KEY POINTS:
UBS, the beleaguered Swiss bank, dumped more than half a billion dollars of toxic sub-prime mortgage securities on an unsuspecting client, simply to get them off its books before they went sour last year, it was alleged in a New York court filing.
The German regional bank HSH Nordbank made the claim in a lawsuit yesterday, which claimed it had lost at least US$275 million ($338 million) in a fraudulent mortgage-derivatives scheme cooked up by UBS in 2002.
From the start of the investment, whose complex structure netted UBS a US$120 million profit on day one, to its ignominious collapse in value when the credit crisis began last summer, UBS had put its own interests over those of HSH, it was claimed.
The suit is the latest legal action stemming from complex mortgage-backed investments called collateralised debt obligations (CDOs), whose value collapsed when Americans began defaulting on the underlying mortgages in record numbers.
HSH says in the lawsuit it is a "regional German bank with little familiarity with international structured finance". It says it hired UBS to suggest a conservative investment in international mortgage-related bonds, "but UBS exploited the structure for its own ends".
- INDEPENDENT
