Trial starts for Conn. trader charged with fraud

Published on NewsOK Modified: February 18, 2014 at 3:25 pm •  Published: February 18, 2014
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NEW HAVEN, Conn. (AP) — A former investment banker charged with defrauding investment funds established as part of the government's response to the financial crisis lied to clients about bond prices to increase profits, a federal prosecutor told a jury Tuesday during opening statements at the former executive's fraud trial.

But Jesse C. Litvak's attorney said the government was alleging fraud based on "harmless fibs" and that his client sold bonds at great prices to sophisticated buyers. Litvak engaged in typical sales tactics, followed company rules and the government couldn't prove any losses, said defense attorney Patrick J. Smith.

"Simply telling a lie does not make you guilty of committing a federal crime," Smith said.

Litvak, of New York City, was a registered broker-dealer and managing director at Jefferies & Co. Inc. who worked on the company's trading floor in Stamford. He is charged with securities fraud, Troubled Asset Relief Program fraud and making false statements to the federal government. His trial began Tuesday in New Haven.

Authorities say Litvak defrauded funds established by the Treasury with government bailout money and private investment funds of more than $2 million. According to the indictment in January 2013, Litvak was terminated from the company in 2011.

The indictment alleges Litvak engaged in a scheme to defraud customers on residential mortgage-backed securities trades by misrepresenting asking and selling prices, keeping the difference between the price paid by the buyer and the price paid to the seller for Jefferies. In other transactions, Litvak misrepresented to the buyer that bonds held in Jefferies' inventory were being offered for sale by a fictitious third-party seller, which allowed Litvak to charge the buyer an extra commission that Jefferies was not entitled to, authorities said.

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