The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) finally threw the book at the world’s largest, most powerful financial institution. UBS Financial Services Inc. of Puerto Rico has been ordered to pay $35 million, nearly one-third of which will go toward restitution for 165 investment clients who suffered major losses of their savings and retirement funds. In many cases, their investments fell by as much as 75%.

The situation, involving the sale of Puerto Rico municipal bonds that collapsed in value, has a convoluted history going back decades. To make a long story short, Puerto Rico – as a US territory – was given special status under the Internal Revenue Code, providing incentives to US corporations to set up factories and create jobs on the island. Those incentives expired in 2006. Then, as provisions of various ill-considered “free trade” agreements began to kick in, the inevitable happened: US corporations began closing down shop in Puerto Rico and moving to low-wage countries. On top of that, Puerto Rico has been largely dependent on oil and gas for its energy needs; sudden, steep increases in these costs devastated the Puerto Rican economy.

As one might expect, the tax base eroded and the Puerto Rican government found itself heavily in debt. By 2009, 44% of the island’s revenue went to cover the deficit. The governor at that time, Luis Fortuño, enacted severe austerity measures, but these did little beyond angering residents. Finally, the Puerto Rican government started an aggressive campaign to sell bonds in order to raise revenues.

It doesn’t take a financial genius to understand that, under such a scenario, government bonds are at best, risky. At worst, they can turn out to be worthless. But here is the rub: under the provisions of the nearly 100-year-old law that made Puerto Ricans US citizens, interest income from securities (i.e., bonds) issued by the government of Puerto Rico is essentially tax-exempt. Financial advisers at UBS Puerto Rico used this as a selling point as they pushed these investments on clients who knew very little about the bond market and were relying on the advice of the “professionals” in whom they placed their trust.

Those advisers were under pressure from further up. Damning evidence in the form of audio recordings eventually surfaced of a UBS supervisor threatening the advisers under his supervision, pressuring them to sell these risky investments or seek employment elsewhere. Another adviser was telling his colleagues that the entire situation could be improved by what amounted to “affirmations” and “positive thinking” as he coached them on how to overcome clients’ objections.

Ultimately, the blame is on UBS for not supervising its Puerto Rican employees more vigilantly. Chances are, even if UBS executives were aware of the situation (which there is much evidence to support), they wouldn’t have given a tinker’s damn. That’s the kind of institution UBS has been for over 80 years. In the 1930s and 1940, the Swiss-based banking behemoth aided and abetted the Nazis, laundering assets confiscated from Holocaust victims. In 2004, UBS paid a $100 million fine to the US Federal Reserve for transferring funds to Iran and Cuba, both of which were under trade embargoes. UBS has been under investigation for evading US taxes, rigging the bond market, manipulating currency and interest rates…the list goes on and on.

Unfortunately, with assets of over $1 trillion, UBS is virtually untouchable. Even the $2 billion fine they set aside to cover liability for its role in rigging currency is a mere 0.2% of that staggering figure. The $34 million UBS has been ordered to pay in the Puerto Rican bond scandal is mere pocket change. It will do virtually nothing to change its corporate behavior.

Nonetheless, the victims of UBS will finally get something back. Many of these former UBS clients have been represented by Peter Mougey of the Levin Papantonio law firm. Mougey says, “These funds carried profound risks and were not suitable for the people we represent in this claim. It is a story that deserves to be told…a story of trust betrayed, knowingly and quite deliberately.”

You can read more about the case click UBS Puerto Rico Bond Fraud.

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K.J. McElrath is a former history and social studies teacher who has long maintained a keen interest in legal and social issues.