Former broker of Credit Suisse was convicted by US judge, faces 45 years in jail

A federal jury in Brooklyn convicted former Credit Suisse broker Eric Butler on Monday after a three-week trial of conspiracy and securities fraud after investors lost nearly $1 billion in a subprime mortgage fraud.

Butler, 37, was found guilty on all three counts after two hours of jury deliberations. Co-defendant Julian Tzolov, 36, who was returned to New York from Spain on July 20 after fleeing prosecution, pleaded guilty to conspiracy, wire fraud and securities fraud July 22. He testified as a prosecution witness against Butler, his former partner, during the three-week trial.

The men sold $900 million in unwanted subprime-related securities to customers, said Tzolov. Under questioning from prosecutors, Tzolov testified that he and Butler worked together to defraud investors including GlaxoSmithKline Plc, Roche Holding AG and Potash Corp. of Saskatchewan.

The indictment states that keeping their investors unaware they used client funds to purchase higher-yielding, mortgage-backed collateralized debt obligations, or “CDOs.” The CDO auction-rate securities provided a higher yield, posed a greater risk and paid Tzolov and Butler higher commissions, prosecutors said. Tzolov said it the allure of the commissions that prompted him and Butler to sell their clients riskier securities than they wanted.

Butler faces up to 45 years in prison at a sentencing scheduled for Oct. 27. Tzolov, a native of Bulgaria, faces a potential life prison term when he is sentenced Oct. 27, Assistant U.S. Attorney Greg Andres said. The prosecutor said the term could be substantial because Tzolov’s fraud exceeded $400 million. U.S. District Judge Jack Weinstein said yesterday he probably won’t impose the term sought by prosecutors when he sentences both men on Oct. 27, saying he believed they operated in a “culture of corruption.”

Butler’s lawyer, Paul Weinstein said yesterday after the verdict that Butler’s conviction will be appealed.