Federal prosecutors say former Credit Suisse Group AG broker Eric Butler used bait-and-switch tactics to fraudulently steer institutional and retail clients into millions of dollars worth of auction-rate securities, collateralized debt obligations (CDOs) and other risky debt instead of the safe, conservative investments the investors initially asked for. On Aug. 14, after only two hours of jury deliberations, Butler was found guilty of conspiracy to commit securities fraud, securities fraud and conspiracy to commit wire fraud. He faces a maximum sentence of 20 years in prison on the most serious count.
Butler’s co-defendant is Julian Tzolov, who had fled the country earlier this year. He was returned to the United States on July 20 and has since pleaded guilty to conspiracy, wire fraud and securities fraud. His is awaiting sentencing.
Butler and Tzolov were charged in September of lying to clients about their purchases of nearly $1 billion of auction-rate securities and CDOs from 2004 to 2007. Reportedly, the two men had told customers their investments were backed by federally guaranteed student loans.
During Butler’s trial, Tzolov served as a witness for the prosecution, providing testimony against his former partner.
“We did it together,” Tzolov told jurors. “We were sitting right next to each other. We were meeting with clients together.”