By Richard Weizel
NEW HAVEN, Conn. Feb 25 Jesse Litvak, a former
trader at Jefferies Group Inc, made extra commissions and
profits by defrauding big Wall Street firms such as JPMorgan
Chase & Co and AllianceBernstein Holding LP on
bond trades, a U.S. Treasury Department agent testified at
Litvak's fraud trial.
The testimony came as Litvak's lawyers filed a request to
dismiss the case, saying the government had failed to prove any
crimes were committed.
Chief Judge Janet Hall of the U.S. District Court in New
Haven, Connecticut, said outside the jury's presence that she
would not rule immediately.
Prosecutors are expected to finish presenting their case on
Wednesday after U.S. Special Agent James O'Connor, a senior
white collar crime investigator and former FBI agent who
testified on Tuesday, leaves the witness stand.
Litvak's lawyer, Patrick Smith, said he may need three days
to offer a defense, meaning that closing arguments could be made
Litvak, 39, went on trial last week, accused of defrauding
investors in a more than $2 million scheme by lying and
misrepresenting the prices of trades on mortgage-backed
The case is crucial to the government, the first brought
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.
In seeking to dismiss the case, lawyers for Litvak said the
government failed to prove that their client intended to defraud
anyone, made any alleged material misstatements, committed a
major fraud against the United States, or made false statements
that could support a guilty verdict.
O'Connor told jurors on Tuesday that at the prosecutors'
request he reviewed emails to and from Litvak over bond trades.
One such exchange occurred on May 5, 2010 between Litvak and a
JPMorgan representative, he said.
"It just sucks. I can't even win when I win," Litvak wrote,
according to O'Connor. "Don't have to tell you how hard it is
the buy bonds right."
"Sorry buddy, but just think how much $$$$$$$ you are
making," the JPMorgan representative replied.
"But I want more ???????" Litvak responded. "This is
Prosecutors then presented charts on various deals in 2009
and 2010 that they said show how Litvak routinely told clients
he was buying bonds at one price, only to then sell them for
significantly higher prices, and collect the profits.
The government said the charts showed that Litvak made
nearly $400,000 in extra profit in one deal alone, more than
$71,000 in another trade, and $44,500 in a third.
O'Connor told Assistant U.S. Attorney Jonathan Francis that
the charts reflected the "actual profit difference" that Litvak
was realizing on his trades.
UNFAMILIAR WITH TERMINOLOGY
Under cross-examination by Smith, O'Connor conceded he had
been unfamiliar with some terminology used in bond trading
before getting involved in the case.
Hall abruptly dismissed jurors for the day as Smith
questioned O'Connor about his familiarity with trading jargon.
"It's wrong to question this agent about what these words mean;
he's not an expert witness in that area," she said.
Smith has repeatedly said that while his client lied and
misled investors on bond trades, the government cannot prove a
crime was committed.
Some witnesses have previously testified that some of
Litvak's activities were considered common practices in the
industry, as the defense has suggested.
Among the defense witnesses expected to be called is Johan
Eveland, a Jefferies managing director.
Litvak worked for Jefferies in its Stamford, Connecticut,
office from 2008 until he was fired in December 2011.
He was arrested in January 2013, and now faces criminal
charges on 10 counts of securities fraud, four counts of making
false statements and one count of fraud connected to TARP.
Litvak has pleaded not guilty, and faces up to 20 years in
prison on each securities fraud count if convicted. He also
faces a U.S. Securities and Exchange Commission civil lawsuit.
Jefferies is now part of Leucadia National Corp.
Neither firm was charged.
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.