NY judge allows HSH Nordbank claim against UBS

By Martin de Sa'Pinto and Grant McCool

ZURICH/NEW YORK, Oct 2 (Reuters) - German institutional investor HSH Nordbank can proceed with its fraud claims against Swiss bank UBS AG over a soured $500 million investment, a judge in New York ruled.

UBS said on Friday the decision to allow HSH to proceed with some of its claims was merely a legal formality and it looked forward to addressing the merits of the case in court.

'The decision is procedural in nature and does not address the merits of the case. The court simply permits the plaintiff, 'ever so narrowly' to try to prove its disputed fraud claim, but dismisses its claim for punitive damages and several other claims,' said UBS spokesman Dominik von-Arx.

The decision by New York State Supreme Court Justice Richard Lowe concerns HSH's allegations that it invested $500 million into a collateralized debt obligation (CDO) program managed by UBS. The investor said that at the time of sale the bank misrepresented its value, allowing UBS to book an immediate $180 million gain.

The program known as North Street 2002-4 (NS4) is now worthless, HSH said.

The judge's decision on Thursday said HSH's original complaints lodged last year were dismissed in October 2008, but that the court had allowed certain amended complaints to be heard after HSH cited specific documents which purportedly backed its claims.

Among other claims, HSH said UBS 'misrepresented its 'faith' in rating agency models in order to sell NS4 to HSH when, in fact, it had rejected those models for its own use.

The court rejected a plea by HSH to bring a cause of action for negligent misrepresentation, dismissing the claim thet HSH was just a naive investor at the mercy of the more experienced UBS.

The case is: HSH Nordbank AG vs UBS AG 600562/2008 in New York State Supreme Court (Manhattan)

(Editing by Leslie Gevirtz)

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