001.



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     “We are here today because cities and towns across America were cheated out of public money,” Assistant U.S. Attorney Kalina Tulley opened her remarks for the government.
     Peter Ghavami, Gary Heinz and Michael Welty each had high-level positions in the municipal bond reinvestment and derivatives desk, or MRD, at UBS, a financial institution whose name was once an abbreviation for the United Bank of Switzerland.
     After its 1998 merger with the Swiss Bank Corporation, the initials UBS stopped signifying a longer phrase.
     According to the indictment, the execs started brokering municipal contracts in summer 2001, using U.S. Treasury bonds obligating that every bidder, or “provider,” had equal opportunity in the process.
     But prosecutor Tulley said that the execs “wore two hats,” abusing their positions as brokers to make sure that UBS had “last looks” before placing winning bids.
     The certificates the executives signed attesting to a fair process “added up to a stack of lies that deceived the issuers and the IRS,” Tulley said.
     While she acknowledged that the execs never profited from the scheme directly, she said that UBS rewarded them for corrupting the process.
     Heinz’s lawyer Marc Mukasey began his statements by distancing his client from the decade-old scheme.
     “Did you realize that everything the prosecution told you about happened 11 years ago,” Mukasey said, without an introduction.
     In 2011, few heard the name Barack Obama, the iPhone had not been invented, and American Idol had not yet hit the airwaves, he continued.
     Earlier, Tulley promised that the prosecution would revive that past era, “unfolding in real time,” by playing UBS’s internal recordings of their employee’s phone calls for the jury.
     In these conversations, the execs allegedly used code words to discuss deals without being detected.
     To get a co-conspirator to submit a losing bid, the UBS execs would say, “I need you to put in a number,” meaning a losing number, and add, “I will show you what the market is,” to signal what bid would lose, according to Tulley.
     To the defense, the fact that the tapes rolled during the course of normal business proved that they were legitimate.
     They were “secret government wiretaps,” Mukasey said, “just open, honest, transparent activities.”
     Heinz, his client, faces more charges than his co-defendants because of an additional count of witness tampering.
     Denying that charge, Mukasey presented his client as a naïf, who was a “freckle faced kid” in his late 20s at the time of the alleged offense.
     The lawyer, playing the populist, said Heinz was “not a fancy Wall Street guy,” and added that his desk at UBS was not the “evil engine” that he said prosecutors presented.
     “No city, no state, no government agency ever complained about” Heinz’s bids, Mukasey said.
     These images, he claimed, originated from the minds of the prosecution’s collaborating witnesses.
     “One of these guys is more dishonest than the next,” Mukasey said.
     Each of the three defense attorneys, as opening statements continued, tried to humanize their clients and vilify the government witnesses.
     Welty’s attorney, Preston Burton, repeatedly called those witnesses “snakes,” saving his most scathing vitriol for convicted conspirator Mark Zaino.
     “All roads lead to Mark Zaino,” Burton claimed.
     Before “slithering” to UBS, Zaino worked for the Beverly Hills-based firm Chambers Dunhill Rubin, or CDR, Burton said.
     CDR was indicted in 2009 for its role in the fraud, and its founder, David Rubin, pleaded guilty in late 2011.
     The firm’s “very name is a fraud,” Burton said, noting that the company had nobody named Chambers or Dunhill.
     Burton told jurors they should disbelieve the testimony of “professional criminal witnesses,” who allegedly stand to gain sentencing leniency for their testimony.
     “They’ve lied, they’ve cheated, and they’ve stolen, and now they want you to punch their pass on their get-out-of-jail-free card,” Burton said.
     The trial is expected to continue for about a month.

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