NEW HAVEN, Conn. (Reuters) - Bond trader Jesse Litvak lied to customers about mortgage securities prices because he wanted to make more money for his employer, a federal prosecutor said on Thursday, as a retrial of the former Jefferies Group Inc managing director got underway.
Litvak faces securities fraud charges for having allegedly misled his customers from 2009 to 2011, causing them to overpay for bonds they bought and be paid less for bonds they sold.
Prosecutors have said Litvak’s fraud boosted profit by about $2.25 million at Jefferies, a unit of Leucadia National Corp (LUK.N), and also increased his bonus.
“The evidence will show the lies meant more money for Jefferies and less for customers,” Heather Cherry, an assistant U.S. attorney, told jurors in her opening argument in the New Haven, Connecticut federal court.
But lawyers for Litvak have countered that his customers, including asset managers such as AllianceBernstein LP (AB.N), were sophisticated enough to know if he was cheating them, and relied on other factors such as their own computer models in deciding when to buy and sell, and at what prices.
A lawyer for Litvak told jurors that his client’s banter on open chat networks about the transactions, which may be introduced as evidence, may qualify as “car salesman” talk, but that his client never misrepresented the bonds he dealt with.
The retrial gives prosecutors a fresh chance to crack down on alleged deceptive Wall Street sales tactics.
Litvak, who worked in Jefferies’ office in Stamford, Connecticut, was originally charged in January 2013, convicted in March 2014, and sentenced to two years in prison.
But a federal appeals court overturned the conviction in December 2015, citing errors by the trial judge and a lack of evidence that Litvak defrauded the government in connection with a financial crisis-era federal bailout.
It nonetheless said he could be retried for cheating customers, and said the trial judge should allow more defense testimony on what they were thinking.
Litvak’s retrial is expected to last about three weeks.
Its outcome could have a bearing on the fates of six traders facing similar charges, including three from Nomura Holdings Inc (8604.T), two from Royal Bank of Scotland Group Plc (RBS.L) and one from Cantor Fitzgerald.
The RBS traders have pleaded guilty, but may under certain conditions withdraw the pleas if Litvak wins, court records show.
Reporting by Mary Ellen Godin in New Haven, Connecticut; Editing by David Gregorio