(Bloomberg News) Julian Tzolov, a former Credit Suisse Group AG broker who pleaded guilty to securities fraud, should be granted leniency in his sentencing tomorrow because of his "substantial assistance," including testifying against his former partner, federal prosecutors said.

Tzolov, 38, fled the U.S. before returning to plead guilty to 12 counts, including securities fraud, wire fraud and bail jumping. After returning, he testified at Eric Butler's trial that the two men told clients they invested their money in auction-rate securities backed by federally guaranteed student loans when they were actually backed by riskier corporate debt and subprime mortgages.

"Tzolov detailed in a straightforward and direct manner the complexities of the auction-rate securities market, how he and Butler manipulated their clients' investment in that market through repeated lies -- in person, over the phone and by e-mail -- and how they profited from that scheme to defraud," prosecutors in the office of U.S. Attorney Loretta Lynch wrote in a court filing today.

The government estimated Tzolov's and Butler's crime cost clients including GlaxoSmithKline Plc and STMicroelectronics NV about $1.1 billion. The jury found Butler, 39, guilty in August 2009. U.S. District Judge Jack B. Weinstein sentenced Butler to five years in prison. He is free on bail while he appeals his conviction. Weinstein is scheduled to sentence Tzolov tomorrow.

In Custody

A native of Bulgaria, Tzolov was returned to New York from Spain in July 2009 after fleeing for three months. He's been in custody since then.

Robert Nardoza, a spokesman for Lynch, declined to comment. Benjamin Brafman, one of Tzolov's lawyers, didn't immediately return a call for comment.

Butler's conviction "stands as one of the most significant prosecutions since the onset of the financial crisis, and in particular the collapse of the auction-rate securities and subprime mortgage markets," prosecutors said in the filing.

The auction-rate securities market, once valued at $330 billion, collapsed in February 2008 when dealers stopped participating in the auctions. Interest on the investments reset periodically at bidding managed by the dealers.

'Consistently Reliable'

"Tzolov's cooperation, principally his testimony, was exemplary," the government wrote. "He did not shade the truth or his greed. His accounts were consistently reliable."

He also told prosecutors about $60,000 he stole from a client account for his personal use while employed at Lehman Brothers Holdings Inc. Prosecutors said they hadn't been aware of that theft.