Ex-Jefferies Executive Loses Bid to Toss TARP Charges

Ex-Jefferies & Co. managing director Jesse C. Litvak lost a court bid to throw out charges that he defrauded customers of more than $2 million on trades of residential mortgage-backed securities.

Litvak, who has pleaded not guilty, was indicted in January on charges of securities fraud, fraud connected to the Troubled Asset Relief Program and making false statements to the federal government. Alleged victims include investment funds, among them six established by the U.S. Treasury Department in 2009 as part of its response to the financial crisis.

U.S. District Judge Janet C. Hall in New Haven, Connecticut, denied a motion to dismiss the indictment in a ruling dated yesterday, rejecting Litvak’s argument that the Public-Private Investment Program created to distribute TARP funds was a private vehicle managed by a private contractor and therefore falls outside of the government’s jurisdiction.

The Public-Private Investment Funds that are the alleged victims of Litvak’s fraud were “government-created entities using mostly taxpayer money to achieve a government program’s purposes,” Hall wrote in her ruling.

“It is simply not the case that Litvak’s interactions with the PPIFs would have been the same had the government not been an investor, for the PPIFs would not exist but for the government’s decision to both create, fund and supervise them,” she wrote.

Litvak is charged with 11 counts of securities fraud and may face as long as 20 years in prison on each count if convicted. He’s also charged with one count of TARP fraud, which carries a maximum penalty of 10 years in prison, and four counts of making false statements to the government, each punishable by as long as five years in prison. He’s free on a $1 million bond and scheduled to go on trial in February.

The case is U.S. v. Litvak, 13-cr-00019, U.S. District Court, District of Connecticut (New Haven).

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