Adoboli trial focuses on ‘genesis of umbrella’

Kweku Adoboli’s defence team yesterday suggested that the “umbrella” – an account the former UBS trader is alleged to have used to hide profits and losses from unauthorised trading – was born from a spreadsheet sent by a former colleague in April 2011.

Paul Garlick QC, representing Adoboli in a criminal case against the former trader, made the suggestion in a cross-examination of Darren Bailey, a cash equities trader at UBS. Bailey had worked with Adoboli before UBS revealed it had suffered a $2.3bn unauthorised trading loss in September 2011.

At Southwark Crown Court yesterday, Garlick alleged that Bailey had sent a spreadsheet containing trades and prices to Adoboli, which he suggested formed the “genesis of the umbrella”. Bailey, who was appearing for a second day as a witness for the prosecution, dismissed the idea as “ridiculous”.

Adoboli denies two counts of fraud and two of false accounting. Bailey is not charged with any wrongdoing.

In the proceedings, Garlick asked Bailey whether the phrase “something for a rainy day” was something he had ever discussed with Adoboli. This was a reference to the “umbrella” system allegedly used by Adoboli to conceal his trading profits and losses from the bank.

Bailey replied that he had not, as far as he could recall.

Garlick then read out an extract from an SMS chat that took place in March last year between Adoboli and Bailey, in which Adoboli sent the message: “IG looking good...Takes our prop close to 4 on the year, but holding some back for a rainy day.”

Bailey said he did not recall the message and may not have read it. Garlick asked if Bailey had any recollection about a so-called slush fund, to which Bailey said he did not.

Garlick then referred to a group electronic chat in March last year in which Adoboli and Bailey were involved, in which Bailey is claimed to have written to Adoboli: “Have you used the slush act?”

When asked by Garlick what he meant by that, Bailey said he did not know and was “genuinely shocked”. Garlick suggested the message showed he knew about the umbrella fund and had now been “found out”, given that message and the earlier reference to the “rainy day”.

Garlick then read out an electronic chat exchange between Adoboli and Bailey that purportedly took place in April last year, in which one of the messages sent by Bailey included an attached Excel spreadsheet including what he confirmed yesterday were amounts and prices of trades.

During that electronic exchange, Garlick read out a passage in which Adoboli allegedly wrote to Bailey: “I can warehouse 50 for you, if you like.” Bailey is said to have replied “I’ve kinda done that, but cool.”

Bailey had told the court during his testimony on Friday that he had once, in June 2011, accepted an offer from Adoboli to warehouse a trade – or book it overnight on his account rather than Bailey’s.

But Garlick said the April exchange showed: “You were perfectly aware about warehousing in April. Does it appear any other way?”

Bailey said he couldn’t remember what he had meant.

Concerning the spreadsheet Bailey allegedly sent to Adoboli in the course of that exchange, Garlick said: “You’re sending him the spreadsheet, which I suggest is your version of the umbrella sheet. I suggest to you your spreadsheet is the genesis of the umbrella spreadsheet.”

Bailey rejected that suggestion, branding it “ridiculous”.

Sasha Wass QC, questioning Bailey after Garlick had finished his cross-examination, asked Bailey if he understood that the defence team was suggesting he was the “architect of the umbrella”. When he replied he understood that, she told the court instead that the prosecution claims a different spreadsheet, which was emailed by Adoboli to himself on Boxing Day 2009, was the true genesis of the umbrella.

The case continues.