Bloomberg News

Ex-Credit Suisse Broker Butler in Plea Talks, U.S. Says

June 29, 2011

Updates with prosecutor’s comment in second paragraph.)

June 29 (Bloomberg) -- Former Credit Suisse Group AG broker Eric Butler, convicted in 2009 of fraudulently selling subprime securities to corporate clients that cost investors more than $1.1 billion in losses, is in plea talks to resolve pending charges, a prosecutor said.

“We’re in discussion, plea negotiations, to resolve these matters,” Assistant U.S. Attorney Daniel Spector told U.S. District Judge Paul G. Gardephe today in Manhattan.

A federal appeals court this month threw out Butler’s securities-fraud conviction at a federal trial in Brooklyn, saying the court was the wrong venue for the charge. At the same time, the appeals court upheld convictions for conspiracy to commit wire fraud and conspiracy to commit securities fraud.

Butler still faces wire-fraud counts in federal court in New York. Spector said today the charges were refiled in Manhattan, in the Southern District of New York, after Butler’s lawyers challenged the charges on grounds of venue.

Brooklyn is in the Eastern District of New York. Butler worked in the Zurich-based Credit Suisse’s office in Manhattan.

“We gave the defendant an opportunity to resolve all of these charges in one forum in the Eastern District,” Spector said. “They chose to force the case to be brought here. They made that choice, and it should be resolved here.”

Defense Lawyer

Butler’s lawyer, Steven F. Molo, argued that the wire-fraud charges stemmed from the same conduct for which Butler had been convicted in Brooklyn and shouldn’t have to face retrial in Manhattan.

“Not only are the government sore losers, they’re sore winners,” Molo said. “They brought these counts in the Eastern District for the same scheme. I find this to be frankly an extraordinary waste of the Department of Justice’s time and money.”

Gardephe agreed to adjourn the case until July 25 to allow both sides could file papers to support their position.

Molo and Spector declined to comment on the plea negotiations after the conference.

Butler and his co-defendant Julian Tzolov were charged with conducting what prosecutors said was an illegal scheme in which they falsely told clients their products were backed by federally guaranteed student loans and were a safe alternative to bank deposits or money-market funds.

Auction-Rate Securities

The products were actually linked to auction-rate securities and generated high commissions for the two, witnesses testified during Butler’s trial.

Tzolov, who was returned to New York from Spain in July 2009 after fleeing prosecution, pleaded guilty to conspiracy, wire fraud and securities fraud. He testified as a prosecution witness against Butler, his former partner.

Butler was sentenced by U.S. District Judge Jack B. Weinstein in Brooklyn to five years in prison and fined $5 million. Weinstein yesterday postponed Butler’s resentencing without giving a new date.

The case is U.S. v. Butler, 1:09-cr-00685, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Thom Weidlich in New York. Editors: Fred Strasser, Charles Carter

To contact the reporter on this story: Patricia Hurtado in New York at

To contact the editor responsible for this story: Michael Hytha at

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