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Emails suggest ex-Jefferies trader's fraud, U.S. agent testifies
February 25, 2014 / 9:32 PM / in 4 years

Emails suggest ex-Jefferies trader's fraud, U.S. agent testifies

NEW HAVEN, Conn., Feb 25 (Reuters) - 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 said at Litvak’s fraud trial.

Litvak, 39, is in the second week of his trial in the federal court in New Haven, Connecticut, accused of defrauding investors in a more than $2 million scheme by lying and misrepresenting the prices of trades on mortgage-backed securities.

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.

Prosecutors have told the presiding judge, Chief Judge Janet Hall, outside the jury’s presence that they may finish presenting their case late Tuesday or on Wednesday, after which the defense would have its turn.

In Tuesday’s testimony, U.S. Special Agent James O‘Connor, a senior white collar crime investigator and former FBI agent, told jurors that at the prosecutors’ request he reviewed emails to and from Litvak over bond trades.

O‘Connor said one such exchange occurred on May 5, 2010 between Litvak and a JPMorgan representative.

“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 torture.”

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 these charts reflected the “actual profit difference” that Litvak was realizing on his trades.

Patrick Smith, a lawyer for Litvak, objected several times during O‘Connor’s testimony. He was expected to cross-examine the witness later on Tuesday.

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.

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.

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