April 26 (Reuters) - A federal judge in Connecticut on Wednesday is set to sentence a former Jefferies Group bond trader after he was found guilty earlier this year of defrauding customers on bond prices.
A jury in January found Jesse Litvak guilty of one of 10 criminal charges he had faced, a muted victory as prosecutors try to crack down on nefarious sales practices on Wall Street.
The verdict became the second time that Litvak was found guilty of fraud. He was first tried and convicted in 2014 and sentenced to two years in prison, but that verdict and sentence were overturned on appeal.
Federal prosecutors are now asking Chief Judge Janet Hall to sentence Litvak to nine to 11 years in prison, while his defense attorneys are seeking eight months of house arrest at his home in Boca Raton, Florida. Litvak had worked in the Stamford, Connecticut, office of Jefferies, a unit of Leucadia National Corp.
Prosecutors argued that a stiff sentence, even tougher than the one handed down for the previous conviction on all 10 counts, was needed as a deterrent to illegal tactics in the financial services industry.
“A prison sentence for such conduct can serve as a powerful deterrent against the commission of financial fraud, in particular, by other broker-dealers like Litvak,” prosecutors said in court papers ahead of Wednesday’s hearing. “As this case shows, there can be a huge personal financial incentive for broker-dealers to commit fraud on their customers.”
Litvak’s attorneys argued that prosecutors were overreaching in seeking such a long sentence.
“The government is attempting to compensate for its mostly unsuccessful prosecution of Mr. Litvak by urging sharp sentencing enhancements based on acquitted and uncharged conduct,” they wrote.
Litvak, who had been a managing director at Jefferies, was accused of generating $2.25 million of illegal profit by misleading customers including AllianceBernstein and Soros Fund Management about bond prices from 2009 to 2011.
Prosecutors said Litvak was motivated by greed, and that his “lies” caused customers to overpay for bonds they bought and accept lower prices for bonds they sold.
But defense lawyers said Litvak’s customers were sophisticated, with a deep well of talent and resources, and would be skeptical if prices that Litvak quoted looked wrong. (Writing by Scott Malone; Editing by Bernard Orr)