[Dottore]

....called me yesterday, from the small market town in southern Germany, where she lives in a two-room flat above the local restaurant. She is 84, a retired teacher, but still fit an active. Her husband Horst, also a retired teacher, died three years ago and left her a small "nest egg" of some 300,000 Euros that he had accumulated after a lifetime of restoring antique furniture in his spare time.

Frida just spent the past 6 weeks in a small cabin on a lake in southern Austria where she has neither television or radio, and was blissfully unaware of the turbulence in the financial markets. Here's what she told me:

After Horst died, she wanted to put away the EU 300K he left her 'somewhere safe', and went across the border to open a private banking account with the Union Bank of Switzerland. Her instructions to her banker were that this was money for a rainy day and that she did not want to put it at risk. Once a year for the last three years her banker would ring her up, she would take the train to Zurich where she always had a nice lunch with her banker while they reviewed her portfolio and made some small adjustments.

Last August, her banker rang her, and as usual she travelled to Zurich to review her modest portfolio. This time though the banker said he had an "irresistible investment" for her which was totally safe and which paid great returns: "as much as 10% for just six months". Well it was great lunch, and Frida decided to follow her bankers advice. After lunch she switched her portfolio entirely into ...wait for it...Lehman Bros. Debt Certificates.

What her wanker (Freudian slip) didn't tell her was that these weren't even shares, but merely an unsecured "promise to pay" at a future date. When she returned from her holiday she discovered that her certificates were worthless and her nest-egg gone.

I made some calls this morning and here's what I've pieced together.

Sometime this summer Lehman Brothers was on the ropes and needed massive amounts of cash to keep their house of cards from collapsing. So they issued these "certificates" to various institutional buyers. How they got past the US regulators I don't know — but I imagine they were issued pursuant to some SEC exemption for "sophisticated" or "institutional" buyers.

In late August, when UBS realized the Lehman certificates were toxic they began a concerted internal effort to offload as many of these as possible to their private banking clients. Including my dear aunt Frida.

As some of you may have read, UBS was bailed out by the Swiss government last week to the tune of 80 billion. I am told—but am still trying to confirm—that the Swiss legislation which formed part of this bailout stipulated that UBS would be immune to "claims arising from events giving rise to the bail out" or some such waffle language that effectively precludes any post-bail-out legal action against UBS for on-selling this rubbish to its own private banking clients. (I gather also that UBS was allowed to sell this crap to its private banking clients in the first place because under Swiss securities law private banking clients come under some sort of "sophisticated investor" exemption.)

So there you have the tale of my dear aunt Frida. I'm going to pursue this for a while and will update this story if anything interesting comes up. If any of you out there have some insights that might be helpful to pursuing a claim under these circumstances I would certainly be interested in hearing from you.