Former Credit Suisse Broker Tzolov Captured in Spain

Julian Tzolov, the former Credit Suisse Group AG broker who fled prosecution in May, was arrested in Spain on charges of securities fraud and bail jumping after an international manhunt.

Assistant U.S. Attorney Daniel Spector disclosed the arrest yesterday in a letter to a federal judge in Brooklyn, New York, where Tzolov faces charges of fraudulently selling subprime mortgages linked to auction-rate securities.

Tzolov, 36, was taken into custody yesterday in Marbella, located in the Costa del Sol region on the Mediterranean Sea, the Spanish National Police said in an e-mailed statement. He had two bodyguards and was using false documents bearing the name Ivan Stefanov Ivanov, police said.

“National Police agents have, in Marbella, captured Julian Tzolov, one of the FBI’s most sought-after fugitives,” the police said in a statement. “The detained person would go about at all times with two persons of heavy build who carried out bodyguard tasks.”

Tzolov, a Bulgarian national, was declared a fugitive in June after disappearing while under house arrest in May and initially telling the court through his lawyer that he intended to plead guilty and avoid a trial.

Acting on a tip from the U.S. Federal Bureau of Investigation, Spanish police identified a suspect who had shown interest in renting and buying “luxury residences” in Marbella province, the police said.

Because of the “numerous” steps he took to conceal his identity, detectives still don’t know where he was living in Spain, the police said. The investigation in Spain was carried out by a unit specializing in tracking down fugitives.

Huge Mistake

“Julian made a huge mistake when he fled,” said Tzolov’s lawyer, Benjamin Brafman. “All he has succeeded in doing is further complicate his legal position.”

The arrest came as U.S. prosecutors in Manhattan filed new wire-fraud charges against Tzolov and Eric Butler, 37, a former Credit Suisse broker. Butler is scheduled to go to trial in federal court in Brooklyn next week.

Butler and Tzolov were charged in an indictment unsealed last September by prosecutors in the office of Brooklyn U.S. Attorney Benton Campbell. That case accused the two of falsely telling clients their products were backed by federally guaranteed student loans.

New Indictment

They were accused on July 14 in a separate 14-count indictment in federal court in Manhattan of operating a wire- fraud scheme to sell auction-rate securities. Manhattan and Brooklyn are separate judicial districts.

“It appears that the government has brought an identical case in a different district to try to give themselves two chances to win a case that they should have not brought once,” Paul Weinstein, a lawyer for Butler, said yesterday in an interview on the latest federal charges.

Federal prosecutors in Brooklyn yesterday also announced the unsealing of additional charges against Tzolov for failing to appear at his trial and for visa fraud after making false statements on his permanent-resident card.

Tzolov faces as long as 15 years in prison if convicted of failing to appear in court, said Robert Nardoza, a spokesman for Campbell.

U.S. District Judge Jack B. Weinstein, who is presiding over the case and isn’t related to Butler’s lawyer, declined government requests to delay Butler’s June 20 trial because of Tzolov’s disappearance.

Judge Weinstein asked the government in a hearing two days ago if Tzolov was still missing.

“If you pick him up before Monday, drag him here,” he said. “I want him here on trial.”

Tzolov was free on $3 million bond and was subject to home confinement at his Manhattan apartment with electronic monitoring. He left his residence May 9 without permission from court officials and prosecutors, the government said at the time.

The U.S. has an extradition treaty with Spain that recognizes securities-fraud crimes such as those leveled against Tzolov, said a person who has knowledge of the case.

After Tzolov was declared a fugitive in June, prosecutors moved to seize $3 million worth of property belonging to two men who had signed Tzolov’s bond, Dimitre Ivanov and Kamen Kiriakov.

Fifth Avenue Apartment

The government seized Tzolov’s ninth-floor apartment at 225 Fifth Ave. in Manhattan, Ivanov’s 18th-floor apartment at 325 Fifth Ave. in Manhattan and Kiriakov’s residence in North Miami Beach, Florida. Both men identified themselves on court papers as Tzolov’s friends.

Paul Weinstein said he and Tzolov’s lawyer, Brafman, objected to some charges being filed in Brooklyn because the alleged crimes occurred in Manhattan.

Until September 2007, Tzolov and Butler ran Credit Suisse’s Corporate Cash Management Group, a division that helped clients manage excess corporate cash holdings, prosecutors said.

Beginning in November 2004, the two approached companies that had banking relationships with Credit Suisse and pitched the benefits of investing cash in “low risk” auction-rate securities backed by student loans from the Federal Family Education Loan Program, according to the government.

Without telling customers, the defendants used client funds to purchase higher-yield mortgage-backed collateralized debt obligations, according to the Brooklyn indictment.

The men face as long as 33 years and 9 months in prison if convicted, prosecutors have said. Each could be fined as much as $5 million, Nardoza said.