Trial starts for Conn. trader charged with fraud

Feb 18, 2014, 9:24 PM

NEW HAVEN, Conn. (AP) – A former investment banker charged with defrauding investment funds established as part of the government’s response to the financial crisis lied to clients about bond prices to increase profits, a federal prosecutor told a jury Tuesday during opening statements at the former executive’s fraud trial.

But Jesse C. Litvak’s attorney said the government was alleging fraud based on “harmless fibs” and that his client sold bonds at great prices to sophisticated buyers. Litvak engaged in typical sales tactics, followed company rules and the government couldn’t prove any losses, said defense attorney Patrick J. Smith.

“Simply telling a lie does not make you guilty of committing a federal crime,” Smith said.

Litvak, of New York City, was a registered broker-dealer and managing director at Jefferies & Co. Inc. who worked on the company’s trading floor in Stamford. He is charged with securities fraud, Troubled Asset Relief Program fraud and making false statements to the federal government. His trial began Tuesday in New Haven.

Authorities say Litvak defrauded funds established by the Treasury with government bailout money and private investment funds of more than $2 million. According to the indictment in January 2013, Litvak was terminated from the company in 2011.

The indictment alleges Litvak engaged in a scheme to defraud customers on residential mortgage-backed securities trades by misrepresenting asking and selling prices, keeping the difference between the price paid by the buyer and the price paid to the seller for Jefferies. In other transactions, Litvak misrepresented to the buyer that bonds held in Jefferies’ inventory were being offered for sale by a fictitious third-party seller, which allowed Litvak to charge the buyer an extra commission that Jefferies was not entitled to, authorities said.

“Mr. Litvak lied to his clients to get more money,” said prosecutor Eric Glover.

He said the scheme unraveled after a customer was accidentally sent a spreadsheet that showed Litvak bought bonds at prices lower than he claimed. He said jurors would see negotiations on chat rooms “and what the truth actually was.”

Smith has denied Litvak defrauded anyone. The profits from the trades went to his company, not Litvak, he said.

“The central problem with this case is that it’s built around a fiction,” Smith said. “The fiction is that bonds were somehow available at a lower price.”

In establishing the bailout program, the government left it up to private fund managers to decide which bonds to buy, Smith said.

The indictment charges Litvak with 10 counts of securities fraud, which carry up to 20 years in prison on each count; one count of Troubled Asset Relief Program fraud, which carries a maximum term of imprisonment of 10 years; and four counts of making false statements, which each carry a maximum prison term of five years if convicted.

Jefferies disclosed last month in a regulatory filing that it agreed to pay $25 million to settle federal criminal and civil investigations related to mortgage-backed securities. The company noted that it terminated a trader in 2011 who was then indicted in January 2013.

The U.S. attorney’s office and the company declined comment on the settlement.

(Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

United States News

FILE - An employee of Honda Motor Co. cleans a Honda car displayed at its headquarters in Tokyo on ...
Associated Press

Japan’s Honda sees declining profits on semiconductor crunch

TOKYO (AP) — Honda’s fiscal first quarter profit fell 33% from last year as a global computer chip shortage, a pandemic-related lockdown in China and the rising costs of raw materials hurt the Japanese automaker. Tokyo-based Honda Motor Co. reported Wednesday that its profit totaled 149.2 billion yen ($1.1 billion) in the April-June quarter, down […]
3 hours ago
People wearing face masks walk past a bank's electronic board showing the Hong Kong share index in ...
Associated Press

Asian stocks fall ahead of US inflation

BEIJING (AP) — Asian stocks followed Wall Street lower Wednesday ahead of U.S. inflation data that traders worry will show upward pressure on prices still is too strong for the Federal Reserve to ease off interest rate hikes. Shanghai, Tokyo, Hong Kong and Seoul declined. Oil prices edged lower. Wall Street’s benchmark S&P 500 index […]
1 day ago
Former President Donald Trump arrives at Trump Tower, late Tuesday, Aug. 9, 2022, in New York. (AP ...
Associated Press

Trump says he’s testifying Wednesday in NY investigation

WASHINGTON (AP) — Former President Donald Trump will be questioned under oath Wednesday in the New York attorney general’s long-running civil investigation into his dealings as a real estate mogul, he confirmed in a post on his Truth Social account. Trump’s testimony comes amid a flurry of legal activity surrounding him, taking place just days […]
1 day ago
FILE - Serena Williams attends the Balmain Ready To Wear Fall/Winter 2022-2023 fashion collection, ...
Associated Press

Serena’s Choice: Williams’ tough call resonates with women

NEW YORK (AP) — Serena Williams said it plainly: It isn’t really fair. A male athlete would never have to make the same choice. But after a trailblazing career that both transformed and transcended her sport, Williams, who turns 41 next month, has told the world she’ll soon step away from tennis to focus on […]
1 day ago
This photo released Tuesday, Aug. 9, 2022, by the Albuquerque Police Department shows Muhammad Syed...
Associated Press

Afghan man charged in killings of Muslims in New Mexico

The ambush killings of four Muslim men in Albuquerque, New Mexico, shook the community but inspired a flood of information, including a tip that led to the arrest of a local Muslim man originally from Afghanistan who knew the victims, authorities said. Muhammad Syed, 51, was arrested on Monday after a traffic stop more than […]
1 day ago
This photo released Tuesday, Aug. 9, 2022, by the Albuquerque Police Department shows Muhammad Syed...
Sponsored Content by

The ambush killings of four Muslim men in Albuquerque, New Mexico, shook the community but inspired a flood of information, including a tip that led to the arrest of a local Muslim man originally from Afghanistan who knew the victims, authorities said. Muhammad Syed, 51, was arrested on Monday after a traffic stop more than […]

Sponsored Articles

...
Day & Night Air Conditioning, Heating and Plumbing

Here are 4 signs the HVAC unit needs to be replaced

PHOENIX — When you think about home investments, what’s the first thing that comes to mind? Was it the air conditioning unit? Pool renovations and kitchen upgrades may seem enticing, but at the forefront of these investments arguably should be what residents use the most. In a state where summertime is sweltering, access to a […]
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Update your child’s vaccines before kindergarten

So, your little one starts kindergarten soon. How exciting! You still have a few months before the school year starts, so now’s the time to make sure students-to-be have the vaccines needed to stay safe as they head into a new chapter of life.
Trial starts for Conn. trader charged with fraud