Auction Rate Securities Take Center Stage In Roche Vs. Credit Suisse Lawsuit
Auction rate securities are at the center of a recently filed lawsuit by Roche Holding AG against Credit Suisse. Roche claims the investment bank sold it more than $545 million in auction rate securities - risky instruments that were contrary to the safe investments the pharmaceutical maker says it had been promised. Named in the lawsuit are Eric Butler and Julian Tzolov - the two former Credit Suisse traders who were arrested last year on allegations they invested clients’ money in stable funds when in truth the duo bought more than $1 billion worth of auction rate securities, collateralized debt obligations and other risky debt.
Prosecutors in the case allege that from November 2004 to September 2007 Butler and Tzolov tried to obtain higher sales commissions by selling auction rate securities (ARS) backed by risky subprime mortgages to Credit Suisse clients who initially requested ARS backed by government-guaranteed student loans. The clients lost their money when the ARS market crashed in February 2008.
Credit Suisse lost a similar case earlier this year against semi-conductor maker ST Microelectronics. On Feb. 12, 2009, a FINRA (Financial Industry Regulatory Authority) panel ordered Credit Suisse to pay ST Microelectronics $406 million in connection to sales of unauthorized auction rate securities.
The Roche lawsuit was first reported in the French-language newspaper Le Temps.
The case is Roche International LTD versus Credit Suisse Group AG (Case No: 1:2009cv08674).
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