Doral Financial’s Levis Wins Reversal of One Criminal Count

Mario “Sammy” Levis, a member of the family that founded Puerto Rican bank-holding company Doral Financial Corp., won reversal of one of three criminal convictions.

Levis, formerly Doral’s treasurer, was convicted in 2010 of two counts of wire fraud and one count of securities fraud for lying to investors about the value of mortgage-related securities held by the company. He was sentenced to five years in prison.

A federal appeals court in New York today threw out one of the wire fraud charges, ruling that the trial judge should have let Levis argue that Doral used a hedging strategy that he reasonably believed limited Doral’s financial risks.

Prosecutors claimed Levis manipulated the value of mortgage-related assets to inflate the price of Doral stock. In March 2005, the Levis family owned 8.2 percent of the company’s shares, prosecutors said.

Doral, based in San Juan, Puerto Rico, said in September 2005 that it would restate its finances to the end of 2004 and cut shareholder equity by $720 million because of overvalued assets. The company eventually paid $129 million to settle an investor lawsuit and a $25 million fine to the U.S. Securities and Exchange Commission.

The case is U.S. v. Levis, 10-CR-4819, Second U.S. Circuit Court of Appeals (Manhattan).

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