Summary of Case:
A securities class action has been filed against UBS AG (Ticker: UBS) ("UBS" or the "Company") on behalf of all common stock purchasers from May 4, 2004 through January 26, 2009 (Class Period) in the United States District Court for the Southern District of New York.
The complaint alleges that in each quarterly and annual report that UBS files, it encourages investors and analysts to look at the "Net New Money" attracted to the bank during the reporting period as a primary indicator of the Company's performance and future prospects.
Throughout the Class Period, however, a material portion of this "Net New Money" was lured to UBS through a fraudulent scheme to help ultra high net worth U.S. investors evade federal taxes by secreting billions of dollars of their funds in "undeclared" Swiss bank accounts. In connection with this fraud, UBS' Swiss bankers have also improperly sold securities in the United States without a license in violation of SEC regulations, and have actively conspired with each other and outside bankers in Switzerland and Lichtenstein to subvert Qualified Intermediary reporting obligations which facilitated tax evasion for U.S. investors.
As a result of these fraudulent acts, UBS has reaped hundreds of millions of dollars annually in fees, and has also leveraged these funds through fractional lending to create additional loans and to collect additional heretofore unquantified servicing and interest fees.
During the Class Period, UBS actively concealed its scheme from the SEC, the Department of Justice, the Internal Revenue Service ("IRS"), customs officials, and investors while intentionally creating and cultivating the impression that the Company's critically important Wealth Management division was experiencing unprecedented growth and success.
Defendants touted the record levels of Net New Money attracted, bragged of record income, profits and earnings per share, and boasted of the Company's purported commitment to integrity and business ethics. Defendants also routinely assured investors and analysts that the Company employed state of the art risk management tactics and had robust internal controls designed to identify and mitigate operational risks. These statements were all false and misleading because at the time they were made Defendants were actively engaged in a tax evasion scheme which, even when investigators had fingered some of the Company's lower level client advisors, Defendants ultimately could not abandon because it was simply too valuable to UBS. When the scheme was finally uncovered by U.S. authorities and UBS began disclosing the true nature of its Swiss banking business, the Company's stock price plummeted causing substantial losses to UBS shareholders.
