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UBS legal executive tied to securities suit resigns

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Bloomberg News / August 5, 2008

ZURICH - UBS AG's top US legal official, David Aufhauser, quit as New York Attorney General Andrew Cuomo and others investigate the bank's sale of auction-rate securities before the market collapsed in February.

Aufhauser, general counsel for the investment bank and Zurich-based UBS's businesses in the Americas, will remain an adviser to the company until Sept. 30, spokeswoman Sabine Woessner said yesterday. She declined to give a reason for his departure. He didn't return a call to his office, and there was no response to a message left at a residential number in his name in Washington. A lawyer for Aufhauser, 57, couldn't immediately be located.

Aufhauser, a former US Treasury legal chief, is among seven unidentified executives mentioned by Cuomo in a lawsuit against UBS on July 24, which refers to him only as "Executive A," two people familiar with the case said. The executives allegedly sold $21 million in personal holdings of auction-rate securities while the company promoted the products to investors.

Firms including UBS abandoned their routine role as buyers of last resort for the instruments in mid-February, letting the $330 billion market collapse. The bank said July 24 it will "vigorously defend" itself against Cuomo's claims and declined to identify the seven executives.

"While UBS does not believe that there was illegal conduct by any employee, we have found cases of poor judgment by certain individuals," the bank said that day. The company planned to evaluate "appropriate disciplinary measures," it said.

Massachusetts Secretary of State William F. Galvin, has accused UBS of fraud in the sale of auction-rate securities. In June, Galvin alleged UBS boosted efforts to sell the securities even as it knew the market for them was collapsing. Galvin also said UBS told investors that the long-term bonds were cash equivalents when the bank knew they weren't.

Texas has filed a related complaint against UBS.

Jim Odell and Mark Shelton will take over Aufhauser's responsibilities as cogeneral counsels for the Americas, while David Graham will act as general counsel of the investment bank, UBS said yesterday in a memo confirmed by New York-based spokeswoman Rohini Pragasam.

As Treasury general counsel from March 2001 to November 2003, Aufhauser provided legal advice on banking, international finance, securities, taxation, trade, and enforcement. He also served on the US president's corporate fraud and abuse task force at the Department of Justice.

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