Bloomberg News

Ex-Credit Suisse Broker Butler Has Resentencing Postponed

June 28, 2011

(Updates with lawyer comment in the sixth paragraph.)

June 28 (Bloomberg) -- Former Credit Suisse Group AG broker Eric Butler, whose securities-fraud conviction was overturned by an appeals court, had his resentencing postponed on two other convictions.

U.S. District Judge Jack B. Weinstein in Brooklyn, New York, adjourned the sentencing scheduled for today. The judge didn’t set a new date. Butler remains free on bail.

In a letter to Weinstein yesterday, Butler’s lawyers said their client couldn’t be resentenced yet because of procedural issues. They also said Butler would agree to have the fraud case remain in federal court in Brooklyn, even after the appeals court said it belonged in federal court in Manhattan, where Butler worked in Zurich-based Credit Suisse’s office. The agreement apparently means that the conviction would stand.

“The defendant will agree to venue in the Eastern District of New York,” which includes Brooklyn, the lawyers wrote.

Butler and his partner, Julian Tzolov, were convicted in 2009 of intentionally misleading clients about securities purchased on their behalf.

One of Butler’s lawyers, Steven F. Molo, confirmed the adjournment in a phone interview and said the parties would have to discuss the procedural issues. Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch, declined to comment.

Weinstein said in a June 17 order that if Butler were retried on the fraud charge in Manhattan he could end up with a longer prison sentence than he already has.

Change Unlikely

Last year, Weinstein sentenced Butler to five years on each of three convictions, to run consecutively. The judge said he was unlikely to change the five-year sentence he imposed. The appeals court upheld the convictions on the two conspiracy counts.

In sentencing Butler, Weinstein had also imposed a $5 million fine on the securities-fraud conviction.

In their letter, Butler’s lawyers said they would also consent to transferring to Brooklyn seven wire-fraud counts pending against him in Manhattan.

The procedural issues holding up the resentencing are that the appeals court hasn’t officially notified Weinstein of its June 15 ruling and that the government on June 24 asked the higher court for more time to request a re-argument of the appeal, according to the letter.

Prison Time

Butler’s lawyers also said that if he were sent to prison immediately today, as Weinstein said he should be prepared for, rather than being allowed to “self-surrender” at a future date, his ability to do his prison time at Fort Dix in New Jersey, a minimum-security facility, would be jeopardized.

A remand order could change the location to a higher- security prison, his lawyers said.

The appeals court upheld Butler’s conviction on conspiracy to commit securities fraud and conspiracy to commit wire fraud, finding those counts could be tried in Brooklyn.

After the appeals panel reversed the securities-fraud conviction, Weinstein said it could be a “Pyrrhic victory at best, or a disaster at worst” for Butler if he ended up with a longer sentence.

Butler and Tzolov falsely claimed the securities they put their clients in were backed by federally guaranteed student loans, according to prosecutors.

The men told clients the investments, actually backed by riskier corporate debt and subprime mortgages, were a safe alternative to bank deposits or money-market funds, according to Lynch’s office. Victims’ losses were more than $1.1 billion, according to the government.

Butler and Tzolov were indicted in 2008. Tzolov, a native of Bulgaria, fled the U.S. before being returned from Spain in July 2009 and pleading guilty. On June 7, Tzolov was sentenced to four years in prison, with 1 1/2 years of that for bail jumping. He testified for the government at Butler’s trial.

The case is U.S. v. Tzolov, 08-cr-370, U.S. District Court, Eastern District of New York (Brooklyn).

--With assistance from Chris Dolmetsch in New York. Editors: Mary Romano, Charles Carter

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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