Former Jefferies trader Litvak's conviction overturned

Tue Dec 8, 2015 11:53am EST
 
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By Jonathan Stempel

(Reuters) - A federal appeals court on Tuesday overturned the conviction of a former Jefferies Group Inc trader accused of lying to investors about mortgage bond prices, in a setback to government efforts to fight Wall Street fraud after the financial crisis.

The 2nd U.S. Circuit Court of Appeals in New York also ordered that Jesse Litvak, the former trader, be retried on some charges, despite a lack of evidence that his misstatements were material to the U.S. government.

Prosecutors said the government was a victim because some of Litvak's customers handled money for the U.S. Treasury Department's Troubled Asset Relief Program, and that his lies impeded efforts to restart the mortgage debt market.

Writing for a 3-0 appeals court panel, Circuit Judge Chester Straub also said the trial judge was wrong to exclude expert testimony on Litvak's behalf with regard to the securities fraud counts, and that this error was not harmless.

But he said "a rational jury could have found that Litvak's misrepresentations were material" to customers, and ordered a new trial on the 10 securities fraud counts.

The defendant was the first person charged under a 2009 law banning major fraud against the United States through TARP.

Tuesday's decision voids his conviction on one TARP fraud count and four counts of making false statements.

U.S. Attorney Deirdre Daly said she was "gratified" that the panel upheld the government's securities fraud theory, and that her office "will proceed with retrying" the securities fraud charges.   Continued...

 
Jesse Litvak, a former managing director at Jefferies Group Inc., walks from the U.S. District Court in New Haven, Connecticut July 23, 2014 after his sentencing hearing.  REUTERS/Mike Segar