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 Litvak, 39, was convicted on all 15 counts he faced, including 10 of
securities fraud. He faced up to 20 years in prison on each
securities fraud count.
Prosecutors accused Litvak of cheating clients out of more than $2
million between 2009 and 2011 by inflating bond prices, lying about
how much Jefferies paid for them and inventing sellers.
They said he wanted to boost Jefferies' profit and his own pay,
using the extra revenue to offset other trading losses. The trial
lasted 2-1/2 weeks.
"Today's verdict shows plainly and powerfully that Wall Street
professionals are not above the law," U.S. Attorney Deirdre Daly in
Connecticut said in a statement.
"The jury rightly rejected Mr. Litvak's shameful claim that he did
nothing wrong because many on Wall Street engage in the same
conduct."
Litvak rubbed and shook his head as the verdict by the seven-man,
five-woman jury in New Haven was read. The married father of two
turned to look at his parents and crying wife in Chief Judge Janet
Hall's courtroom.
"We're gratified the jury returned the verdict it did," Assistant
U.S. Attorney Eric Glover told reporters outside the courtroom.
"Justice was served."
His lawyer, Patrick Smith, said an appeal was planned.
"Mr. Litvak is obviously very disappointed in the verdict," Smith
said. "The court made several serious errors that undermined Mr.
Litvak's ability to present his full defense."
LANDMARK CASE
The verdict was a victory for the government in its effort to punish
financial misconduct that occurred after the financial crisis.
Most of the recent litigation against banks had focused on
pre-financial crisis conduct, but Litvak's prosecution was the first
under a law banning major fraud against the United States through
the $700 billion federal bailout known as the Troubled Asset Relief
Program (TARP).
"This landmark case is likely to embolden prosecutors to be even
more aggressive," said Jordan Thomas, a partner at Labaton Sucharow
and former federal prosecutor. "Defendants awaiting trial, and
individuals under investigation, will have to think twice about
going the distance because of the government's demonstrated skill in
successfully bringing this type of case."
Litvak also was found guilty of one count of fraud connected to TARP
and four counts of making false statements.
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Jefferies, now part of Leucadia National Corp, disclosed in January
that it agreed to pay $25 million to resolve U.S. government probes
related to Litvak, whom it fired in December 2011.
Neither Jefferies nor Leucadia was accused of wrongdoing in the
criminal case, which was unveiled in January 2013.
ACTIVE GOVERNMENT PROBE
The U.S. government disclosed in January that it was investigating
fraud in the trading of residential mortgage-backed securities,
including in transactions stemming from the bailout.
Prosecutors said the United States was victimized because some of
Litvak's clients, such as the large asset manager AllianceBernstein
Holding LP, participated in the Public-Private Investment Program, a
TARP initiative designed to spur demand for troubled mortgage debt.
Glover said on Friday that the investigation was "continuing,
ongoing and active."
Litvak's defense lawyers had argued that his clients at Jefferies
were "sophisticated" investors capable of analyzing whether the bond
prices they were paying were fair.
His lawyers said Litvak's activity was common in the bond industry
and that Jefferies objected only when faced with the possible loss
of a big client.
Smith said Litvak's appeal would focus partly on the judge's refusal
to admit evidence that Jefferies had condoned similar conduct by
other traders who were not punished.
Litvak did not testify in his own defense during the trial. He also
faced a U.S. Securities and Exchange Commission civil lawsuit.
He remained free on bail, and his sentencing was scheduled for May
30.
The cases are U.S. v. Litvak, U.S. District Court, District of
Connecticut, No. 13-cr-00019; and SEC v. Litvak in the same court,
No. 13-00132.
(Additional reporting by Jonathan
Stempel in New York; editing by Phil Berlowitz, James Dalgleish and
Amanda Kwan)
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