2 ex-Credit Suisse employees guilty of mortgage fraud

Two former Credit Suisse executives on Wednesday pleaded guilty to falsely inflating subprime mortgage-related bond prices as the US housing market tanked, authorities said. The Manhattan US attorney general and the FBI said that fraud charges were filed against the two men, David Higgs and Salmaan Siddiqui, who worked in the investment banking division of the Swiss bank. Fraud charges were also filed against another former Credit Suisse employee, Kareem Serageldin, who was the global head of structured credit in the department's securities business. Higgs and Siddiqui each pleaded guilty to one count of conspiracy to falsify books and records and commit wire fraud, the statement said. Each face a maximum sentence of five years in prison and a fine of at least $250,000. The two men are cooperating with the government's investigation, it said. The defendants were charged with jacking up the prices of asset-backed bonds, which comprised subprime residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) in Credit Suisse's accounts. Serageldin, Higgs and Siddiqui were able to secure significant year-end bonuses for themselves through the alleged fraud since bonus amounts were largely based on trading books' profitability, officials said. "While the residential housing market was in free fall, and shock waves were reverberating throughout the economy, these defendants decided they were above the rules of the market and above the law," said Preet Bharara, the Manhattan US attorney general. "As alleged, they papered over more than a half billion dollars in subprime mortgage-related losses to secure for themselves a big payday at the same time that many people were losing their homes and their jobs." The fraud took place between late 2007 and early 2008, as the collapsing US housing bubble sent millions of home mortgages into default and wiped off hundreds of billions of dollars in value from mortgage backed securities widely held by banks and other institutional investors. In March 2008 Credit Suisse announced if was restating its 2007 year-end earnings with a $2.65 billion write-down, a large portion of it related to the fraud.