Former Credit Suisse Investment Banker Sentenced in Financial Crisis Case
CHRISTOPHER M. MATTHEWS
Updated Nov. 22, 2013 5:34 p.m. ET
Kareem Serageldin arrives at court in New York, where he was sentenced to 2 1/2 years in prison on Friday.Jin Lee/Bloomberg News
A former Credit Suisse Group AG CSGN.VX +0.15% investment banker was sentenced to 2½ years in prison for his role in a conspiracy to falsify records related to inflating the values of mortgage bonds during the financial crisis.
As the former global head of Credit Suisse's Structured Credit Trading business, Kareem Serageldin is the highest-ranking Wall Street executive charged criminally in a case related to the 2008 financial crisis.
U.S. District Judge Alvin K. Hellerstein expressed ambivalence about handing down a sentence, saying he had to weigh the seriousness of Mr. Serageldin's crime with a tearful statement read by Mr. Serageldin's mother during the hearing Friday.
"Your crime is a serious one," Judge Hellerstein said. "It has to teach people that in the worst of times they have to do what is right."
As the U.S. real-estate market began to deteriorate in 2007, Mr. Serageldin and others began manipulating the value of securities backed by mortgages held by Credit Suisse, U.S. prosecutors said. Mr. Serageldin was extradited from the U.K. in April and pleaded guilty to a conspiracy to falsify the Swiss bank's books and records.
Judge Hellerstein ordered Mr. Serageldin to forfeit more than $1 million and pay a $150,000 fine. But he said Credit Suisse wasn't entitled to any restitution from Mr. Serageldin, which the bank asked for, saying the bank had created a "rather terrible climate" and that Mr. Serageldin wasn't alone in his crimes.
"Mr. Serageldin's crime, and it was a crime, was duplicated by many others at the bank," the judge said.
A Credit Suisse spokesman referred to a 2012 statement from the Securities and Exchange Commission that commended the bank for cooperating with the investigation.
Mr. Serageldin also faces civil charges by the SEC in connection with mortgage-securities manipulation. At the time, the SEC said it had decided not to charge Credit Suisse because of the isolated nature of Mr. Serageldin's wrongdoing and the bank's "immediate self-reporting" to the SEC, among other things.
Mr. Serageldin and the SEC are in the "final stages of finalizing settlement papers," according to court records.
Mr. Serageldin's notoriety was the subject of some debate during his sentencing hearing Friday. Lawyers for Mr. Serageldin argued he should receive little to no time in prison, saying his exposure in the press was a punishment in itself. That Mr. Serageldin also lost $25 million in deferred compensation to Credit Suisse and had his career destroyed should also be factored into the decision, his lawyers told the judge.
Prosecutors had asked the judge for a sentence of 57 to 60 months in prison, citing the importance of deterring similar conduct in the financial-services industry.
The government alleged in an indictment last year that Mr. Serageldin and two others conspired to inflate the values of mortgage bonds during the financial crisis. Mr. Serageldin was originally charged with conspiracy to commit wire fraud, conspiracy to falsify books and records, and two other charges, but was only charged with one conspiracy count under his plea agreement with prosecutors.