A former top executive at the Credit Suisse Group was sentenced to two and a half years in prison on Friday for inflating the value of mortgage bonds as the housing market collapsed.
The prison term makes the executive, Kareem Serageldin, one of the most senior Wall Street officials to serve time for criminal conduct during the financial crisis.
Wearing a dark suit and blue tie, Mr. Serageldin remained stoic as Judge Alvin K. Hellerstein of the United States District Court in Manhattan handed down the sentence, which was less than the roughly five-year sentence called for by nonbinding sentencing guidelines. Judge Hellerstein showed mercy on Mr. Serageldin in part because of what he said was a toxic culture at Credit Suisse and its rivals.
“He was in a place where there was a climate for him to do what he did,” the judge said. “It was a small piece of an overall evil climate inside that bank and many other banks.”
A spokesman for Credit Suisse disagreed with the judge’s remarks, noting that when regulators decided not to charge the bank in connection with Mr. Serageldin’s actions, they highlighted the isolated nature of the wrongdoing, the bank’s immediate self-reporting to the government and the prompt correction of its results.
Mr. Serageldin, 40, led a group at Credit Suisse that traded in mortgage-backed securities. As the housing market soared, his group made hundreds of millions of dollars for the bank by pooling mortgage assets, slicing them up and selling the pieces to investors. Many of those were subprime loans that went to shaky borrowers, however, and banks found themselves holding billions of dollars in sour mortgages when the market collapsed.
Federal authorities began their investigation into Credit Suisse in 2008 after the bank disclosed that Mr. Serageldin’s team had mismarked its mortgage portfolio. The bank suspended the team and cooperated with authorities. Two other traders in that group, David Higgs and Salmaan Siddiqui, were also charged alongside Mr. Serageldin. They all pleaded guilty; Mr. Higgs and Mr. Siddiqui have yet to be sentenced.
Mr. Serageldin, the son of Egyptian immigrants, joined Credit Suisse out of Yale University and rose swiftly through the ranks. By 33, he was named the global head of structured credit and earned millions of dollars a year running his group from London. Prosecutors argued that Mr. Serageldin had masked the true value of those assets to increase his bonus, an accusation his lawyers denied.
“This is the worst day of my life,” Mr. Serageldin told the judge. “I am terribly sorry for what I have done.”
In an unusual moment during the hearing, Judge Hellerstein allowed Mr. Serageldin’s mother to speak about her son. Holding back tears, she told the judge her son had always worked hard to make the family proud. “Please see him in the context of his whole life history,” she told the judge, who commiserated with Ms. Serageldin by telling her that he, too, was the child of immigrants. “Whatever sentence he serves, I will serve.”
The judge asked Mr. Serageldin’s lawyer to explain his client’s misconduct. “This is a deepening mystery in my work,” the judge said. “Why do so many good people do bad things?”
Sean Casey, a lawyer at Kobre & Kim, said that Mr. Serageldin was under great pressure during the credit crisis and made a big mistake when confronted with failure for the first time.
Judge Hellerstein said that his sentence was necessary to deter misconduct on Wall Street. “Each person has to look within himself and ask himself what is right, what is wrong,” the judge said. “Even in the worst of times, what is right cannot be sacrificed.”