US names 2 Credit Suisse brokers in bln-dlr subprime fraud (AFP)

WASHINGTON (AFP) - US regulators filed civil fraud charges against two Credit Suisse brokers, alleging they made more than one billion dollars in unauthorized purchases of subprime-related securities.

Named in the complaint by the Securities and Exchange Commission were Julian Tzolov and Eric Butler, who had been working in the New York office of Swiss-based Credit Suisse Securities.

The brokers "misled customers into believing that auction rate securities being purchased in their accounts were backed by federally guaranteed student loans and were a safe and liquid alternative to bank deposits or money market funds," the SEC said.

But in fact the securities "were backed by subprime mortgages," and other debts not related to student loans.

The complaint comes amid a focus on auction rate securities, debt instruments issued by financial firms, municipalities and student loan companies, the market for which collapsed during the credit crunch.

"As alleged in our complaint, these two brokers foisted more than one billion dollars in subprime-related securities upon unsuspecting customers to illegally obtain higher commissions from their sales," said Linda Chatman Thomsen, the SEC's enforcement chief.

Andrew Calamari, associate director of the SEC's New York Regional Office, added, "This case demonstrates how the recent turmoil in the subprime market has affected even investors who had no intention of buying subprime securities."

According to the SEC, Tzolov and Butler deceived foreign corporate customers in short-term cash management accounts by sending or directing their sales assistants to send email confirmations in which the terms "St. Loan" or "Education" were added to the names of non-student loan securities purchased for the customers.

The brokers also routinely deleted references to "CDO" or "Mortgage" from the names of the securities in these emails. As a result, the complaint alleges that customers were stuck holding more than 800 million dollars in illiquid securities after the market dried up in August 2007.