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 Jurors in the New Haven, Connecticut federal court will on Thursday
begin weighing the fate of Litvak, 39, who is accused of cheating
major Wall Street firms, pension funds and charities through
overcharges out of more than $2 million to boost profit for
Jefferies and himself, and offset trading losses elsewhere.
The case is the first under a 2009 law banning major fraud against
the United States through the $700 billion federal bailout known as
the Troubled Asset Relief Program, or TARP.
Prosecutors said the United States was a victim because some of
Litvak's clients, such as the large asset manager AllianceBernstein
Holdings LP, participated in TARP's Public Private Investment
Program, which was intended to help rebuild a market for troubled
mortgage debt.
While most litigation linked to the 2008 financial crisis has
addressed conduct that predated it, Litvak's case is different
because the alleged wrongful conduct began later.
"Jesse Litvak may have worked in a complicated industry, but what he
did was very simple," Assistant U.S. Attorney Jonathan Francis told
the jury of seven men and five women. "He lied to his customers to
boost profits. That is fraud, and that is a crime."
Francis recalled testimony from February 19 in which
AllianceBernstein executive Michael Canter said he became suspicious
of Litvak only after receiving a misdirected spreadsheet by email
that detailed his trades.
"If it weren't for a spreadsheet mistakenly sent by a salesperson at
Jefferies to AllianceBernstein, no one would have ever known what
Mr. Litvak was doing," Francis said. "And what did he do when he was
confronted? (He) said it had been a bad year and he had to do
whatever he could to make more money."
Defense lawyer Patrick Smith countered, as he often has since
opening statements on February 18, that Litvak's activity had been
approved by his former bosses, and amounted to "fibs that are
accepted as part of the culture of Wall Street."
He likened the seriousness of the activity to the commission of a
foul at a pick-up basketball game.
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"Jesse Litvak committed no crime," Smith told jurors. "Many of the
so-called 'victim witnesses' (testified) that they would have still
done the trades from the prices quoted because they were getting
good bonds at good prices."
Smith also said his client never thought he was committing a
crime. "Jesse Litvak's state of mind was that this was something all
traders did, and that it was an accepted practice," Smith said. "He
never thought of it as fraud, and it wasn't fraud."
Litvak did not take the witness stand in his defense.
Jefferies is now part of Leucadia National Corp. Neither company was
charged.
The defendant has pleaded not guilty to 10 counts of securities
fraud, four counts of making false statements and one count of fraud
connected to TARP. If convicted, he faces up to 20 years in prison
on each securities fraud count.
A U.S. Securities and Exchange Commission civil lawsuit is also
pending against Litvak.
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 Tom Brown)
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