Smoking Gun Audio Recording To Help UBS Fund Fraud Victims

Victims of the UBS closed end fund Puerto Rican scandal received some good news this week. Rueters published an article describing audio tapes with Miguel Ferrer, then the chairman of UBS Financial Services Inc. of Puerto Rico, and the firm’s brokers in April of 2011. The article, written by Suzanne Barlyn with commentary by Andrew Stoltmann describes how, in April 2011, the bond funds were so risky, most brokers wouldn’t even think about touching them with a ten-foot pole, let alone sell them. The brokers, at that time, alleged the funds suffered from low liquidity, excessive leverage, oversupply and instability. The funds were loaded in debt of the Puerto Rican government and underwritten by UBS.

On June 2nd of 2011, Miguel Ferrer, the then-chairman of UBS Financial Services Inc. of Puerto Rico, a unit of UBS AG, held a meeting in San Juan and ordered the brokers to change their mindset about the bonds. They would be selling them. He is quoted in a recording as saying “You need to focus again on the attractive benefits of our funds and stop this nonsense that there are no products available-because if there are no products, go home, get a new job!” He then said his team’s production had dropped “40-something percent” and they were “doing quite badly.”

Says Stoltmann: “the recording could help to bolster arbitration claims filed with the Financial Industry Regulatory Authority in the U.S. by hundreds of investors seeking more than $900 million in damages from UBS. The claims are based on allegations UBS Puerto Rico pitched the funds’ high yields and tax benefits to clients, but did not tell them about the risky nature of the investments. UBS also put its own financial interests ahead of its clients by steering clients to funds containing bonds underwritten by UBS.”

Some of the funds lost half to two-thirds of their value between March 2011 and October 2013, and have never recovered. Some of the funds’ debt is higher than it was in March 2011. Puerto Rico is still wracked with debt, and the island has more debt per capita than any other U.S. state. If you invested money in Puerto Rico bond funds, please call us at 312-332-4200. We are securities attorneys who specialize in recovering investment fund losses and we can help you recover those losses.

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