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France's top court demands new trial over $2 billion UBS fine

Wed, November 15, 2023



By Tassilo Hummel, Mathieu Rosemain and Noele Illien

PARIS (Reuters) - France's top court on Wednesday ruled a new trial should be held over a 1.8 billion-euro ($1.95 billion) fine against UBS for promoting illegal banking services and money laundering in the country.

The court, which also upheld the guilty verdict against the bank, said a new trial would need to take place at the Paris appeals court to determine a new fine, if any.

The ruling reverses and annuls the decision of the Paris Court of Appeal from Dec. 13, 2021, but only insofar as it relates to penalties and civil interests, all other provisions being expressly maintained, the court said.

UBS's shares, which were already up on the day, spiked as much as 3% more after news broke that the 1.8 billion-euro fine was struck down. However, they then erased those gains and more, to last stand up around 1.6%.

The decision by the Cour de Cassation, France's highest judicial court, means the guilty verdict on UBS is final. The court said a new trial over penalties was needed because the previous decision on the fine did not follow all the correct legal procedures.

UBS said it was disappointed the court had upheld the overall verdict against it, adding it continued to maintain that it acted in accordance with all applicable laws and regulations, and would defend itself in the forthcoming trial.

The ruling once again extends uncertainty over the fine for the Swiss bank, which sought to overturn the verdict and penalty for having wooed wealthy French clients into hiding undeclared funds in Swiss bank accounts between 2004 and 2012.

"UBS may be able to partially reduce the 1.1bn euros of provisions currently set aside (for the case)," Keefe, Bruyette & Woods said in a note to clients before the ruling was released.

"However, we would caveat that a new trial may lead to a final settlement above or below the 1.8bn euros," it said, adding that it expected the case to take "multiple years" to come to an end.

LEGAL SAGA

The legal saga has lasted for more than a decade and saw some of the bank's representatives grilled by French judges.

The 1.8 billion-euro fine ordered two years ago against UBS in France was less than half an initial overall penalty of 4.5 billion imposed on the bank after a first trial in 2019.

It is comprised of a 1 billion-euro penalty and 800 million euros in damages owed to the French state.

UBS reported in its third quarter results that it had put aside over $4 billion in provisions for litigation and regulatory matters, roughly half of which is for Credit Suisse. It estimated that the financial implications from the French case alone would come to 1.1 billion euros.

France's top court reviewed whether the Paris appeals court ruling had complied with the law, not the facts that underpinned its decision.

UBS remains involved in a string of litigation and regulatory matters including claims related to the sale of mortgages and residential mortgage-backed securities in the United States.

It also assumed a number of cases from Credit Suisse when it officially took over its former rival and has already settled a number of those, such as with Mozambique over the decade-old $1.5 billion-plus "tuna bond" scandal

($1 = 0.9207 euros)

(Reporting by Tassilo Hummel, Mathieu Rosemain and Noele Illien; Additional reporting by Stefania Spezzati; Editing by Silvia Aloisi and Mark Potter)

UBS Wins Right to Fight for Cut to €1.8 Billion French Fine

Gaspard Sebag and Leonard Kehnscherper
Wed, November 15, 2023 


(Bloomberg) -- UBS Group AG won a French top court ruling that may help it cut a €1.8 billion ($2 billion) penalty it got two years ago for helping wealthy French clients stash away undeclared funds in Swiss accounts, extending a decade-long spat yet further.

The judges upheld a lower court’s money laundering conviction against UBS but said the overall penalty should be reexamined. The judges called into question the validity of a €1 billion confiscation order and the justification for €800 million in reparation awarded to the French state.

The Cour de Cassation asked a different panel of judges at the Paris appeals court to issue a new ruling on the overall amounts based on Wednesday’s legal guidance. That also reopens the debate on a third part of the penalty, leaving the possibility that the actual criminal fine set at €3.75 million can be increased.

The legal saga in France has rumbled on for more than a decade with UBS fighting on to cut the €4.5 billion penalty it initially got in 2019. The case has also featured twice-failed settlement talks, a banking boss calling his staffers “egomaniacs,” a whistle blower spying on former colleagues during tennis matches and investigators accusing the bank of deploying stealth tactics “worthy of James Bond.”

“UBS continues to maintain that it acted in accordance with all applicable laws and regulations at all times,” the company said in a statement. “UBS will defend itself in the forthcoming trial.”

Read more: UBS’s Record French Tax Fraud Penalty Slashed to $2 Billion

UBS shares jumped after the ruling and were up 2% by 4:28 p.m. in Zurich.

Morningstar analyst Johann Scholtz said the ruling was “a positive” for UBS, adding he didn’t see “much merit” in the initial French decisions.

On Wednesday, the top court also confirmed a prior finding that UBS covertly and unlawfully dispatched Swiss bankers in France to encourage prospective clients to move money across the border.

Throughout the French trials, UBS deployed a vast team of high-powered attorneys, executives and communications staff to deny the bank ever helped French citizens hide funds and hammer on the weaknesses in the case.

The bank relentlessly questioned the truthfulness of bankers-turned-witnesses, saying one “lied” and accusing another of stealing €750,000 from clients. But it’s the Swiss bank’s arguments on the amount of the overall penalty that have held the most sway with judges in France.

In the meantime, UBS acquired local rival Credit Suisse in a rescue that closed in June. The deal has set the bank on one of the most complex integrations since the financial crisis, which includes efforts to keep key talent in certain areas while shedding other aspects of the business.

UBS has also been winding down its backlog of unresolved cases this year, including a $1.4 billion settlement over US mortgage-backed securities. Switzerland’s biggest bank also reached a settlement with Mozambique over Credit Suisse’s role in a ship-financing scandal.

--With assistance from Alan Katz and Steven Arons.

(Updates throughout)

Bloomberg Businessweek