Broker involved in $1.1B fraud avoids prison -- for now

Ex-Credit Suisse Group AG broker Eric Butler can remain free while he appeals his securities- fraud conviction, a judge ruled, overturning another judge’s decision. U.S. District Judge Jack B. Weinstein in Brooklyn, New York, granted Butler his freedom today as the appeals court in Manhattan considers his conviction for fraudulently selling securities that cost investors more than $1.1 billion. “What’s the point in putting him in prison at this stage?” Weinstein asked prosecutors at a hearing today. “I don’t see any point in making the family suffer because the court of appeals is so terribly overburdened.” Weinstein reversed an April decision by U.S. Magistrate Judge Ramon Reyes, who revoked Butler’s bail and ordered him to prison, saying he didn’t raise any issues that showed his conviction might be reversed. Weinstein had allowed the broker to stay free during a review of that decision. Weinstein, ruling from the bench today, said Butler had raised “conceivable” issues in his appeal to the 2nd U.S. Circuit Court of Appeals. “There’s no prediction of what the second circuit will do,” Weinstein said. May Appeal Butler was found guilty in August of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. Weinstein sentenced him to five years imprisonment in January. In his May appeal, Butler said Weinstein erred by allowing jurors to hear some evidence against him, and said Brooklyn was the wrong venue for the trial. “There’s no question that the materiality of the issue that was raised could well result in an outright reversal,” Butler’s attorney Steven Molo said at the hearing. Lawyers in U.S. Attorney Loretta Lynch’s office, which prosecuted Butler, opposed his request. “All it does is delay the defendant’s inevitable time he will spend in prison,” Assistant U.S. Attorney John Nowak told Weinstein today. Nowak declined to comment after the hearing. Butler was indicted with Julian Tzolov in 2008. Prosecutors claimed the men falsely told clients their securities were backed by federally guaranteed student loans and were a safe alternative to bank deposits or money-market funds. Tzolov, who was returned to New York from Spain in July after fleeing prosecution, pleaded guilty that month to conspiracy, wire fraud and securities fraud. He testified as a prosecution witness against Butler, his former partner. The case is U.S. v. Tzolov, 08-cr-370, U.S. District Court, Eastern District of New York (Brooklyn).