Damage Waiver

The New Orleans Employees’ Retirement System has filed a class action lawsuit seeking billions of dollars in damages from UBS. The suit was filed in the United States District Court for the Southern District of New York by the $400 million pension fund on behalf of all purchasers of UBS stock between May 4, 2004, and January 26, 2009. The pension fund says that it purchased shares of UBS at “artificially inflated prices during the Class Period.”

The complaint, through the pension fund’s counsel Labaton Sucharow LLP, alleged that UBS maintained and benefited from a scheme allowing and encouraging clients to evade U.S. tax law by concealing billions of dollars of funds in “undeclared” Swiss bank accounts.

According to a press release, the complaint also alleges that UBS’s Swiss bankers have improperly sold securities in the United States without a license in violation of SEC regulations, and have actively conspired to subvert Qualified Intermediary reporting obligations, which facilitated tax evasion for U.S. investors.

The complaint says: “Defendants touted the record levels of Net New Money attracted, bragged of record income, profits and earnings per share (EPS), and boasted of the Company’s purported commitment to integrity and business ethics,” and 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.” However, the complaint alleges that those 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.”

The complaint goes on to note that, “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. Further, that, as a result of its alleged malfeasance, UBS now faces a penalty fine in the amount of $1.2 billion, and possibly a felony indictment from the U.S. Government.”