In the summer and fall of 2007, as the credit crunch deepened, some U.S. employees at UBS AG became increasingly concerned about billions of dollars of debt securities inventoried on the bank's books and wanted to find a way to unload them, according to emails in a court case. "OK still have this vomit?" one UBS employee asked. The email emerged in a lawsuit against UBS, alleging that the Swiss bank found at least one place to sell the problem securities: Stamford, Conn., hedge fund Pursuit Partners LLC. Documents filed in the Connecticut court case provide one of the more complete windows into how UBS allegedly scrambled internally to find ways to alleviate the financial pain that worsened throughout 2007 thanks to the deteriorating mortgage market. They also add to a debate that continues across Wall Street and beyond about bankers' culpability in the financial crisis. This week, Connecticut Superior Court Judge John F. Blawie issued a decision that said there was evidence to show that UBS ultimately had an "awareness that ... high-grade securities on its hands would soon turn into financial toxic waste" as it tried to persuade Pursuit to buy debt securities known as collateralized debt obligations, or CDOs. The hedge fund says it invested in three CDOs and had losses of $35.5 million. Pursuit has alleged that it sought steady cash flow and required that it be sold only investment-grade securities, or ones that provide relatively low risk of default. UBS did sell Pursuit investment-grade securities but knew that the securities were about to be downgraded, Pursuit alleges. Pursuit initially filed a complaint against UBS in March 2008. It subsequently asked the court to require UBS to set aside money or assets to cover Pursuit's losses, which the judge granted on Tuesday when he ordered that the bank set aside $35.5 million to cover a potential judgment against it in the case. http://online.wsj.com/article/SB125262701573801493.html