FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 A
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`NYSC 3F DOC. NO.
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`436
`NYSCEF DOC. NO. 436
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`fiX NO.
`653340/20;
`INDEX NO. 653340/2016
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`09/25/20;
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`RECEIVED NYSCEF: 09/25/2017
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`EXHIBIT 3
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`EXHIBIT 3
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`RECEIVED NYSCEF: 09/25/2017
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`Page 22
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`Page 24
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`12
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` THE CHAIRWOMAN: Are we good?
`3 All minds clear? Does that mean you
`4 would like to take a two-minute break
`5 before your opening or would you like
`6 to get right into it?
`7 MR. BORTNICK: We can go right
`8 into it, because both sides are always
`9 juggling witnesses before they show
`10 up.
`11 What is the intended stop time?
`12 THE CHAIRWOMAN: Today?
`13 MR. BORTNICK: And tomorrow, if
`14 you know that, too.
`15 THE CHAIRWOMAN: I'll take
`16 guidance from you guys.
`17 ARBITRATOR ZATKIN-BUTLER:
`18 Whatever you want to do is fine.
`19 THE CHAIRWOMAN: Is 5 a good
`20 time?
`21 ARBITRATOR ZATKIN-BUTLER:
`22 Whatever they want is fine.
`23 THE CHAIRWOMAN: Is 5 a good
`24 time or would you like to push it?
`25 MR. BORTNICK: I'm happy to push
`
`12
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` MR. CHINN: So we can have the
`3 lunch break before he appears. That
`4 way there's not a lot of time before
`5 he appears. And I just want to
`6 address what Mr. Bortnick said -- at
`7 least 99.9 percent of it. To the
`8 extent Mr. Bortnick is calling
`9 witnesses during Mr. Passaretta's
`10 case, who we also intend to call on
`11 our case, we absolutely agree for
`12 efficiency's sake they should testify
`13 once.
`14 THE CHAIRWOMAN: Thank you.
`15 MR. CHINN: With the following
`16 caveat: That Mr. Passaretta is not
`17 testifying first. And so if
`18 Mr. Passaretta testifies after UBS
`19 witnesses have testified and, for
`20 example, says something -- attributes
`21 a statement to Mr. Zola that we've
`22 never heard about before, let me just
`23 say as an example -- I'm not saying
`24 that will happen -- we reserve the
`25 right to recall Mr. Zola in our case,
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`1 Opening - Claimant
`2 it. Also, in my experience it's also
`3 a good breaking point, 5 or 5:30.
`4 Staying later than 6 --
`5 MR. CHINN: The guards leave.
`6 THE CHAIRWOMAN: Let's not do
`7 past 6 because we all have to be back
`8 here tomorrow, too. So we want to
`9 pace ourselves accordingly.
`10 Let's take a break at 5 and see
`11 where we are. How's that? Good? All
`12 minds clear?
`13 So, Mr. Bortnick, you have the
`14 floor.
`15 MR. BORTNICK: Thank you.
`16 Good morning again. I'm going
`17 to try to keep this short, as I said,
`18 at least short by lawyers' standards.
`19 Because when it comes right down to
`20 it, I think this matter is relatively
`21 simple and straightforward. I also
`22 believe that it's generally best for
`23 the evidence to speak for itself
`24 without the spin that one often hears
`25 in the opening argument.
`
`12
`
` because it's something we didn't know
`3 about and haven't heard of before.
`4 THE CHAIRWOMAN: What --
`5 MR. BORTNICK: That's our
`6 intent. The idea is to be as
`7 efficient as possible, but sometimes
`8 the goal is not met.
`9 MR. CHINN: Broadly speaking, we
`10 completely agree with that.
`11 THE CHAIRWOMAN: The goal of the
`12 efficiency comment.
`13 MR. CHINN: Witnesses only
`14 testify once.
`15 MR. BORTNICK: And we do a have
`16 a witness who is appearing in the
`17 order of appearance by subpoena, a
`18 former UBS employee, tomorrow morning.
`19 I don't know if Mr. Zola will be done
`20 or not. Hopefully he will.
`21 Is there any flexibility in his
`22 start time?
`23 MS. SHORE: Yes.
`24 MR. BORTNICK: We could probably
`25 work through that without a problem.
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`RECEIVED NYSCEF: 09/25/2017
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`Page 26
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`Page 28
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`1 Opening - Claimant
`2 Gianluca Passaretta,
`3 Mr. Passaretta, was hired by UBS in
`4 October of 2009.
`5 (Discussion off the record.)
`6 THE CHAIRWOMAN: Okay. I'm
`7 sorry. You're just getting started.
`8 We're going to have to do one
`9 housekeeping matter, and that's just
`10 to get the court reporter hooked up
`11 properly.
`12 MR. BORTNICK: Certainly.
`13 MR. CHINN: You want to take a
`14 two-minute break? And why don't we
`15 let Mr. Bortnick start again with,
`16 "Good morning."
`17 MR. BORTNICK: I think I can
`18 leave the introductory paragraph out.
`19 ARBITRATOR CARACCIOLO: I'm up
`20 to "2009."
`21 (A recess was taken.)
`22 ARBITRATOR ZATKIN-BUTLER: We're
`23 back on the record. Session 1 on the
`24 record, 11:15.
`25 THE CHAIRWOMAN: Mr. Bortnick?
`
`1 Opening - Claimant
`2 bolted on to it. So he was to come up
`3 with the business plan for the
`4 continuation of this group. It was
`5 the Latin American Rates & Credit
`6 Trading operation, albeit it was very
`7 thinly staffed by intent and had, as
`8 you'll see, a very little balance
`9 sheet to do -- to be a significant
`10 contributor to UBS. Because when
`11 you're in an area of the securities
`12 industry at a firm like UBS where
`13 you're taking risk, the firm's balance
`14 sheet, the firm's capital is being
`15 used and put at risk so that there is
`16 only so much in any firm and
`17 particularly in UBS Mr. Passaretta's
`18 area's allowed to use in order to take
`19 a risk.
`20 But the bottom line here, you'll
`21 see, was, that it was set up in a way
`22 that it was not going to be a
`23 significant contributor to UBS.
`24 In fact, you'll see that UBS
`25 from the very outset had its own
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`Page 27
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`1 Opening - Claimant
`2 MR. BORTNICK: Okay. I'll pick
`3 up basically where I left off.
`4 So Mr. Passaretta was hired at
`5 UBS in October 2009 to head Latin
`6 American Derivatives Trading. You
`7 will see in some documents it's called
`8 LatAm. As you'll see, he performed
`9 extremely well over the next
`10 succeeding years. And I don't think
`11 that's going to be disputed.
`12 In November 2012 UBS underwent a
`13 major restructuring. Indeed, you'll
`14 see that Mr. Passaretta was even on
`15 the cut list. Ultimately, his job was
`16 saved. And so he continued to be
`17 employed, although the role did change
`18 substantially.
`19 He was moved to another area.
`20 And, in sort of the basic most
`21 simplistic terms, was charged with
`22 coming up with a business plan for
`23 sort of a new combined area that had
`24 been -- part of it had been pruned,
`25 other parts of UBS had sort of been
`
`1 Opening - Claimant
`2 doubts about this new group and
`3 whether it would even pan out at all.
`4 And, in fact, you'll see that it
`5 didn't pan out for a number of
`6 reasons. And we're not necessarily
`7 blaming anyone for this. It's just
`8 what happened. In fact, subsequent to
`9 Mr. Passaretta's termination, that
`10 area was, for the most part, largely
`11 wound down.
`12 Mr. Passaretta's performance
`13 reviews are truly excellent. The only
`14 exception that you'll see was in 2012
`15 where what even UBS called some
`16 outlier comments by one particular
`17 individual, Douglas Ellison, who is
`18 scheduled to be here tomorrow. He
`19 worked in the Market Risk function,
`20 sort of a control function area. And
`21 you'll see that his commentary had to
`22 do with a disagreement regarding
`23 primarily the pricing of a security,
`24 nothing to do with this case, per se.
`25 But they had a somewhat public
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`Page 30
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`1 Opening - Claimant
`2 disagreement that caused some issues
`3 between them personally for a while.
`4 But other than that -- and
`5 Mr. Ellison, you'll hear him testify
`6 about those comments presumably.
`7 You'll see that his reviews were just
`8 essentially uniformly excellent.
`9 After the business plan was
`10 approved, which did not happen at the
`11 beginning of 2013 -- the changeover
`12 occurred right at the end of the year
`13 2012, after the holidays, didn't even
`14 get up and going until January 2013.
`15 The business plan was approved
`16 sometime thereafter.
`17 There was a trader in Brazil,
`18 Mr.
` he reported to
`19 Mr. Passaretta -- and he sought to do
`20 a large trade. In simplest terms, it
`21 was an arbitrage trade. Mr.
` had
`22 recognized that the same security but
`23 was trading at two different prices in
`24 the market, depending on where it was
`25 trading. This security was due to
`
`1 Opening - Claimant
`2 mature very shortly, and therefore he
`3 understood that the prices would
`4 slowly converge. And that's what
`5 arbitrage traders often do. They try
`6 to take advantage of the price
`7 discrepancy between the same security
`8 in different markets and get that
`9 advantage.
`10 In a completely different
`11 context, nothing to do with this, one
`12 example might be if one company is
`13 going to take over another company,
`14 the stock is trading at $60 and the
`15 takeover price is at $80, and there's
`16 that $20 discrepancy, you know the
`17 deal's going to go through, assuming
`18 you know it is, at $80, arbitragers
`19 like to jump in and take advantage of
`20 that $20 price discrepancy and make
`21 that one-third gain.
`22 Similarly here, that's the way
`23 that trade worked, except instead of
`24 wondering whether the deal would go
`25 through -- it's a security that
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`1 Opening - Claimant
`2 matures and everyone gets paid off.
`3 So unless there was some risk of
`4 default, which there really wasn't
`5 here, the price will converge and
`6 there's a profit to be made.
`7 So that's what was going on.
`8 And this is what Mr.
`sought to
`9 take advantage of, this price
`10 discrepancy, but also wanted to hedge
`11 the trade to make it essentially
`12 riskless.
`13 Nevertheless, even though it was
`14 essentially a riskless trade, it was a
`15 large trade. And Mr.
` recognized
`16 that under the UBS standards at the
`17 time, he could not just pull the
`18 trigger. He had to get
`19 Mr. Passaretta's permission to do so,
`20 and he did. He asked Mr. Passaretta
`21 for permission.
`22 And Mr. Passaretta recognized,
`23 however, that due to the size of the
`24 trade, regardless if it's riskless,
`25 regardless of whether the risk policy
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`1 Opening - Claimant
`2 made sense or not, its size required
`3 approval from a separate area of UBS,
`4 Market Risk. They don't trade. They
`5 just look at the risk and the balance
`6 sheet of UBS ultimately across the
`7 entire Investment Bank. And he needed
`8 their permission to do that.
`9 So that's what Mr. Passaretta
`10 did. The first thing after talking to
`11 Mr
` and trying to understand what
`12 the trade was about, he said, "I like
`13 the idea. It's an excellent idea.
`14 However, I'm instructing you you
`15 cannot do the trade until I go to
`16 Market Risk and get approval." It was
`17 an order.
` understood, and
`18 Mr.
`19 Mr. Passaretta thereafter went off to
`20 Market Risk to try to explain the
`21 trade to them and seek approval.
`22 Unknown to Mr. Passaretta,
`23 however, while he was seeking Market
`24 Risk's approval, as soon as he went
`25 off to Market Risk, Mr.
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`Page 34
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`1 Opening - Claimant
`2 nevertheless, went ahead and did the
`3 trade without Mr. Passaretta's
`4 permission, without Market Risk's
`5 permission, without anybody knowing
`6 about it other than the actual people
`7 that executed the trade. So it was a
`8 direct violation of Mr. Passaretta's
`9 order.
`10 Now, this is relatively a short
`11 time before the market was closing.
`12 And now this was done through Brazil.
`13 So we're talking about the Brazilian
`14 market closing. And it was shortly
`15 soon to close. And it was when
`16 Mr. Passaretta found out about it, it
`17 was chaos, frankly, for him, for
`18 Mr.
` and what was going on.
`19 Mr. Passaretta's first thought
`20 was to try to protect the firm, try to
`21 unwind the trade, which ultimately did
`22 make a profit. He unwound part of it
`23 before the market closed and
`24 subsequently was told, "Don't bother
`25 unwinding the trade any further." And
`
` --
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`1 Opening - Claimant
`2 least certainly -- in the heat of the
`3 moment, that's certainly what
`4 Mr. Passaretta understood him to say.
`5 And he answered "No," not surprisingly
`6 and honestly.
`7 Mr. Murphy also said at that
`8 time
` meaning
`9
` was toast."
`10 Not a surprising comment given
`11 the fact that Mr.
` had violated a
`12 direct order. And in the trading
`13 world, violating a direct order is
`14 right up there with cheating and
`15 stealing. It's about as bad as it
`16 gets.
`17 In any event, UBS here alleges
`18 that Mr. Passaretta, as part of this
`19 ongoing chaos, was asked a question by
`20 Mr. Ellison -- who we'll hear from
`21 tomorrow -- he was also in Market
`22 Risk. And before the market closed,
`23 Mr. Ellison, according to UBS in its
`24 statement of answer, asked, "Was there
`25 enough time to get this trade done?"
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`Page 37
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`1 Opening - Claimant
`2 so it did make a profit.
`3 He also needed to interface with
`4 Market Risk. It was a very chaotic
`5 situation. And he was also
`6 interfacing with Market Risk during
`7 this time about whether there would be
`8 approval.
`9 Once the market closed,
`10 Mr. Passaretta had all the facts, he
`11 had some mitigation through partial
`12 unwinding of the trade, and he told
`13 Market Risk what had happened.
`14 Matthew Zola was -- and you'll
`15 hear from him this afternoon --
`16 Mr. Passaretta's direct boss. His
`17 boss's boss was a gentleman by the
`18 name of Chris Murphy, who is based in
`19 London, but happened to be in New York
`20 that day.
`21 He asked Mr. Passaretta during
`22 this chaotic time whether he knew
`23 about it, meaning, did Mr. Passaretta
`24 know about the trade and approve it
`25 before Market Risk approved it. At
`
`1 Opening - Claimant
`2 This trade hadn't been approved at
`3 this point, and that Mr. Passaretta
`4 allegedly said, "Yes," implying,
`5 therefore, that the trade had not
`6 occurred. But you'll see that this
`7 was not a question that was asked of
`8 Mr. Passaretta.
`9 Now, as expected, an
`10 investigation followed. Quite normal.
`11 It lasted, it appears, less than two
`12 weeks or so, the evidence would
`13 suggest.
`14 By May 15th, it may have even,
`15 at least from a fact-gathering
`16 perspective, ended much sooner than
`17 that. Maybe within a week or so or
`18 just over a week.
`19 But by this time UBS certainly
`20 knew what had happened, knew all of
`21 the relevant facts, certainly by May
`22 15th or probably earlier. And it
`23 clearly had to know what it wanted to
`24 do.
`25 One of the things it did not do
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`RECEIVED NYSCEF: 09/25/2017
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`Page 38
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`1 Opening - Claimant
`2 is it did not suspend Mr. Passaretta.
`3 In fact, from the very moment this
`4 trade happened, he was never
`5 suspended. He was told when this
`6 whole thing blew up, "Go back to work.
`7 Work normally." And, in fact,
`8 Mr. Passaretta did just that, worked
`9 normally as if nothing ever happened
`10 for almost the next two months.
`11 What UBS did do, decide to do,
`12 was wind down the business area. And
`13 you'll see there are probably pretty
`14 good reasons for that, having nothing
`15 to do with this trade whatsoever.
`16 Now, if this was a
`17 restructuring, which this ultimately
`18 was, Mr. Passaretta would have been
`19 entitled to at a minimum some
`20 severance and his deferred
`21 compensation. Now, that's a little
`22 over 1.2 -- between 1.2 and 1.3
`23 million. Because as Mr. Passaretta
`24 worked over the years, you'll see that
`25 a substantial amount, half or more, of
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`1 Opening - Claimant
`2 through -- but shortly after that
`3 time, UBS was reviewing the base
`4 salaries of everybody as part of a
`5 normal regular review, and Mr
`6 salary, I think, may have been bumped
`7 up. So he got a warning letter, and
`8 that was it.
`9 So the person who tries to clean
`10 up the mess, did nothing wrong,
`11 looking out for the best interest of
`12 the firm, gets fired for cause because
`13 he allegedly lied not about the trade,
`14 but about not knowing that the trade
`15 occurred, which didn't happen. And
`16 the guy that violates the direct order
`17 gets a warning letter and perhaps a
`18 bump up in salary.
`19 On this point, lying, I'm going
`20 to ask you as the Arbitrators to do
`21 one thing during the case. I want you
`22 to continually throughout these
`23 hearings ask yourself the following
`24 question: Does this make sense? I
`25 don't mean does it make sense in terms
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`Page 41
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`1 Opening - Claimant
`2 what he earned was deferred and he
`3 didn't get it. You don't get it
`4 unless you're there when it fully
`5 vests unless, for example, there is a
`6 restructuring.
`7 But if he's terminated for
`8 cause -- which is what UBS alleges
`9 here -- whether you want to call it
`10 permitted to resign, or whatever the
`11 reason, it was a cause termination, he
`12 gets nothing. Likewise, if
`13 Mr. Passaretta voluntarily quits, he
`14 gets nothing. You'll see the facts
`15 are, "You're getting fired for cause,"
`16 and that's what happened.
`17 Mr.
` on the other hand,
`18 whom everyone will expect or admit,
`19 violated a direct trading order, as I
`20 said one of the worst offenses on Wall
`21 Street, had nothing happen to him
`22 except for a warning letter. And, in
`23 fact, I think you'll see that shortly
`24 after that time -- and we'll get more
`25 clarity on this as the hearing goes
`
`1 Opening - Claimant
`2 of the person who didn't do the trade
`3 gets fired and the person who did the
`4 trade just gets a warning letter. I
`5 don't mean that. I mean ask yourself
`6 does it make sense, the story about
`7 what Mr. Passaretta is alleged to have
`8 done; that he lied. I want you to ask
`9 yourself that in the context of all
`10 the evidence as we go forward.
`11 Because I think you're going to find
`12 that UBS' story does not make sense.
`13 In other words, another way to
`14 put it or a corollary is, what was
`15 Mr. Passaretta's incentive to lie when
`16 he did nothing wrong?
`17 Now, on June 25, 2013, nearly
`18 two months after the trade and about
`19 one-and-a-half months or so, maybe
`20 more, after at least the fact part,
`21 the fact-gathering part of the
`22 investigation had ended, and UBS as an
`23 institution knew what had happened,
`24 during this entire time, as I said,
`25 which Mr. Passaretta worked normally,
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`RECEIVED NYSCEF: 09/25/2017
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`Page 42
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`Page 44
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`1 Opening - Claimant
`2 on June 25, Mr. Passaretta was called
`3 into an office and told he was being
`4 fired.
`5 Coincidentally, or not
`6 coincidentally, at this time, UBS
`7 decided that it was largely winding
`8 down the business area that
`9 Mr. Passaretta ran for UBS.
`10 I believe that what you will
`11 find is that the evidence will show
`12 that this so-called coincidence is
`13 far, far too convenient for UBS. I
`14 think you'll find that UBS' righteous
`15 indignation that I'm sure you will be
`16 hearing pounded into all of us,
`17 probably beginning with my adversary's
`18 opening statement, is really a
`19 charade. It was a cover. It was a
`20 way to, as part of winding down what
`21 was really not a profitable business,
`22 to get rid of Mr. Passaretta, who
`23 would certainly have been terminated
`24 in this restructuring, but deny him
`25 his deferred compensation.
`
`1 Opening - Claimant
`2 see in the U-5, statements then
`3 implied that Mr. Passaretta, in fact,
`4 wrongly executed the trade without
`5 approval.
`6 So Mr. Passaretta is here not
`7 only to recover the compensation that
`8 is owed to him, but also to fix his
`9 U-5 as well.
`10 Now, another defense that you'll
`11 probably hear about quite a bit is
`12 that Mr. Passaretta was an employee at
`13 will under New York law; that he could
`14 be fired for any reason, whether
`15 rightly or wrongly, as long as it's
`16 not discriminatory, or even no reason
`17 at all at any time whether on notice
`18 or no notice. And as a corollary to
`19 this defense, that under UBS'
`20 severance policy, he would forfeit his
`21 deferred compensation. Even if it
`22 turns out that, well, UBS was wrong
`23 and maybe he really shouldn't have
`24 been fired for cause.
`25 Well, we obviously could not
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`1 Opening - Claimant
`2 Now, the first thing on
`3 Mr. Passaretta's mind after he was
`4 terminated was how is this going to be
`5 reported? In other words, how is it
`6 going to be reported on his U-5. You
`7 will hear him talk about how he needed
`8 a clean resignation or a clean U-5.
`9 Because he believed at the time that
`10 getting a future job would be
`11 extremely difficult otherwise, and
`12 certainly his reputation would be
`13 forever stained in the industry.
`14 So one of the things that he
`15 asked for -- one of the things that he
`16 asked for -- as part of a clean
`17 termination was that he be permitted
`18 to resign. And UBS ultimately did
`19 agree to that.
`20 But just because you're
`21 permitted to resign is not necessarily
`22 enough. What Mr. Passaretta didn't
`23 know was that UBS would as part of
`24 that make statements on his U-5,
`25 defamatory statements. And as you'll
`
`1 Opening - Claimant
`2 disagree more. And that legal
`3 argument is set out in
`4 Mr. Passaretta's statement of claim.
`5 There are exceptions to this
`6 defense. One of them, as I mentioned,
`7 would be a claim for discrimination.
`8 And the other one here, which is
`9 set forth in the statement of claim,
`10 I'm going to address in much greater
`11 detail at the end of the case, but for
`12 purposes of an opening argument what
`13 is important to understand is that in
`14 the security industry when there is an
`15 arbitration agreement, the nature of
`16 the at-will employment changes.
`17 So don't be fooled by the
`18 argument that the law of at-will
`19 employment requires you to deny
`20 Mr. Passaretta's claims. Because it
`21 does not.
`22 As we set forth in our statement
`23 of claim, courts have recognized this,
`24 arbitration panels, securities
`25 industry arbitration panels have
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
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`INDEX NO. 653340/2016
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`RECEIVED NYSCEF: 09/25/2017
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`Page 46
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`Page 48
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`1 Opening - Respondent
`2 recognized this. And at the end of
`3 the day, you'll see that
`4 Mr. Passaretta was treated very
`5 wrongly. In fact, grossly so. And
`6 that the law permits you to rectify
`7 this injustice. That's why
`8 Mr. Passaretta is here.
`9 And I thank you for listening.
`10 THE CHAIRWOMAN: Thank you,
`11 Mr. Bortnick.
`12 Mr. Chinn?
`13 MR. CHINN: Sure.
`14 So I don't think you'll be
`15 surprised to learn that we have a very
`16 different view of this, and we believe
`17 the facts will show -- will really
`18 refute every aspect of the opening
`19 that Mr. Bortnick just gave that's in
`20 controversy.
`21 What we have here in this case
`22 is an individual, Mr. Passaretta, who
`23 while at UBS did not believe that the
`24 rules applied to him and does not
`25 believe now that he's here before you
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`1 Opening - Respondent
`2 there can also be overt or outright
`3 lies. The evidence will show that
`4 Mr. Passaretta engaged in both.
`5 Third, there is UBS' rule
`6 consistent with the law of New York
`7 and the expectation of banking
`8 regulators that unvested deferred
`9 compensation is forfeited if an
`10 employee quits or is terminated for
`11 any reason other than death,
`12 disability, retirement or redundancy.
`13 And I can tell you that Mr. Passaretta
`14 was not made redundant. We will
`15 address that.
`16 Fourth, the FINRA rules,
`17 specifically Regulatory Notice 10-39,
`18 require employers to provide complete
`19 and accurate information on Form U-5s.
`20 And by the way, New York Law
`21 does not allow employees to come to a
`22 FINRA arbitration and seek damages for
`23 the content on their Form U-5s. The
`24 highest court of the State of New York
`25 has said that there is no such claim
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`Page 47
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`Page 49
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`1 Opening - Respondent
`2 that the law of this state applies to
`3 him. And I'm going to walk through
`4 some of those rules and laws, although
`5 I won't make any legal argument here,
`6 but that Mr. Passaretta for some
`7 reason believes he's exempt from.
`8 First, there's UBS' rule that
`9 requires that large transactions be
`10 approved. And you will see that there
`11 was a significant tug-of-war between
`12 Mr. Passaretta and UBS over an
`13 extended period of time. He didn't
`14 like this policy -- this rule. It
`15 wasn't a policy. It was a rule. He
`16 didn't like it, and he rebelled
`17 against it frequently.
`18 Second, there is the rule, the
`19 expectation that UBS employees need to
`20 be honest with their superiors and
`21 with control functions like Risk. And
`22 that honesty extends to affirmatively
`23 disclosing facts that those
`24 individuals need to know; that is,
`25 there can be lies by omission, and
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`1 Opening - Respondent
`2 available, and arbitrators are not
`3 permitted to make such an award.
`4 Although in his statement of
`5 claim Mr. Passaretta asserts an
`6 entitlement to a bonus for 2013, I did
`7 not hear any discussion of that during
`8 Mr. Bortnick's opening. So I won't
`9 dwell on that here. But I would just
`10 simply say, that any claim for a bonus
`11 here runs contrary to UBS' rules,
`12 indeed the agreements that
`13 Mr. Passaretta signed; that bonuses
`14 are purely discretionary; that there's
`15 no legal entitlement to one
`16 whatsoever; and, two, that an employee
`17 must be present to be paid a bonus;
`18 that is, must be employed at the time
`19 bonuses are paid.
`20 So those are the fifth and sixth
`21 rules that Mr. Passaretta believes
`22 he's exempt from.
`23 Seventh, there is UBS' rule,
`24 there is an agreement between UBS -- a
`25 signed contract -- that provides that
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`212-267-6868
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`Veritext Legal Solutions
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`13 (Pages 46 - 49)
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`516-608-2400
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`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`NYSCEF DOC. NO. 436
`
`INDEX NO. 653340/2016
`
`RECEIVED NYSCEF: 09/25/2017
`
`Page 50
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`Page 52
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`1 Opening - Respondent
`2 UBS employed Mr. Passaretta on an
`3 at-will basis. Meaning, he could quit
`4 or be terminated at any time. And
`5 there is no legal exception under New
`6 York law that's applicable here to
`7 that rule or agreement made between
`8 UBS and Mr. Passaretta.
`9 The only way for Mr. Passaretta
`10 to win this arbitration is for you to
`11 find out that he is somehow exempt
`12 from all of these rules, exempt from
`13 the law of the State of New York,
`14 exempt from the agreements that he
`15 freely entered into governing his
`16 employment and his deferred
`17 compensation. That's the only way
`18 that Mr. Passaretta would win, is for
`19 him to be exempt from all of those
`20 things. Which is he is not.
`21 UBS is a global financial
`22 services firm with three principal
`23 businesses: Investment banking,
`24 Wealth Management and Asset
`25 Management. And there is management,
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`1 Opening - Respondent
`2 In May of 2013, Mr. Passaretta
`3 was the head of a trading desk, the
`4 Latin American Rates & Credit desk.
`5 It's important to emphasize
`6 Mr. Passaretta was the head of that
`7 desk. Mr
` reported to him as
`8 well as others, including a gentleman
`9 whose name I might be pronouncing
`10 incorrectly, Rafael Queiroz. Those
`11 two gentlemen, among others, reported
`12 to Mr. Passaretta at the time. So he
`13 had responsibility for their actions.
`14 He also had responsibility for being
`15 honest about their actions. Among
`16 Mr. Passaretta's other duties, he was
`17 required to manage those individuals
`18 and do so in an honest and forthright
`19 manner.
`20 Now, the first rule that you
`21 will see that Mr. Passaretta disagreed
`22 pretty openly with in terms of whether
`23 it should apply to him or not was the
`24 rule that UBS had that said that large
`25 trades had to be approved before they
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`Page 51
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`Page 53
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`1 Opening - Respondent
`2 that is, individual managers, at the
`3 group level who oversee the entire
`4 global business across all of those
`5 businesses.
`6 Mr. Passaretta worked in the
`7 Investment Banking Division of UBS.
`8 And, of course, it had itself its own
`9 management. Relevant for our purposes
`10 here, by early 2013 Mr. Passaretta
`11 reported in the United States to Matt
`12 Zola, as Mr. Bortnick described in his
`13 opening.
`14 At the time, for simplicity's
`15