Former Credit Suisse employees were faced with both civil and criminal charges today related to defrauding investors over the value of mortgage-backed securities.
Federal prosecutors charged the bank’s former global head of structured credit trading, Kareem Serageldin; former head of hedge trading, David Higgs; and former trader Salmaan Siddiqui with criminal conspiracy to falsify books and records and commit wire fraud.
Higgs and Salmaan Siddiqui both pleaded guilty earlier today to one count each of conspiracy to falsify books and records and commit wire fraud, according to Bloomberg. The count carries a maximum five-year term and three years supervised release, according to the plea agreement.
The Securities and Exchange Commission also filed civil fraud charges against the three men, as well as Faisal Siddiqui, another former trader. The agency alleges that they ignored specific market information showing a sharp decline in subprime bond prices under the control of their group.
Higgs and Salmaan have been aiding the investigation, the SEC said in its complaint.
Serageldin, meanwhile, has been charged with additional falsifying of books and wire fraud charges, according to Reuters. The SEC claims he was the mastermind of the scheme to hide losses.
He’s a dual British citizen so he’s currently in the U.K. However, he is not being treated as a fugitive, the SEC said during the media conference call. During the conference call, SEC officials said they would seek his extradition if he did not return to the U.S.
SEC did not sanction Credit Suisse, which was credited for acting swiftly in detecting the scheme and reporting it to the agency. In early 2008, it announced it would revisit its Q4 2007 earnings just a week after releasing them because of irregularities.
Credit Suisse has estimated the reduction in the fair value of all affected securities to be about $2.85 billion, having an estimated net income impact of$1.0 billion, according to the SEC’s complaint.
The four employees were terminated by Credit Suisse in March 2008, and their actions were well-reported at the time. Investigators did not detail why it took four years to conclude the investigation other than to say they needed that time to ensure it could obtain guilty verdicts.