Bankers Cleared After Seeing Tips Pop Up on Phone of Train Passenger

(Bloomberg) -- UBS Group AG and two bankers were cleared by French enforcers after facing accusations of inappropriately obtaining a tip about a secret $15 billion Iliad SA takeover plan and then approaching the French carrier to offer financing.

At the heart of the case is a Eurostar trip between London and Paris five years ago where a former UBS investment banker Alexandre Zaluski caught glimpses of messages that popped up on his neighbor’s mobile phones. A Lazard Ltd. dealmaker on the train was working on an attempt by Iliad to take over T-Mobile US Inc., and was unknowingly also providing Zaluski a window into the deal.

It was part of Zaluski’s job as an investment banker to share the tip with his UBS colleague and telecom sector specialist Christian Lesueur, the Autorite des Marches Financiers’ enforcement committee ruled. Similarly, Lesueur can’t be criticized for putting together a team of a dozen UBS bankers, briefing them, and making a financing pitch with Iliad.

The leak incident came as part of a wider AMF case focusing on accusations that Iliad Chairman Maxime Lombardini made insider trades by selling shares of the French carrier just a few weeks before the phone company said it was offering $15 billion for a majority stake in T-Mobile US. Lombardini was fined 600,000 euros and Iliad ordered to pay 100,000 euros. Iliad and Lombardini previously rejected the “unfounded grievances.”

UBS representatives declined to comment on Monday’s ruling, as did lawyers for Zaluski and Lesueur. Neither of the bankers had been accused of making any illicit trades based on the non-public information.

Zaluski no longer works at UBS. He has denied any wrongdoing, saying he treated the information confidentially on a need-to-know basis only and arguing that his seatmate blamed him for his own failure to guard the secrets. Lesueur said he was doing what he would be expected to do: collect information in order to drum up new business.

During the March hearing in the case, defense lawyers and AMF officials replayed details of the Eurostar scene.

On July 15, 2014, Lazard dealmaker Vincent Le Stradic boarded a train in London and didn’t pay attention to his neighbor during the 2 1/2 hour trip.

Sitting alongside Le Stradic, Zaluski saw snippets of messages on his phones but was unable to make sense of the piecemeal information into the deal, which would be announced two weeks later. The UBS banker decided immediately to reach out to Lesueur, head of telecom, media and technology for Europe, Middle East and Africa at UBS.

It didn’t take Lesueur long to understand what was afoot: Iliad was planning to force its way into the U.S. market by taking a majority stake in a wireless provider much larger than the French company.

On July 31, 2014, Iliad issued an after-market confirmation of the offer it had made about a week earlier but the bid for a controlling stake was rejected by owner Deutsche Telekom AG, forcing Iliad to drop its American ambitions.

In the AMF case, investigators had accused UBS of being imprudent in sharing the tip on the upcoming bid with a dozen of its bankers -- paving the way for a possible leak. The allegations were dismissed by the enforcement committee as unfounded after the bank’s lawyer, Thierry Gontard, pointed to procedures in place at UBS to avoid insider information to spread.

While Le Stradic wasn’t accused of any wrongdoing, AMF enforcers did note his “negligence” in Monday’s decision.

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