Ex-Credit Suisse trader pleads guilty in MBS case

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Published April 12, 2013

| Reuters

NEW YORK, April 12 (Reuters) - A former Credit Suisse Group AG trader on Friday pleaded guilty to a conspiracy charge in a U.S. criminal case relating to the alleged inflation of subprime mortgage bond prices.

Kareem Serageldin, the Swiss bank's former global head of structured credit, pleaded guilty to conspiracy to falsify books and records at a hearing in Manhattan federal court.

Prosecutors had accused him of artificially boosting the prices of subprime mortgage-backed bonds between August 2007 and February 2008, when housing and credit conditions were rapidly deteriorating.

Serageldin faces up to five years in prison, a prosecutor said at the hearing.

"I made a terrible mistake and I deeply regret my conduct," Serageldin, 39, told U.S. District Judge Alvin Hellerstein.

Two other former colleagues of Serageldin's at Credit Suisse, David Higgs and Salmaan Siddiqui, have already pleaded guilty. Higgs was a managing director and Siddiqui a vice president in the Swiss bank's investment banking division, according to prosecutors.

Their manipulation of bond prices contributed to Credit Suisse's taking a $2.65 billion writedown in its 2007 year-end results, according to prosecutors.

Credit Suisse has not been accused of wrongdoing. Bank spokesman Drew Benson declined to comment.

Credit Suisse awarded Serageldin a bonus of $7 million in cash and stock in 2007, before it discovered the scheme, according to the Manhattan U.S. Attorney's Office. The bank later rescinded the bonus.

Serageldin said at the hearing that under the plea agreement he has agreed to forfeit about $1 million, which represents his after-tax cash portion of his 2007 bonus.

Under Serageldin's plea agreement, the government dropped a charge of wire fraud and a charge of false books and records.

The case is U.S.A. v. Serageldin, U.S. District Court, Southern District of New York, No. 12-00090

A former Credit Suisse Group AG trader on Friday pleaded guilty to a conspiracy charge in a U.S. criminal case relating to the alleged inflation of subprime mortgage bond prices.

Kareem Serageldin, the Swiss bank's former global head of structured credit, pleaded guilty to conspiracy to falsify books and records at a hearing in Manhattan federal court.

Prosecutors had accused him of artificially boosting the prices of subprime mortgage-backed bonds between August 2007 and February 2008, when housing and credit conditions were rapidly deteriorating.

Serageldin faces up to five years in prison, a prosecutor said at the hearing.

"I made a terrible mistake and I deeply regret my conduct," Serageldin, 39, told U.S. District Judge Alvin Hellerstein.

Two other former colleagues of Serageldin's at Credit Suisse, David Higgs and Salmaan Siddiqui, have already pleaded guilty. Higgs was a managing director and Siddiqui a vice president in the Swiss bank's investment banking division, according to prosecutors.

Their manipulation of bond prices contributed to Credit Suisse's taking a $2.65 billion writedown in its 2007 year-end results, according to prosecutors.

Credit Suisse has not been accused of wrongdoing. Bank spokesman Drew Benson declined to comment.

Credit Suisse awarded Serageldin a bonus of $7 million in cash and stock in 2007, before it discovered the scheme, according to the Manhattan U.S. Attorney's Office. The bank later rescinded the bonus.

Serageldin said at the hearing that under the plea agreement he has agreed to forfeit about $1 million, which represents his after-tax cash portion of his 2007 bonus.

Under Serageldin's plea agreement, the government dropped a charge of wire fraud and a charge of false books and records.

The case is U.S.A. v. Serageldin, U.S. District Court, Southern District of New York, No. 12-00090

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