UBS legal chief Aufhauser quits amid fraud furore

UBS general counsel David Aufhauser has resigned amid the growing auction rate securities (ARS) fraud that is centred on the investment bank.

Aufhauser’s resignation, which came yesterday (Monday 4 August), follows allegations that he is one of the seven unnamed executives thought to have sold more than $21m of their holdings in ARS based on inside knowledge.

Los Angeles-based Gibson Dunn & Crutcher is understood to be representing him in relation to the UBS case.

As reported in this week’s issue of The Lawyer, Debevoise & Plimpton litigator Mary Jo White is advising UBS on the case. The firm refused to comment on the instruction.

Last Friday (1 August) Merrill Lynch was also accused of fraudulently selling auction rate securities, which are long-term debt instruments with regularly reset interest rates.

Bingham McCutchen partner Mary Gail Gearns is advising Merrill Lynch, along with a team at Skadden Arps Slate Meagher & Flom.

Skadden refused to say which partner was leading the team, a decision that one New York litigator at another firm claimed could be significant.

“It is possible Skadden doesn’t want to give away too much about its defence or the future direction of the litigation by naming the lead partner and revealing, for example, whether he or she is a criminal specialist as opposed to a general commercial litigator,” said Oliver Armas, a litigation partner at Chadbourne & Parke. “In addition, it’s likely to be a multi-faceted defense, so Skadden is likely to have several partners leading the charge.

In both the UBS and Merrill cases, the regulators claim the banks were aware the auction markets faced difficulties and yet continued to sell the securities to investors.

A UBS spokesperson said: “Effective Monday August 4, we have accepted the resignation of David Aufhauser as general counsel of the investment bank and of the Americas, and as interim co-group general counsel of UBS AG.

“We have asked David to continue in a consultative role through September 30 to facilitate the transition and to ensure continuity.”

UBS lawyers Mark Odell and Mark Shelton will serve as co-general counsel on an interim basis, while David Graham will serve as general counsel to the Americas.