Credit Suisse Settles Elbit Suit Stemming From FraudPatricia Hurtado
Credit Suisse Group AG and Elbit Systems Ltd. agreed to a settlement of the Israeli defense contractor’s lawsuit seeking to hold the bank liable for the conduct of two former brokers convicted of defrauding investors.
Elbit, Israel’s biggest non-government developer of defense technology, said it would withdraw its lawsuit “in return for the payment of an undisclosed amount,” according to a company statement yesterday.
Ex-Credit Suisse broker Eric Butler was convicted by a federal jury in Brooklyn, New York, in August 2009 of intentionally misleading clients by saying their investments were backed by federally guaranteed student loans when the instruments were actually auction-rate securities tied to the housing market. Victims sustained losses of more than $1.1 billion, according to the government.
Julian Tzolov, Butler’s partner, pleaded guilty and testified against him at trial. Both men were sentenced to five years in prison.
Elbit sued in federal court in Manhattan in 2010, alleging that the bank’s role “was to keep the fraudulent scheme hidden from the public, the federal authorities and from the victims themselves, for as long as possible.”
U.S. District Judge Sidney Stein in January denied a bid by Credit Suisse to dismiss the suit.
Katya Jestin, a lawyer for Haifa, Israel-based Elbit, declined to comment on the settlement. Mark Hanchet, a lawyer for Zurich-based Credit Suisse, didn’t immediately respond to a voice-mail message left at his office yesterday seeking comment.
The civil case is Elbit Systems Ltd. v. Credit Suisse Group, 10-cv-10, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Tzolov, 08-cr-370, U.S. District Court, Eastern District of New York (Brooklyn).