Lies or banter? Ex-Jefferies trader's fraud trial heads to jury

By By Jonathan Stempel Features Reuters

NEW HAVEN, Conn. (Reuters) - The fate of a former Jefferies Group bond trader being tried a second time for defrauding clients is heading to a jury, after prosecutors and the defense battled over whether he told his customers "lies" or merely employed sales "banter" they knew to shrug off.

Continue Reading Below

Jesse Litvak, 42, was "motivated by greed," and it was no excuse that other traders might have deceived their own customers, Assistant U.S. Attorney Jonathan Francis told a federal jury in New Haven, Connecticut in his closing argument.

"Even a child knows that 'Billy did it too' isn't an excuse for bad behavior," Francis said. "A grown man knows that lying to cheat people is the wrong thing to do."

In contrast, defense lawyer Dane Butswinkas emphasized how Litvak's customers were sophisticated investors who relied on a bevy of computer models and economists, and that Litvak's "banter" was not so material to their decisionmaking.

"They're very skeptical about things they cannot verify," Butswinkas told jurors. "These are people who are crossing T's and dotting I's."

Litvak had worked in Jefferies' office in Stamford, Connecticut, and was first charged in January 2013.

Continue Reading Below

The securities fraud case signaled the start of a federal crackdown on suspect negotiating tactics by bond traders, and its outcome could affect cases against six other former traders.

Three from Nomura Holdings Inc <8604.T> face an early May trial, one from Cantor Fitzgerald & Co was charged last month, and two from Royal Bank of Scotland Group Plc pleaded guilty. An acquittal of Litvak could lead to a withdrawal of those pleas.

Prosecutors accused Litvak of misleading customers including AllianceBernstein and Soros Fund Management about bond prices from 2009 to 2011, hoping to make more money for his employer and himself.

They said this caused customers to overpay for bonds they bought and be paid less for bonds they sold, leading to roughly $2.25 million of improper profit for Jefferies, a unit of Leucadia National Corp .

Litvak was convicted of securities fraud and defrauding the government in March 2014 and sentenced to two years in prison.

A federal appeals court overturned the conviction in December 2015, but said prosecutors could try again to prove the 10 securities fraud counts.

Unlike at the first trial, Litvak was allowed to offer expert testimony about his customers' sophistication, and a defense witness did so on Thursday. Litvak did not take the stand at either trial.

The case is U.S. v. Litvak, U.S. District Court, District of Connecticut, No. 13-cr-00019.

(Reporting by Jonathan Stempel in New Haven, Connecticut; Editing by Chris Reese, Cynthia Osterman and David Gregorio)