Staff Writer
Columbus CEO

c.2013 New York Times News Service

NEW YORK — A former top executive at the Credit Suisse Group was sentenced to 2 1/2 years in prison Friday for inflating the value of mortgage bonds as the housing market collapsed.

The prison term makes the executive, Kareem Serageldin, one of the most senior Wall Street officials to serve time for criminal conduct during the financial crisis.

Serageldin remained stoic as Judge Alvin K. Hellerstein of U.S. District Court in Manhattan handed down the sentence, which was less than the roughly five-year sentence called for by nonbinding sentencing guidelines. Hellerstein showed mercy on Serageldin in part because of what he said was a toxic culture at Credit Suisse and its rivals.

“He was in a place where there was a climate for him to do what he did,” the judge said. “It was a small piece of an overall evil climate inside that bank and many other banks.”

A spokesman for Credit Suisse noted that, when regulators had decided not to charge the bank in connection with Serageldin’s actions, it highlighted the isolated nature of the wrongdoing, the bank’s immediate self-reporting to the government and the prompt correction of its results.

Serageldin, 40, led a group at Credit Suisse that traded in mortgage-backed securities. As the housing market soared, his group made hundreds of millions of dollars for the bank by pooling mortgage assets, slicing them up and selling the pieces to investors. Many of those were subprime loans that went to shaky borrowers, however, and banks found themselves holding billions of dollars in sour mortgages when the market collapsed.

Federal authorities began their investigation into Credit Suisse in 2008 after the bank disclosed that Serageldin’s team had mismarked its mortgage portfolio. The bank suspended the team and cooperated with authorities. Two other traders in that group, David Higgs and Salmaan Siddiqui, were also charged alongside Serageldin. They all pleaded guilty; Higgs and Siddiqui have yet to be sentenced.