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Bond executive testifies ex-Jefferies banker lied on trades
February 19, 2014 / 9:00 PM / 4 years ago

Bond executive testifies ex-Jefferies banker lied on trades

NEW HAVEN, Conn., Feb 19 (Reuters) - A senior AllianceBernstein Holding LP executive testified on Wednesday that former Jefferies Group Inc banker Jesse Litvak misled him into overpaying for bonds, prompting him to press for an investigation.

Michael Canter, senior vice president and director of securitized assets at AllianceBernstein, told jurors at Litvak’s fraud trial that his suspicions were aroused after he received an email that contained an attached spreadsheet detailing Litvak’s trades and “filled with discrepancies.”

Under questioning from federal prosecutor Jonathan Francis, Canter said he thought “it all could be worked out” but changed his mind as a result of a three-way call in November 2010 with Litvak and the sales representative who had mistakenly sent the attachment.

“Mr. Litvak said, yes, he was sorry, but they were doing whatever they could to make money and that he hoped we could still continue doing business,” Canter told jurors in U.S. District Court in New Haven, Connecticut.

“It was clear that he had lied to us, and I yelled at him that I couldn’t believe what he was freaking doing to me and our company,” Canter continued. “I really took it personally, but I knew it was up to my superiors and the (U.S.) Department of the Treasury to decide what to do.” Canter said he also advised his traders not to do business with Jefferies.

Prosecutors have accused Litvak, 39, of cheating customers on residential mortgage-backed securities trades in a $2 million scheme designed to boost Jefferies’ revenue and his own pay.

The case 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.

AllianceBernstein, which ended 2013 with $450.4 billion of assets under management, was among the participants in a program under TARP that was intended to help rebuild a market for troubled mortgage debt.

The trial began on Tuesday. One of Litvak’s attorneys, Patrick Smith, told jurors during his opening argument that while his client did not always tell the truth when advising investors, he did what he was taught by supervisors, and that prosecutors will be unable to prove a crime was committed.

Litvak worked for Jefferies between 2008 and December 2011, when he was fired. He has pleaded not guilty to 10 counts of securities fraud, one count of TARP fraud and four counts of making false statements.

The defendant faces up to 20 years in prison on each fraud count if convicted.

Canter’s testimony, including cross-examination by Litvak’s attorneys, is expected to continue into Thursday. The trial is expected to last about four weeks.

Jefferies is now part of Leucadia National Corp.

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.

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