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UBS fined $100m over dollar distribution

By Haig Simonian in Zurich and Ellen Kelleher in New York
May 11 2004
Financial Times, UK

UBS yesterday suffered a blow to its reputation after the US Federal Reserve fined it $100m for delivering dollar banknotes to countries blacklisted by Washington such as Iran and Cuba.

The fine is one of the largest penalties imposed by the US banking regulator and appears to have taken the bank, which last week made no provisions in its first-quarter results, by surprise.

The penalty followed the revelation last week that Switzerland's biggest bank had for some time allowed dollar banknotes, distributed from a Zurich depository under contract to the New York Fed, to reach blacklisted countries.

UBS admitted the matter had come to its attention last summer, and said it had been conducting an internal investigation into staff at the depository based at its headquarters.

The bank said about six employees had been dismissed and about half-a-dozen others disciplined.

UBS, which has a reputation for high quality, conservative management, said it accepted the findings and was pulling out of the international banknote trading business. The bank has also been formally reprimanded by the Swiss Federal Banking Commission, which will supervise corrective measures.

UBS is one of a small number of banks outside the US contracted by the Fed to distribute currency, retiring old banknotes and introducing new ones. The bank has also operated a separate banknote trading business.

UBS said the employees affected had not been criminally motivated, but had been guilty of serious mistakes. Apart from breaking Fed rules, the bank said those concerned had submitted false reports to the US authorities to conceal their activities.

Michael Willi, head of communications management, said the bank was not aware of any further punitive measures or potential lawsuits by investors.

Analysts, who did not raise the issue in a first-quarter conference call with chief executive Peter Wuffli last week, appeared largely unworried. Many said the fine should be seen in the context of the much bigger penalties and settlements being agreed by other financial institutions.

This is one of the biggest fines levelled against a bank, but it is not unprecedented. Last year, the Fed slapped a $100m fine on Crédit Lyonnais for allegedly breaking US banking laws when it acquired Executive Life, a failed Californian insurer.

UBS shares, down 3.5 per cent before the late afternoon announcement, closed down 4.5 per cent at SFr88.90 yesterday.
7 posted on 05/10/2004 11:44:52 PM PDT by F14 Pilot (John ''Fedayeen" sKerry - the Mullahs' regime candidate)
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U.S. Trying to Sort Out Iran Role in Iraq

Associated Press Writer
May 11, 2004

WASHINGTON -- Reports from inside Iraq continue to suggest that Iran's conservative Islamic government is meddling in the affairs of its neighbor, according to U.S. officials and lawmakers with access to information about the instability there.

Yet as of late last month, the U.S.-led coalition held only 15 Iranian prisoners, according to the U.S. military command in Baghdad. Officials are struggling to pin down exactly what role Iran may be playing in the chaos still roiling military forces in Iraq.

Some think Iran is operating simply as any worried neighbor would: keeping tabs on the affairs of a tumultuous nation with which it shares a 900-mile border. Iran's critics contend Tehran is stirring up trouble and laying groundwork to try to establish an Islamic republic on the Iranian model after the United States and its allies leave Iraq.

Others say the truth lies in between.

Senior officials including Defense Secretary Donald H. Rumsfeld have warned Iran not to get involved. "We know the Iranians have been meddling, and it's unhelpful to have neighboring countries meddling in the affairs of Iraq," Rumsfeld said last month at a Pentagon briefing.

A State Department official, speaking on condition of anonymity, said the Bush administration lacks hard evidence that would implicate or exonerate Iran from involvement in destabilizing Iraq. Anecdotal but unconfirmed reports indicate Iranian arms, militia members and financial aid are crossing the border, the official said.

Yet given Iran's past connections with terrorist activity, many U.S. officials are concerned, the official said Monday.

Senate Intelligence Chairman Pat Roberts, R-Kansas, has said Iran has "obvious designs on the future of Iraq." So too says another member, Sen. Carl Levin, D-Mich.: "There is some Iranian effort to influence events."

Majorities in both countries belong to the Shiite sect of Islam, although Iraq's Shiites were dominated under former President Saddam Hussein by the Sunni sect. Arab Iraq and Persian Iran waged an eight-year war in the 1980s.

That the situation inside Iran is complex may be adding to the difficulty in unraveling what, if anything, Iran is doing in Iraq, said Rasool Nafisi in Washington, an Iranian-American in regular contact with both reformers and hard-liners in Iran.

While Iran's hard-liners have issued opinions supporting Shiite rebellions in Iraq, Nafisi said the more moderate reformists, who have no handle on power, may "in the bottom of their hearts" want to see the U.S.-led coalition succeed.

Robert Baer, a former Iraq-based CIA officer who left the agency in 1997, said Tehran probably is delighted that Saddam was overthrown and his Sunni followers disenfranchised. The ruling Shiites in Iran have ties with Iraq's Shiite majority.

But the Iranian government probably is unnerved by the U.S. presence in Iran and by American goals, Baer said.

"They do not want to see a secular, democratic, pro-Western government in Iraq with 12 American bases," Baer said. "They will assume these bases are meant to interfere in Iran."

Perhaps the most extreme views on whether Iran is meddling come from Iranian resistance leaders such as Alireza Jafarazadeh, who ran the Washington office of Iran's exiled opposition National Council of Resistance until the State Department closed it down last year for ties to anti-Iranian terrorists.

Based on intelligence from inside Iran, Jafarazadeh contends Iran is pouring tens of millions of dollars into Iraq each month to inspire unrest, dispatching thousands of clerics to organize local insurgencies and sending resistance fighters.

Politically, Jafarazadeh, now president of Washington-based Strategic Policy Consulting, believes Iran is waiting out the U.S.-led occupation for a chance to erect an Islamic republic next door.

Some Iranian actions have been overt.

At the Iranian government's invitation, representatives from the United States and Iran held a rare meeting last month in Iraq.

"We had a firm message for the Iranians across the board with regard to their role in Iraq, which is to be constructive, not destructive," Coalition Provisional Authority spokesman Dan Senor said.

As the insurgency flared, Senor added that the Iranians are not needed as middlemen to negotiate with the radical Shiite cleric, Muqtad al-Sadr, whose militia is a leading source of unrest in the south.

It's unclear what, if any, aid Iran is giving to al-Sadr.

Brig. Gen. Mark Kimmitt, the top military spokesman in Baghdad, has said he can't answer whether al-Sadr's fighters are state sponsored. He has said, however, that it would be a mistake to call al-Sadr's militia Iranian-backed, manned or controlled.

Nafisi said it seems unlikely that Tehran would support such a radical, junior cleric in a significant way.

Al-Sadr has no ties to Iran, as do Grand Ayatollah Ali al-Husseini al-Sistani, born in Iran, or Mohammed Said al-Hakim, a powerful Iraqi-born cleric, Nafisi said. Both could wield power in Iraq after the June 30 U.S. handover of power.

Instead, Nafisi said, Iran may want to let al-Sadr stir up trouble until clerics close to Tehran can emerge. An added perquisite for that tack: "It bogs down the United States and makes the U.S. look bad in the Muslim world.",0,2847152.story?coll=sns-ap-politics-headlines
8 posted on 05/11/2004 1:28:07 AM PDT by F14 Pilot (John ''Fedayeen" sKerry - the Mullahs' regime candidate)
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