How Much Trickery Is Legal on Wall Street?

Former Jefferies Group managing director Jesse Litvak was convicted in March of defrauding investors of $2 million by misrepresenting the prices of mortgage-backed securities he was buying and selling. After Litvak was arrested, George Canellos, former deputy director of the U.S. Securities and Exchange Commission, said the statements Litvak made during the sales negotiations were “unfit for a used-car lot.”

On Nov. 18, Litvak turned that declaration on its head when his lawyers warned the Court of Appeals for the Second Circuit in Manhattan that his conviction could be used to prosecuteany business involved in simple negotiations—including car dealerships. “Every car salesman who tells a customer that he cannot lower his price any further because he would earn only a minuscule profit on the sale as it is would be guilty of fraud,” the lawyers said in a filing. The filing also said U.S. District Judge Janet Hall in New Haven gave “deficient” jury instructions and excluded evidence central to Litvak’s defense. Thomas Carson, a spokesman for the U.S. Attorney’s Office in New Haven, declined to comment.