A former Credit Suisse Group broker has been convicted by a federal jury of fraud for steering corporate clients into risky auction-rate securities, causing nearly $1 billion of losses. A New York jury found Eric Butler guilty of securities fraud and two counts of conspiracy after less than a day of deliberation, following a three-week trial, said Reuters. Prosecutors accused Butler and co-defendant Julian Tzolov of buying securities backed by subprime mortgages and other risky debt in order to generate higher commissions, while misleading clients into believing they were getting securities backed by federally guaranteed student loans. The scheme unraveled in August 2007 when the market for mortgage-backed collateralized debt obligations stalled and auctions for debt backed by those securities began to fail. “The defendants’ fraudulent misrepresentations saddled investors with unknown risks they did not bargain for,” said Benton Campbell, the U.S. Attorney for the Eastern District of New York. Butler, 36, faces up to 45 years in prison, the U.S. Attorney’s office said. Tzolov pleaded guilty on July 22 to fraud charges and to bail jumping, and later testified against Butler. He is awaiting sentencing.
Ex-Credit Suisse Broker Convicted of ARS Fraud
A seller of auction-rate securities faces a prison term of up to 45 years.
August 18, 2009