Judge Gives Lower Sentence to Former Credit Suisse Broker Convicted of Auction-Rate Securities Fraud

Eric Butler, a former Credit Suisse Group AG broker, has been sentenced to five years in prison for securities fraud. A jury found the ex-stockbroker guilty of misleading clients into thinking that they were buying student loan-backed, low-risk auction-rate securities when they were actually buying ARS that were high-risk and backed by home mortgage assets. He modified the trade confirmations to conceal this discrepancy. His securities fraud scam collapsed when the ARS market did, but not before investors sustained $1.1 billion in losses.

The government asked that Butler be ordered to serve a 45-year prison sentence pay stiff penalties. However, U.S. District Court Judge Jack Weinstein sentenced him to just five years, imposed a $5 million fine, and ordered that he forfeit $500,000.

Following the guilty verdict, Weinstein expressed concern about placing all of the blame on Butler. He said that he gave the ex-Credit Suisse broker a reduced sentence because the financial services industry has a “pernicious and pervasive” corrupt culture.

Weinstein says the blame for misdeeds such as stockbroker fraud should be placed not only on individuals but also on the financial institutions that hire them. While stating that Butler abused his power, violated his clients’ trust, and defrauded them of significant sums of money, the judge also placed accountability for the former Credit Suisse broker’s crimes on the failure of lawmakers and government regulators to properly oversee the financial markets, the investors’ failure to supervise their financial transactions, and Credit Suisse’s failure to properly supervise Butler.

Our stockbroker fraud lawyers can’t help but wonder why investors continue to place their faith in an industry where so many brokers have proven that they lack the experience to successfully manage clients’ assets and the arbitration process is set up in a manner that makes it hard for investors to recover a substantial portion of their investment losses.

Related Web Resources:
Ex-Credit Suisse Broker Butler Gets Five-Year Prison Sentence, Bloomberg, January 23, 2010
Ex-Credit Suisse broker guilty in $1B scheme, NY Daily News, August 17, 2009