NEW YORK, Aug 1 (Reuters) - David Aufhauser, the general counsel for UBS AG’s UBSN.VX investment banking unit, is at the center of a civil probe by New York Attorney General Andrew Cuomo into the Swiss bank’s sales of auction-rate securities, a person familiar with the situation said on Friday.
Last week, Cuomo sued UBS and accused it of committing fraud by steering clients into auction-rate securities that became impossible to sell once the credit market tightened. Cuomo contends UBS insiders dumped their own holdings even as the bank continued to sell the debt to clients.
Aufhauser is the executive who was described in the lawsuit only as “Executive A,” said the source, who asked not to be named. According to the lawsuit, he was part of an executive group that looked into a series of problems related to auctions managed by UBS.
Shortly after exchanging messages with other UBS executives about the increasing difficulty with auctions, Aufhauser sent an e-mail to his broker asking to shed all of his $250,000 in personal auction-rate holdings, according to the lawsuit.
The New York AG’s office did not respond to requests for comment. UBS declined to comment on Executive A’s identity.
“The New York attorney general did not identify the names of the executives in his complaint, and we decline to do so,” the bank said in a statement.
Aufhauser, who is still an employee of UBS, was not available for comment.
Aufhauser, who joined the bank in 2004 and was formerly a general counsel to the U.S. Treasury Department, later bought back some auction-rate securities, the lawsuit said. No charges have been filed against him or any other individual.
According to the state lawsuit, at least seven UBS executives dumped $21 million in auction-rate securities held in personal accounts as the credit market began showing signs of trouble. The state alleges the bank continued to sell those securities even as executives privately expressed worries that these markets were struggling.
UBS last week said it conducted an internal probe of alleged sales of personal holdings of auction-rate debt by its executives and found no wrongdoing. (Reporting by Joseph A. Giannone, editing by Phil Berlowitz)