The latest lawsuit that showed how municipal agency dealings on complex financial instruments backfired during the 2008 financial crisis was of a German water utility on their derivatives investments.
According to court documents, Kommunale Wasserwerke Leipzig GmbH claimed that former UBS AG banker Steven Bracy resorted to booking strippers for Swiss firm Value Partners consultants and coming with them on an African safari while the utility is negotiating its swap deals with Swiss global financial services company.
Bloomberg said that the lawsuit filed by KWL was a response to claims earlier filed by UBS. UBS insisted in its lawsuit against the German utility that the latter owes $138 million thanks to so-called credit protection agreements from 2006 and 2007. KWL alleges that the UBS' close relation with the consultants created a conflict of interest, which invalidates its deal with the bank. Bracy is expected to give his testimony at a London trial today, the news agency added.
Lawyer Timothy Lord for KWL, said at the beginning of the trial last month, "All these exchanges show that there was a mutually dependent relationship that developed between Value Partners and UBS."
Charles Falconer, another KWL lawyer, had told the court in April that written agreements have proven that Value Partners were advising the German utility on the transaction. He added, "There was never any doubt in anyone's mind that Value Partners were acting for KWL. Attempts by Value Partners during the course of the transactions to blur the line were rebuffed by UBS."
According to KWL in court documents, Bracy appeared to have asked a man to arrange for four strippers, who were to be paid $5,600. Value Partners later that year allegedly invited Bracy and another UBS employee to join them in a luxury safari in South Africa to discuss future business opportunities.
UBS has since denied the allegations, and that it was simply looking to get the money KWL has owed them.
The Zurich-based bank said in a statement, "UBS considers the allegations made by KWL in the litigation that it is not obliged to make any payment to UBS to be unfounded."
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