* Jesse Litvak accused of securities fraud, TARP fraud
* Jefferies is accused of condoning defendant's activity
By Richard Weizel
NEW HAVEN, Conn., Feb 27 Lawyers defending Jesse
Litvak at the former Jefferies Group Inc trader's federal fraud
trial on Thursday accused the firm of firing him and then
helping prosecutors out of concern that it might otherwise lose
a major client.
Johan Eveland, a managing director and co-head of fixed
income at Jefferies, testified in U.S. District Court in New
Haven, Connecticut, that he had been part of the team of
supervisors who decided to fire Litvak in December 2011.
The dismissal came after AllianceBernstein Holding LP
complained that Litvak had "lied, misled and defrauded" it on
several bond trades, according to prior testimony.
"Isn't it true, Mr. Eveland, that AllianceBernstein made it
crystal clear that it would never do business with Jefferies as
long as Jesse Litvak was still there?" Litvak's attorney,
Patrick Smith, asked. "Weren't you and aren't you concerned that
you could become the subject of a criminal investigation?"
"No, I don't believe so," Eveland answered, during
questioning as several jurors took notes and shook their heads.
Prosecutors accused Litvak of defrauding customers in a
more-than-$2 million scheme involving mortgage-backed
securities, by misleading them about prices in a manner that
allowed him to generate higher profits and commissions.
Litvak's lawyers have argued that it was common in bond
trading for clients to be misled about prices and that their
client's activities were not crimes.
During his second day on the witness stand, Eveland at times
seemed uncertain about how to answer.
Chief Judge Janet Hall told jurors that Smith was trying to
impeach Eveland by showing how Jefferies treated Litvak
differently from colleagues.
Part of the defense is that Jefferies looked the other way
when some traders engaged in the same practices as Litvak, and
that the firm would not have done so had it considered those
practices improper or illegal.
Eveland testified that Jefferies, now part of Leucadia
National Corp, is reviewing some of those traders'
Asked by Assistant U.S. Attorney Eric Glover why Litvak was
ultimately fired while colleagues were not, Eveland said: "It
was the magnitude and extent of what (he) did."
The case against Litvak, 39, is 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.
Litvak 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.
Thursday's testimony ended with defense witness Marc
Menchel, a principal at Menchel Consulting LLC and
self-described "regulatory consultant," on the stand.
No court sessions are planned for Friday or Monday. Menchel
is expected to resume testifying on Tuesday, followed by other
It remains unclear whether Litvak will testify. Hall
indicated on Thursday that it is possible that closing arguments
may take place early next week. Prosecutors took about six days
to present their case, starting on Feb. 18.
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.