A U.S. judge delayed the trial of a former Credit Suisse Group AG
Former Credit Suisse colleagues Julian Tzolov and Eric Butler were indicted in New York last year in one of the first prosecutions stemming from the 2007 credit crunch on charges of fraudulently selling mortgage-backed auction rate securities.
Jury selection had been scheduled for Monday for the trial in Brooklyn federal court of Butler, 37, after Tzolov fled house arrest in May. He was arrested in Marbella, Spain last Wednesday.
Judge Jack Weinstein granted a government request to delay the trial after prosecutors told him that Tzolov was expected back in New York later on Monday escorted by FBI agents. The judge ordered a two-day delay until Wednesday.
He made the ruling over the objection of Butler's lawyer. To have a trial today doesn't prejudice the government, lawyer Paul Weinstein said in court. He said his client was not to blame for Tzolov's actions.
It is our preference to have a joint trial without presenting any evidence of Mr Tzolov's flight, U.S. prosecutor Greg Andres said in court.
Tzolov, who has had no contact with his lawyer for three months, may decide to proceed to trial or enter into discussions to resolve his case. Court records show that before he fled, he indicated he was considering pleading guilty.
He is in a very tenuous legal position, Tzolov's lawyer Benjamin Brafman told reporters after the hearing. There are a number of options Mr Tzolov has, but without speaking to him I cannot speculate on what he is thinking.
The former colleagues, who helped run a cash management unit at Credit Suisse for corporate clients, are accused of fraudulently trying to earn higher commissions worth millions of dollars in $1 billion worth of deals in auction-rate securities (ARS).
The ARS -- debt sold at periodic auctions by Wall Street firms -- was collateralized by subprime mortgages, collateralized debt obligations, mobile home contracts, and other nonfederally guaranteed, nonstudent loan collateral.
The debt plunged in value as the housing market crumbled in 2007.
Prosecutors said Butler and Tzolov lied to clients about how the money was invested, causing them to lose on investments they believed were safe.
Credit Suisse said the employees resigned in 2007 after the firm suspended them for prohibited activity.
The brokers were indicted on charges of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. They have also been indicted on 14 counts of wire fraud in Manhattan, a separate federal district.
Tzolov faces additional charges of jumping bail and illegally obtaining a permanent U.S. residence card.
Dimitre Ivanov, one of two sureties on Tzolov's $3 million bail, appeared in court on Monday to ask the judge not to be held responsible for the bond because he had helped the government in its efforts to find Tzolov. The judge stayed any ruling for one month.
The case is USA v Tzolov and Butler 08-370 in U.S. District Court for the Eastern District of New York (Brooklyn).
(Reporting by Grant McCool, editing by Maureen Bavdek and Tim Dobbyn)