UBS Settles With Pursuit Partners Over 'Crap and Vomit' Suit

Sep 1 2015 | 6:58pm ET

UBS has settled a dispute with hedge fund Pursuit Partners regarding the sale of CDOs referred to by UBS staff as "crap" and "vomit" in internal emails.

At issue was the sale of approximately $45 million in collateralized-debt obligations, or CDOs, by UBS to Pursuit in the summer of 2007. According to internal UBS emails that subsequently came to light, UBS executives repeatedly referred to the CDOs at the time as “crap” and “vomit”, according to court filings.

Moreover, UBS did not disclose to Pursuit that private conversations with Moody’s staffers as early as July 2007 indicated that the rating agency no longer believed the CDOs merited investment-grate ratings. Moody’s subsequently downgraded the debt instruments in October 2007, rendering them virtually worthless. 

The deal was struck the day before a trial in the long-running case was to begin. Terms were not disclosed, although UBS was required by a judge in 2009 to set aside $35.5 million related to the crisis-era case, and Pursuit initially sued UBS for $100 million. 

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