Credit Suisse Directors Charged with Inflating Mortgage Backed Securities

Allison Tussey —  February 3, 2012 — Leave a comment

Kareem Serageldin, David Higgs, and Salmaan Siddiqui, respectively, Managing Director/Global Head of Structured Credit, Managing Director, and Vice-President in the Investment Banking Division of Credit Suisse Group (“Credit Suisse“) have been charged with fraudulently inflating the prices of asset-backed bonds which comprised subprime residential mortgage backed securities and commercial mortgage backed securities in Credit Suisse‘s trading book in late 2007 and early 2008. 

Higgs and Siddiqui each pled guilty to one count of conspiracy to falsify books and records and commit wire fraud, for their roles in the scheme.  They are cooperating with the Government’s investigation.

The defendants’ alleged manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial results.  Serageldin, Higgs, and Siddiqui were able to secure significant year-end bonuses for themselves since bonus amounts were largely based on trading books’ profitability.  Serageldin‘s 2007 bonus was over $1.7 million and his Incentive Share Unit Award was more than $5.2 million.  The latter was rescinded after Credit Suisse discovered the alleged fraud. 

Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the charges. 

 

 

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Allison Tussey

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