Metro

Two former Credit Suisse trader pleads guilty in bond probe

Two former Credit Suisse Group employees pleaded guilty Wednesday to criminal charges over alleged misstatements regarding the bank’s mortgage-bond valuations during the financial crisis.

David Higgs, a UK citizen, pleaded guilty to conspiracy to falsify books and records and to commit wire fraud at a hearing before US District Judge Alison J. Nathan in Manhattan federal court.

A second ex-Credit Suisse employee, Salmaan Siddiqui, will also plead guilty to conspiracy charges in the mortgage-bond valuation probe.

Higgs, who is cooperating with prosecutors, faces up to five years in prison on the charge.

At a court hearing on Wednesday, Higgs said that he, along with other traders, manipulated the value of securities backed by mortgages as the US real-estate market began to deteriorate in 2007 and in 2008, instead of marking down the value of those securities.

He said he did so at the direction of his boss, Kareem Serageldin, then global head of the Structured Credit Group in Credit Suisse’s investment banking unit. No criminal charges have been publicly announced against Serageldin and he couldn’t immediately be located for comment Wednesday.

Higgs was employed as a managing director in the firm’s investment banking unit in London at the time.

“Rather than mark these securities down to market as we were required to do, at the direction of my superior Kareem Serageldin and with the help of other traders at Credit Suisse, I, with the agreement and assistance of Kareem Serageldin and others, manipulated and inflated the cash bond position markings of a trading book referred to as ‘ABN1’ in order to hide losses in this book and to achieve daily and month-end profit and loss objectives,” Higgs said.

“I did this because I wanted to remain in good favor with my boss, Kareem Serageldin, and enhance my job performance.”

When asked how he hoped to enhance his job performance, Higgs said he received a year-end bonus. John Brownlee, a lawyer for Higgs, declined comment after the hearing.

Higgs surrendered early Wednesday at FBI headquarters in Manhattan, according to an FBI spokesman. He was released on a $500,000 bond and will be allowed to return to the UK.

To read more, go to The Wall Street Journal.