UPDATE 1-Jury out in London trial of ex-UBS trader Adoboli

LONDON Wed Nov 14, 2012 2:42pm GMT

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LONDON Nov 14 (Reuters) - The jury in the London trial of former UBS trader Kweku Adoboli, who is blamed for a loss of $2.3 billion, retired on Wednesday to consider its verdicts.

Adoboli, 32, denies two charges of fraud by abuse of position and four charges of false accounting, covering the period from October 2008 to his arrest on Sept. 15, 2011. His trial started on Sept. 10 this year.

There was no way of knowing how long the jury would take to reach verdicts on all six counts.

There are 11 jurors in the case, meaning that if they cannot reach a unanimous verdict on one or more counts, a 10-1 majority decision would be acceptable.

Adoboli joined UBS as a graduate trainee in 2003 and worked in back and middle office roles until December 2005, when he became a trader.

He joined the Exchange Traded Funds (ETFs) desk in September 2006 and remained there until his arrest.

He is accused of carrying out unhedged trades far in excess of his authorised risk limits, concealing his true risk exposure by booking fictitious hedging trades, and concealing some of his profits so that he could plough them back into the official accounts when it suited him.

The prosecution say he was driven by a desire to be a star trader with huge bonuses to match.

Adoboli accepts that he did those things but says he was not acting dishonestly because everything he did was to maximise profits for UBS and his methods were in line with the bank's culture.

As judge Brian Keith put it while summing up the case for the jury at Southwark Crown Court, Adoboli's defence is that managers gave traders "a wink and a nod" that it was permissible to exceed risk limits in pursuit of profits.

Adoboli also says that his three fellow traders on the ETFs desk were active participants in his trading methods, and that traders on other desks engaged in similar practices.

THE DISHONESTY QUESTION

The judge explained to the jurors that under British law, Adoboli should be considered dishonest if he knew at the time when he was carrying out the alleged crimes that his conduct would be considered dishonest by sensible and honest people.

The indictment is split into two periods, one from October 2008 to the end of May 2011, and the other from June to September 2011. It was in the second period that Adoboli racked up the huge losses.

For each period, Adoboli faces one count of fraud by abuse of position and two of false accounting.

The fraud charges relate to the unhedged trades in excess of risk limits. In order to convict him of those charges, the jurors have to be sure either that he intended to expose the bank to the risk of losses beyond what was normal for any trader, or that he intended to make a personal gain for himself, or both.

The first set of false accounting charges relate to the booking of fictitious hedging trades to conceal the true risk exposure from the bank.

The second set of false accounting charges relate to the booking of fictitious cash-only trades. This was the method that Adoboli used, as part of what he called his "umbrella", to conceal some of the profits from his unauthorised trades for the time being.

Adoboli says he did this so the ETFs desk would have a "cash buffer" to offset mounting costs and to give the traders more confidence to take risk.

The prosecution say he did it to hide losses and smoothe the desk's profit and loss curve to give the impression that he was always producing profits.

In order to convict him of the false accounting charges, the jurors have to be sure that he intended to make a personal gain for himself.

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