Pulled Down Inflated Annual Bonus of Nearly $7 Million.

[ by Melanie Gretchen ]

The former global head of structured credit for Credit Suisse's investment banking division on Friday pled guilty to fraudulently inflating the value of mortgage-backed securities in 2007, as the housing market been to collapse.  In so doing so, Kareem Serageldin became one of the highest-ranking Wall Street executives to admit to crimes related to the 2007-2008 financial crisis.

Federal Findings and Allegations.   Mr. Serageldin, 39, an American citizen living in London, was first charged in February 2012 by federal prosecutors who encouraged him to return to the United States to face the charges. Serageldin, along with 2 underlings - David Higgs and Salmaan Siddiqui - apparently conspired to overvalue the MBS's in order to increase their 2007 year-end bonuses.  Serageldin's inflated valuations resulted in a cash bonus of more than $1.7 million and a stock award of more than $5.2 million.  All were discovered and reported by Credit Suisse.

While Serageldin chose not to enter a plea until he was extradited from Britain a week before his appearance in federal court, Higgs and Siddiqui pled guilty early on in the investigation and agreed to cooperate with the government. 

Serageldin appeared before Federal Judge Alvin Hellerstein in District Court in Manhattan, and said he discovered that members of his team were fudging the value of its bond portfolio.  Yet, rather than put an end to it, he decided to participate in the fraud so as to "preserve my reputation in the bank at a time when there was great financial turmoil."

U.S. Attorney Preet Bharara issued this comment on the case:  "While the real estate market was imploding and the financial crisis emerging, Kareem Serageldin and his co-conspirators concealed significant subprime mortgage-related losses in order to secure multimillion-dollar paydays."

Federal Sanctions.  Serageldin pled guilty to a single count of conspiracy to falsify books and records, for which he could serve as much as 5 years.  His sentencing is scheduled for 8/2/13.  Upon suspension of Serageldin’s team, the bank Credit Suisse rescinded his stock award, and he agreed to forfeit about $1 million.

For further details, go to [Dealbook, 4/12/13].

To contact Melanie Gretchen: melanie@compliance-insights.com.