Following an investigation by New York Attorney General Andrew Cuomo into his involvement over the sale of auction rate securities, David Aufhauser, general counsel of Swiss-based investment giant UBS, has resigned from his legal post.
News of Aufhauser’s resignation comes one week after the senior UBS executive became the focus of a lawsuit filed by Cuomo against UBS on July 24, 2008. In addition to accusing the investment bank of aggressive marketing tactics and promoting auction rate securities as safe, cash alternatives to investors, Cuomo charges that Aufhauser was among seven UBS executives who sold $21 million in personal auction holdings as soon as the market started to collapse. At the same time, the executives continued to push the securities onto unsuspecting clients.
Auction rate securities are long-term bonds that act as short-term debt because the interest rates reset at auctions held every seven, 14, 28 or 35 days. In February, the $330 billion market for the securities collapsed, creating millions of dollars in investment losses as countless individuals were left holding illiquid securities.
UBS customers currently hold approximately $25 billion in auction rate assets - assets they previously had been led to believe were the equivalent of cash. Cuomo says UBS customers are owed the full value of the securities they purchased and couldn’t resell when the auction market seized up in February. The value of UBS customers’ auction securities is now $37 billion, according to the lawsuit. Aufhauser’s hasty departure comes on the heels of a recent agreement by UBS to pay the state of Massachusetts $750,000 after it sued the bank on behalf of municipalities adversely affected by the sale of auction rate securities. A separate case against UBS involving auction rate securities is pending in Texas.
Prior to joining UBS, Aufhauser was the General Counsel of the U.S. Department of Treasury under President George W. Bush. Ironically - in light of the recent charges by Attorney General Cuomo - Aufhauser also served on the President’s corporate fraud and abuse task force. Meanwhile, the controversy now surrounding Aufhauser, 57, creates a black mark on a seemingly illustrious professional career
No comments:
Post a Comment