An ex-Credit Suisse AG broker convicted on multiple counts of defrauding institutional investors out of $1 billion is likely still to face a five-year prison term despite a recent appeals-court dismissal of one of his convictions, a federal judge said.

Eric Butler may ultimately find the dismissal a Pyrrhic victory at best, or a disaster at worst, U.S. District Judge Jack Weinstein wrote in a memorandum released on Friday.

Butler was convicted by a Brooklyn federal jury in 2009 on charges of conspiracy to commit wire and securities fraud, as well as one count of securities fraud. He was sentenced to five years on each count, to be served concurrently.

On Wednesday, the 2nd U.S. Circuit Court of Appeals reversed the securities fraud conviction, ruling that prosecutors had erred in bringing the case in Brooklyn instead of Manhattan federal court. The appeals court also ordered the trial court to resentence Butler on the two conspiracy counts.

In his memorandum Weinstein said that it is unlikely that the sentencing terms on (the conspiracy counts) will be changed from five years' imprisonment.

As for the dismissed count, Weinstein suggested that Butler should consider whether he now wishes to (possibly retroactively) consent to venue in the Brooklyn court.

If he does not consent, Weinstein warned, prosecutors could choose to re-indict him on that count in Manhattan, or possibly in Brooklyn once again, should Butler's co-defendant, who previously took the stand against him, provide new evidence to tie the crime to that venue.

If a second trial resulted in conviction, Butler could receive an even harsher sentence, Weinstein cautioned. Securities fraud carries a maximum sentence of 20 years in prison.


A resentencing hearing on the conspiracy counts is scheduled for June 28. On that date, Butler will be immediately returned to prison, in accordance with a request filed by the U.S. attorney's office on Wednesday. He has been free on bail since 2009 pending the appeal of his conviction.

The charges against Butler and co-defendant Julian Tzolov -- who previously pleaded guilty and cooperated with prosecutors in building the case against Butler -- related to a scheme that prosecutors said bilked institutional clients such as GlaxoSmithKline, Roche International LLC, and ST Microelectronics NV out of $1 billion by passing off investments in risky subprime-backed auction-rate securities as the more conservative purchases the clients had approved.

Tzolov was sentenced by Weinstein to two years in prison, in addition to the two years he has already spent behind bars awaiting sentencing.

An attorney for Butler, Steven Molo of MoloLamken, did not immediately return a request for comment.

The case is U.S. v. Tzolov et al, in the U.S. District Court for the Eastern District of New York, no. 08-00370.

(Reporting by Jessica Dye; Editing by Gary Hill)