BancWest Corp., the U.S. consumer banking arm of BNP Paribas SA, filed a lawsuit alleging that UBS AG secretly designed a collateralized debt obligation fund to insure against its own subprime investment losses.

The complaint, filed last week in the California Superior Court for San Francisco County, claims that the TABS 2007-7, a type of CDO that UBS created in 2007, was designed to get other financial institutions "to put up hundreds of millions of dollars to unwittingly insure UBS against its own subprime investment losses" when the Zurich firm knew those losses were mounting.

UBS relied on a "clever accounting artifice" to use investors' cash as a form of insurance to cover its own losses, "like a vintner buying crop insurance after learning that its groundwater has become contaminated with toxic chemicals," according to the suit.

The complaint also names James Gibbons, a senior vice president of UBS Financial Services, as a defendant. BancWest claims that Gibbons, who is based in Orange County, promoted the investment.

He referred a request for comment to Mark Arena, a UBS spokesman, who would not discuss the matter.

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