NEW YORK (CNNMoney) -- In a case stemming from the housing meltdown that led to the financial crisis, a former executive at Credit Suisse and two associates have been charged with deliberately inflating the price of mortgage-backed securities held on their books.
Kareem Serageldin, Credit Suisse's former Global Head of Structured Credit, faces up to 45 years in prison if convicted on all charges. Serageldin earned $7.3 million in compensation for 2007, though much of this was clawed back after Credit Suisse discovered the fraud in early 2008.
Two other former bankers at Credit Suisse -- David Higgs and Salmaan Siddiqui -- have pleaded guilty and are cooperating with the government, the U.S. Attorney's Office in Manhattan said Wednesday. Serageldin is a U.S. citizen who currently lives in the United Kingdom, and U.S. attorney Preet Bharara called for him to return to the U.S. and face the charges.
By overstating the value of the assets on their books, prosecutors claim, the men masked their trading losses and artificially increased their division's profitability, earning lurcative bonuses for themselves in the process.
"While the residential housing market was in free fall, and shock waves were reverberating throughout the economy, these defendants decided they were above the rules of the market and above the law," Bharara said.
"They papered over more than a half billion dollars in subprime mortgage-related losses to secure for themselves a big payday at the same time that many people were losing their homes and their jobs."
In a statement back in March of 2008, after Credit Suisse discovered the fraud, the bank said it was the work of "a small number of traders," and the defendants were later terminated.
"This incident is unacceptable and it does not represent the high standard of Credit Suisse," CEO Brady Dougan said at the time. The bank declined to comment on Wednesday's charges.
The cooked trading book was responsible for $540 million of the $2.65 billion writedown that Credit Suisse () reported in March 2008, according to the U.S. Attorney's office.
The Securities and Exchange Commission announced parallel civil charges Wednesday against the three defendants and another former Credit Suisse banker, Faisal Siddiqui.
"At precisely the moment investors and market participants were urgently seeking accurate information about financial institutions' exposure to the subprime market, the senior bankers falsely and selfishly inflated the value of more than $3 billion in asset-backed securities in order to protect their bonuses," SEC enforcement director Robert Khuzami said. He and Bharara both said that their investigations are continuing.
Higgs reported to Serageldin at Credit Suisse, according to the SEC complaint, and those two men oversaw Faisal and Salmaan Siddiqui in their mismarking of securities.
Serageldin's lawyer, James McGuire, called the indictment "a surprise" and said his client had been cooperating with the investigation for over three years.
"We're very disappointed that after that cooperation, the government has taken the steps it's taken today," McGuire said. "Mr. Serageldin believes he's done nothing wrong, and that's why he's cooperated all the way through."
Ira Lee Sorkin, a lawyer for Salmaan Siddiqui who has also represented convicted Ponzi schemer Bernard Madoff, said his client "has been cooperating with the US attorney and the SEC for quite some time."
"He will continue to cooperate, and he deeply regrets being directed to mismark the book by his boss and his boss's boss," Sorkin said.
A lawyer for Faisal Siddiqui, who cooperated with the government along with Higgs and Salmaan Siddiqui, said the matter "has been settled satisfactorily." Higgs' attorney did not immediately return requests for comment.
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