Ex-credit Suisse broker gets fraud conviction

18 August 2009

A former Credit Suisse Group broker has been found guilty of fraud by a jury in New York.

Eric Butler was convicted of encouraging corporate clients to invest in risky securities, resulting in losses of almost $1 billion.

He now faces up to 45 years in prison, while Julian Tzolov, his co-conspirator who pleaded guilty last month to fraud, has yet to be sentenced.

Tzolov may receive a lesser prison term due to the fact that he agreed to testify against Butler after pleading guilty.

US attorney for the eastern district of New York Benton Campbell said in a statement that "the defendants' fraudulent misrepresentations saddled investors with unknown risks they did not bargain for".

The actions of the pair were discovered in August 2007 when auctions for debts backed by sub-prime mortgages - which the pair had convinced clients to invest in - began to fail.

Selling these high-risk securities meant that the pair received greater commissions for their work than they would have done if they had urged investors to make safer purchases.

Assistant US attorney John Nowak described the crime as "a bait-and-switch scheme", adding: "They deceived clients who had trusted them."

Companies affected by the actions of Butler and Tzolov included drug manufacturer Roche, fertilizer producer Potash and STMicroelectronics, a semiconductor firm.

The jury needed less than a day of deliberation to find Butler guilty after a three-week trial, Reuters reports.

According to the news source, this case is one of the first prosecutions to be made as a result of the causes of the credit crunch two years ago.

Earlier this month, Bernard Madoff's former chief investment officer Frank DiPascali admitted securities fraud, conspiracy and money laundering charges at Manhattan Federal Court, confirming the belief that Madoff did not operate alone when carrying out his $65 billion Ponzi scheme.

Written by Tony Aynsley

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