| NEW YORK
NEW YORK Oct 21 A former Jefferies Group Inc
managing director must face trial on criminal charges
that he defrauded a federal bank bailout program by falsifying
the prices of mortgage securities, a Connecticut federal judge
ruled on Monday.
The prosecution of Jesse Litvak, a former Jefferies senior
trader, was the first brought under a 2009 law banning "major
fraud" against the United States through the Troubled Asset
Relief Program, according to U.S. authorities.
U.S. District Judge Janet Hall in New Haven, Connecticut,
rejected Litvak's claim that the indictment against him,
unveiled in January, should be dismissed because it lacked
sufficient evidence to support the charges. That is a question
to be answered at trial, she said.
"Inasmuch as that this argument is actually an attack on the
government's evidence against Litvak, it is premature," Hall
Ross Garber, a defense attorney for Litvak, did not
immediately respond to an email seeking comment.
Prosecutors allege that Litvak defrauded a number of public
and private funds, generating more than $2.7 million of revenue
The funds included participants in the Public-Private
Investment Program, which was designed to distribute TARP funds
to resuscitate the failing mortgage-backed securities market.
The alleged victims include funds set up by
AllianceBernstein Holding LP, BlackRock Inc,
George Soros' Soros Fund Management LLC, Daniel Loeb's Third
Point LLC, and Wellington Management Co, according to the
Jefferies is not accused of wrongdoing. Brokerage industry
records show the company fired Litvak in December 2011.
A Jefferies spokesman declined to comment on the case.
Prosecutors say Litvak misrepresented prices of residential
mortgage-backed securities in trades he helped arrange and then
kept the differences between the prices paid by buyers and paid
He was also accused of inventing a fictional third-party
seller for some trades of bonds in Jefferies' own inventory,
allowing him to charge commissions that he would not otherwise
According to prosecutors, Litvak used the trades to help
offset a plunge in his overall trading revenue, a factor in his
compensation. They said he lost more than $10 million on trading
in 2011, compared with a profit of more than $40 million in
The indictment included 11 counts of securities fraud, one
court of TARP fraud and four counts of making false statements.
Litvak faces up to 20 years in prison on each count.
The U.S. Securities and Exchange Commission has filed a
parallel civil action against Litvak.
The cases are U.S. v. Litvak, U.S. District Court, District
of Connecticut; and SEC v. Litvak in the same court, No.