UBS - Legal Controversies

Legal Controversies

On May 10, 2004, UBS was fined US$100 million by the U.S. Federal Reserve for illegally transferring funds from an account set up by the Federal Reserve at UBS to Iran, Cuba and other countries presently under a U.S. trade embargo.

In April 2005, UBS lost the landmark discrimination and sexual harassment case, Zubulake v. UBS Warburg. The plaintiff, Laura Zubulake, was former institutional equities salesperson at the company's Stamford office. The jury found that her manager, Matthew Chapin, had denied her important accounts and mocked her appearance to co-workers. She claimed several sexist policies in place, such as entertaining clients at strip clubs, made it difficult for women to socialize and foster business contacts with clients. The jury found that UBS had destroyed relevant e-mail evidence after the litigation hold had been in place. UBS was ordered to pay the plaintiff US$9.1 million in compensatory damages (including back pay and professional damage), and US$20.2 million in punitive damages.

The Securities and Exchange Board of India (SEBI) alleged that UBS had played a role in the 2004 Black Monday stock market crash which followed the National Democratic Alliance government’s defeat in the general elections. SEBI's ruling of May 17, 2005 barred UBS from issuing or renewing participatory notes for a period of one year.The ban was later lifted on appeal, as a result of a government tribunal ruling on September 9, 2005.

On October 18, 2005, three African-American employees filed a class action lawsuit against the company in the United States District Court for the Southern District of New York alleging racial discrimination in hiring, promotion and other employment practices. The three plaintiffs in Freddie H. Cook, Sylvester L. Flaming Jr. and Timothy J. Gandy v. UBS Financial Services, Inc., claim that segregation and discrimination in job assignments and compensation were widespread and the firm had done nothing to diversify its workforce. The lawsuit also claims offices operating in Largo, Maryland and Flushing, New York were illegally created to serve African-Americans and Asian-Americans respectively, and that the firm’s management frequently ridiculed the Largo branch office and its staff, referring to it as a “diversity” office. On April 23, 2007, U.S. District Judge, Peter J. Messitte, granted plaintiff's request to dismiss the class allegations without prejudice. As a result of this dismissal, the case now comprises the individual claims of three plaintiffs. According to Bruno-Manser-Fonds, which campaigns for tropical rainforests, UBS has accepted bribes from timber business in Malaysia.