Adoboli….smiling in adversity

Experts doubt he had the skills to commit this fraud alone

The case of UBS’s Kweku Adoboli continues to disturb me. Much as I understand that, in our age, the minute somebody commits a heinous crime there are 300 folks telling The Sun they wouldn’t hurt a fly, on this occasion I’m inclined to believe them. I posted last week to opine that Adolobi doesn’t fit the Nick Leeson profile of flash, aspirant money. The more detail that emerges about the bloke, the more convinced I become of this.

As my one remaining Plod contact is always keen to remind me, every alleged crime has to be approached on the basis of how and why. From the start, he thinks as I do, the ‘case’ as reported doesn’t make sense. Rather than seeing Adoboli as having been set up, the old pro now consulting on financial forensics for the police thinks the accused UBS trader may be anything from naive to merely a small cog in a bigger wheel.

“First of all, there’s the ‘how’ question,” he told me Sunday morning. “If it’s true that he’d been doing this since 2008, then the whole of UBS’s London management should be fired. It sounds like the same MO [modus operandum] as the SocGen case. The idea that in the aftermath of that disaster, even a  bunch of numpties like UBS wouldn’t spot it is  ridiculous. My guess is that as long as the trades were running the right way for the bank, they ignored it. If I knew more, I’d be able to comment as to whether they actively approved it – or even suggested it to Mr Adoboli in the first place. The thing you must remember in these corporate cases is, if you identify closely with your employer and are generally of good character, it’s a small step to bending the law in order to help.”

That Kweku Adoboli was loyal to his circle seems beyond question. “He was very loyal to UBS,” a friend told the FT at the weekend, “He loved working there.” But at the same time, another FT informant noted that “About two and a half years ago they got rid of a lot of senior people and promoted young people with not very much experience from analyst support roles in order to save money”. This I find worrying: it leaves the way open to the possibility of both incompetence, and persuasive pressure being put on the naive.

“Delta desks are like quicksand salted with mines,” one trader told The Slog colourfully last Friday, “To put a slow-lane bloke like [Adoboli] into that position is stupidity on the part of the management….and enough on its own to have the shareholders asking questions.”

The Slog’s police informant continued:

“There is an air about this of the accused trying to help rather than hide. The story being put out is that he told them of his losses – so clearly, the circle of deceit wasn’t infinite. But to hide it from a room full of close colleagues who socialised hard, yelled progress across to each other and were clearly a team…well, it beggars belief that they weren’t in on it….or at least, knew about it and looked the other way.”

What is also becoming clear is that Adoboli was a promoted backroom boy, and in the greater scheme of things a relatively small earner. I have yet to find anyone among City sources, for example, who can explain to me how the young trader benefited personally from the scam….or indeed, precisely what the scam was.

“If he was dealing in ETFs,” one told me, “then you’ve got to go some to lose two billion bucks. I do find that part of it surprising.”

My suspicions were originally aroused when, immediately following the announcement last week, UBS’s CDS value slid dramatically – as you’d expect – but then very rapidly regained its lost ground – by 11.15 the same morning. And my nose was twitching again at the weekend when the bank gave an exact date – November 17th – when further cuts would be announced ‘in the light of the losses’. That seemed like a lot of preparation a long way ahead for an outfit that claims it had no idea a junior guy was losing billions in the trading room.

Equally odd, I think, is the abrupt resignation of his boss John Hughes, and the ease with which Hughes has become invisible to both media and police. This is a disappearance on a par with Martin Bormann….and also suggests, perhaps, that Adoboli’s supervisor had thought about that day of escape for some considerable time. Forbes financial analyst and corporate legal specialist Daniel Fisher also clearly has his suspicions in this area. “If you have a higher-up who says, `Wait a minute I didn’t know this was going on,’ it becomes very difficult for the government because they must show that executive made deliberate steps to avoid getting this knowledge….traders go rogue on a regular basis, and maybe the fact executives are ignoring it is their compensation systems [which] are dependent upon making risky bets that pay off….the interesting question is whether compensation is structured in a way that it creates a strong incentive to commit fraud.”

As I wrote earlier above, if things are going the bank’s way, nobody bothers to look into it. But the question still remains as to how broadly UBS management knowledge of what was really going on extended. If you were John Hughes and totally innocent, would you resign and do a runner to ground? I know I wouldn’t: it would look immediately like an admission of guilt.

But finally – and this is important – I come back again to Kweku Adoboli’s career path. He wasn’t a high flier. The Dacre Mail refers dramatically to his ‘£1000 a week apartment’, but that’s comparatively modest in the bonkers City State that is London these days. He didn’t come in from Nottingham University as a potential star, and then shoot up the ranks: he was plonked into the backroom….and only promoted when UBS’s other myriad incompetences forced the bank to cut costs. Take a look at the dozens of shots of him on Google images: his smile is one of innocence, not cunning. Unlike Jerome Kerviel at SocGen, you get the impression that, while Kweku is an intelligent bloke, he’s not a leader. In relative terms within the bank, you’d have to conclude that he wasn’t the sharpest card in the pack. Yet he seems to have hoodwinked everyone single-handed.

I don’t buy it. And if this is going to be a full and wide-ranging police inquiry, my bet is that more collusion will come to light. This smells to me like a corporate entity looking for a convenient excuse: Adoboli may well not be entirely innocent, but he’s no criminal mastermind either.