UBS
Warburg |
Also Read
|
Based
in Switzerland, UBS Warburg is one of the world’s foremost
financial firms. Among its various connections to other
companies, it serves as sister company to Paine Webber, Inc.,
providing the latter with research and analysis. In 2002, both
companies were named in a class action lawsuit filed by former
investors, who allegedly suffered losses as a result of actions
perpetrated by UBS.
Why was UBS accused of fraud?
UBS Warburg was accused of knowingly deceiving investors when it
rated Enron’s stock as a “strong buy” during a period in which
Enron was headed for certain disaster. Enron’s own employees
were the biggest victims in the alleged scheme; through an
arrangement with UBS Warburg’s sister company, Paine Webber,
they were encouraged to invest their 401(k) contributions in
Enron. Plaintiffs say that the arrangement forbid Paine Webber’s
brokers from warning these employees about the pending downfall
of their employer. Plaintiffs cited one broker’s dismissal as
evidence of this: Chung Wu was fired, they claim, after advising
investors to “diversify” their investments. The defendants say
Chung was fired because his advice was unauthorized.
The suit alleged that appalling debt and credit problems were
clear “red flags” of Enron’s impending doom, and that UBS
Warburg therefore should have avoided rating Enron as a strong
buy. Plaintiffs in the suit claimed that UBS Warburg waited
until four days prior to Enron’s bankruptcy filing before
warning investors. By doing so, said the plaintiffs, UBS and
sister company Paine Webber, Inc. were able to collect more fees
from their client, Enron. The companies were accused under both
Section 10(b)(5) and Sections 11 and 12 of the Exchange Act,
which prohibit misrepresentation.
UBS Warburg and Paine Webber countered that the information they
were accused of hiding from investors was available to the
public. They said that the plaintiff’s accusations were based on
speculation as to their knowledge of facts that went beyond this
information.
Return
to the Stock Fraud Index
|
Piper
Jaffray |
Merill Lynch |
Lehman Brother |
Alliance capital |
Morgan Stanley |
Credit Suisse |
J P Morgan Chase |
Contact Us: 209, Indulal Commercial Complex, L.
B. Shastri Road, Navi Peth,Pune - 411030 indiaforensic@gmail.com |