(Bloomberg News) Former Credit Suisse Group AG employee David Higgs surrendered to the FBI after a person familiar with the matter said fewer than five people will be charged in a U.S. prosecution for intentionally mismarking prices of securities including collateralized debt obligations.
Switzerland's second-largest bank announced in February 2008 that it would take writedowns on asset-backed securities after finding "mismarkings" by a group of traders. The bank said a month later it would write down $2.65 billion after an internal review found pricing errors on residential mortgage- backed bonds and CDOs were made intentionally "by a small number" of traders who were then fired or suspended. At the time, the bank hadn't disclosed the names of the traders.
The prosecution is one of only a handful brought over charges tied to the subprime-mortgage market. The government failed in its biggest prosecution tied to the 2008 financial collapse when ex-Bear Stearns Cos. hedge-fund managers Ralph Cioffi and Matthew Tannin were acquitted in 2009 in Brooklyn, New York federal court of charges they misled investors who lost $1.6 billion.
Higgs surrendered at 8:02 a.m. this morning in Manhattan, according to J. Peter Donald, a spokesman for the Federal Bureau of Investigation. At least one other individual is set to surrender to the FBI and face charges today in New York federal court, a second person familiar with the case said.
The U.S. Securities and Exchange Commission was also involved in the probe, said one of the people familiar with the case. Both declined to be identified because the investigation isn't public. Credit Suisse won't be prosecuted, one of the people said. John Nester, an SEC spokesman, declined to comment yesterday about the prosecution.
Court Appearance
Higgs is scheduled to appear before U.S. District Judge Alison Nathan in Manhattan today, according to Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara.
Higgs hasn't worked for Credit Suisse since his employment was terminated in 2008, said Steven Vames, a spokesman for the bank in New York.
"Following its revaluation review, Credit Suisse has determined that the pricing errors were, in part, the result of intentional misconduct by a small number of traders," Credit Suisse said in a statement on March 20, 2008. "These employees have been terminated or have been suspended."
Step Up Probes
Last year, U.S. prosecutors said they were planning to step up probes of fraud involving CDOs and credit default swaps.