June 5, 2018 / 7:56 PM / a year ago

U.S. judge throws out Nomura bond trader's conviction

(Reuters) - A U.S. judge on Tuesday threw out the conspiracy conviction of a former Nomura Holdings Inc (8604.T) trader accused of lying to customers about mortgage bond prices, a setback for prosecutors in their crackdown on improper sales tactics.

U.S. District Judge Robert Chatigny’s decision to set aside Michael Gramins’ conviction means both convictions won by prosecutors at trial in their 5-1/2-year probe have now been tossed. Two other traders have been acquitted.

Chatigny said the Hartford, Connecticut jury that convicted Gramins last June 15 may have been improperly influenced by another trader who testified that Gramins owed him a duty to tell the truth about bond prices.

Such “point of view” testimony was deemed irrelevant by the federal appeals court in Manhattan on May 3 in a similar case, when it voided former Jefferies Group LLC trader Jesse Litvak’s conviction and ordered his release from prison.

Chatigny rejected requests by Gramins and co-defendant Ross Shapiro, also a former Nomura trader, to dismiss their indictment, but questioned whether prosecutors subjected them to “discriminatory enforcement” that may have violated due process.

“As the government concedes, lying in arms-length commercial transactions is not always illegal,” the judge wrote. “It is fair for the defendants to wonder what distinguishes their conduct from that of others who have been spared indictment.”

Jurors acquitted Gramins and Shapiro on several counts, and deadlocked on others. A retrial is scheduled for July 9, court records show.

Thomas Carson, a spokesman for U.S. Attorney John Durham in Connecticut, said that office is reviewing the decision.

Marc Mukasey, a lawyer for Gramins, said in an email: “We are grateful for the careful analysis by the judge and look forward to resolving this.”

Guy Petrillo, a lawyer for Shapiro, did not immediately respond to requests for comment.

U.S. authorities have charged at least 11 people, including six from Nomura, in connection with deceptive bond trading practices, and eight have been criminally charged.

Though some pleaded guilty, former Cantor Fitzgerald trader David Demos was acquitted, as was former Nomura trader Tyler Peters, a co-defendant of Gramins and Shapiro.

On Monday, U.S. District Judge Richard Berman in Manhattan rejected Peters’ bid to dismiss a related U.S. Securities and Exchange Commission civil lawsuit, where the burden of proof is lower.

The case is U.S. v. Shapiro et al, U.S. District Court, District of Connecticut, No. 15-cr-00155.

(This version of the story corrects word “legal” to “illegal” in quote in paragraph 6)

Reporting by Jonathan Stempel in New York; Editing by David Gregorio

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