UBS to Pay $1.44 Billion to Settle Financial Crisis-Era DOJ Case
Swiss bank is last to settle over securities that fueled 2008 crisis and culminated in $36 billion of fines across Wall Street The UBS settlement would resolve the last case the Justice Department brought against a big bank over its role in the 2008 financial crisis. Photo: Arnd Wiegmann/REUTERS By Margot Patrick and Dean Seal Updated Aug. 14, 2023 3:29 pm ET UBS will pay $1.44 billion to settle U.S. Justice Department allegations that it defrauded investors who bought bonds backed by mortgages before the financial crisis, marking the end to a decadelong string of prosecutions against Wall Street’s biggest players. The case is the last among more than a dozen DOJ prosecutions against banks and other financial institutions o
The UBS settlement would resolve the last case the Justice Department brought against a big bank over its role in the 2008 financial crisis.
Photo: Arnd Wiegmann/REUTERS
UBS will pay $1.44 billion to settle U.S. Justice Department allegations that it defrauded investors who bought bonds backed by mortgages before the financial crisis, marking the end to a decadelong string of prosecutions against Wall Street’s biggest players.
The case is the last among more than a dozen DOJ prosecutions against banks and other financial institutions over securities backed by subprime loans, the agency said. Including the UBS case, the DOJ said it reached more than $36 billion in all via settlements with banks including Bank of America, Citigroup and HSBC. Credit Suisse, now owned by UBS, paid $5.3 billion in 2016.
UBS said it already fully provisioned the settlement amount. It had said in its 2022 annual report that it took a provision.
In 2018, after many of the cases against other banks were settled, federal prosecutors alleged UBS defrauded investors in 40 bond deals in 2006 and 2007. The DOJ alleged UBS knew about problems with the loans backing the bonds and made false and misleading statements to buyers of the securities.
In the 2018 complaint, prosecutors said UBS put a higher priority on selling bonds and making profits than in accurately representing the quality of the underlying loans to investors. They cited emails between UBS employees as evidence the bank knew about deficiencies at lenders originating the loans.
“You dance with the devil and sell your soul,” an employee wrote about doing business with one of the lenders. Another described a pool of loans as a “bag of s—.”
UBS initially had argued that it also was a big loser on mortgage-backed bonds and related assets, but failed in an effort to get the lawsuit dismissed. UBS had to be bailed out by the Swiss government in 2008, largely because of losses related to those mortgage bonds.
UBS in 2018 said it invested $100 billion in the assets and lost more than $45 billion, including nearly $900 million on the deals in the DOJ complaint.
Subprime mortgage securities helped to fuel a housing boom and bust that sent the economy into its deepest economic downturn since the Great Depression. In 2012, the DOJ put together a task force of federal and state agencies to prosecute banks and other involved parties.
Write to Margot Patrick at [email protected] and Dean Seal at [email protected]
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