Ex-Jefferies trader lied to customers, jurors are told

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By Mary Ellen Godin | NEW HAVEN, Conn.

NEW HAVEN, Conn. Bond trader Jesse Litvak lied
to customers about mortgage securities prices because he wanted
to make more money for his employer, a federal prosecutor said
on Thursday, as a retrial of the former Jefferies Group Inc
managing director got underway.

Litvak faces securities fraud charges for having allegedly
misled his customers from 2009 to 2011, causing them to overpay
for bonds they bought and be paid less for bonds they sold.

Prosecutors have said Litvak’s fraud boosted profit by about
$2.25 million at Jefferies, a unit of Leucadia National Corp
, and also increased his bonus.

“The evidence will show the lies meant more money for
Jefferies and less for customers,” Heather Cherry, an assistant
U.S. attorney, told jurors in her opening argument in the New
Haven, Connecticut federal court.

But lawyers for Litvak have countered that his customers,
including asset managers such as AllianceBernstein LP,
were sophisticated enough to know if he was cheating them, and
relied on other factors such as their own computer models in
deciding when to buy and sell, and at what prices.

A lawyer for Litvak told jurors that his client’s banter on
open chat networks about the transactions, which may be
introduced as evidence, may qualify as “car salesman” talk, but
that his client never misrepresented the bonds he dealt with.

The retrial gives prosecutors a fresh chance to crack down
on alleged deceptive Wall Street sales tactics.

Litvak, who worked in Jefferies’ office in Stamford,
Connecticut, was originally charged in January 2013, convicted
in March 2014, and sentenced to two years in prison.

But a federal appeals court overturned the conviction in
December 2015, citing errors by the trial judge and a lack of
evidence that Litvak defrauded the government in connection with
a financial crisis-era federal bailout.

It nonetheless said he could be retried for cheating
customers, and said the trial judge should allow more defense
testimony on what they were thinking.

Litvak’s retrial is expected to last about three weeks.

Its outcome could have a bearing on the fates of six traders
facing similar charges, including three from Nomura Holdings Inc
, two from Royal Bank of Scotland Group Plc and
one from Cantor Fitzgerald.

The RBS traders have pleaded guilty, but may under certain
conditions withdraw the pleas if Litvak wins, court records

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