UBS CMBS bond trader denies telling analyst to skew reports
UBS Group AG's head trader for commercial mortgage-backed securities denied claims of trying to influence research reports published by the Swiss bank's former senior strategist for those products.
David McNamara testified on Dec. 14 at a trial brought by former CMBS strategist Trevor Murray, who says UBS illegally fired him in February 2012 for blowing the whistle on alleged attempts to skew his reports to benefit the bank.
Under questioning by a UBS lawyer, Gabrielle Levin, McNamara said he never confronted Murray in the hallway of the bank's New York office in December 2011 to tell him he'd been "too bearish" in an annual outlook article for the CMBS market. Murray had earlier made that claim.
"Not to my knowledge, no," McNamara said.
"Did you ever tell Mr. Murray that this article would be tough to send to clients?" Levin asked.
"Definitely not," McNamara said.
Murray accuses UBS of violating the whistle-blower protections enacted as part of the 2002 Sarbanes-Oxley law. His suit describes a "concerted, extended effort" by managers and colleagues to get him to write bullish assessments. Murray says McNamara, a UBS managing director and head of CMBS trading, asked to "preclear" drafts of his reports in violation of UBS policy, something the bank has vehemently denied.
McNamara's former boss, Kenneth Cohen, who left the bank in 2013, testified this week that he never told Murray to get his reports precleared. Cohen also denied complaining that Murray’s reports were "off message."
UBS has said Murray's firing was part of a broader reduction in staff across the bank's fixed income division caused by several setbacks, including a $2 billion loss by a rogue trader at its London office in September 2011. The employment of a senior strategist for CMBS was a luxury the bank couldn't afford, and the role hasn't been refilled, the bank has said.
UBS on Thursday sought to bolster its claim about the challenging mortgage-bond market in 2011 and 2012, following several days of evidence by Murray’s lawyers suggesting UBS’s CMBS business was expanding and thriving.
Levin presented an internal UBS email in which CMBS workers were thanked on the last day of 2011 for their "focus and professionalism during what has been a difficult year." The message went on to predict "more headwinds" to come, according to a copy of the email displayed on screens for the jury.
Murray and more than 100 other workers were fired from UBS's fixed-income division starting a few months later. Murray is seeking back pay worth more than $3 million plus unspecified damages for allegedly violating the whistle-blower protections enacted as part of the 2002 Sarbanes-Oxley law.
Cohen, a well-known figure in the CMBS market who now leads commercial real estate at Bank of America Corp., also testified on Thursday about what he called a challenging environment for CMBS at the time of Murray’s firing.
"We were impacted by the firm's financial results and ultimate change in strategy," Cohen told the bank’s lawyer. "We were under constant head-count pressure."
"Our strategy went from one of growth and expansion to one of shrinkage," he said. "It was a very painful time."
Murray's lawyer, Robert Herbst, asked Cohen why he didn't look for a new job in 2011 and 2012 if UBS was pulling back support for the CMBS business he oversaw. Cohen responded that he didn’t want to "abandon" the unit he was hired to build.
Herbst went on to show Cohen and the jury an email from November 2011 in which Cohen told an acquaintance at Morgan Stanley that UBS's financial problems weren't going to hurt the bank’' CMBS business.
"As a result of our rogue trading scandal, the firm is going to cut back certain areas," Cohen wrote in the email. "The RMBS and CMBS businesses are completely unaffected."
The trial is scheduled to end Dec. 22.
The case is Murray v. UBS Securities, 14-cv-00927, U.S. District Court, Southern District of New York (Manhattan).