Ex-Bond Trader Wants Home Stay as U.S. Said to Urge Prison

Updated on
  • Litvak was convicted of 1 of 10 counts after second trial
  • Lawyers say government may seek longer sentence than last time

Former Jefferies & Co. managing director Jesse Litvak says he should be spared prison when he is sentenced later this month following his conviction of a single count of fraud -- a crime the government says is worth jail time.

A federal jury in Connecticut found Litvak guilty in January of defrauding customers on trades of mortgage-backed securities, but on only one of 10 criminal counts. The circumstances surrounding sentencing have changed "dramatically," his lawyers said in court filings Monday, seeking a term of eight months of home confinement and a $250,000 fine.

Prosecutors, on the other hand, seemed “poised” to ask for a sentence of at least nine to 11 years in prison -- the same term they sought after Litvak’s conviction at his first trial, which was reversed on appeal, defense lawyers said. Sentencing is scheduled for April 26 in New Haven.

Thomas Carson, a spokesman for U.S. Attorney Deirdre Daly, declined to comment on the filing. The U.S. Probation Office submitted its presentence investigation report and recommendations under seal on March 31. Prosecutors have until April 15 to file their response to the defense’s sentencing memo.

At his first trial, Litvak was convicted of 15 counts of securities fraud in 2014 and sentenced to two years in prison and to pay a $1.75 million fine. In requesting home confinement following the second trial, defense lawyers said the victim of Litvak’s crime suffered no monetary loss.

Tweaking Chat Trips Up Ex-Jefferies Bond Trader Jesse Litvak

Litvak’s lawyers also noted that government has settled matters with two other mortgage-bond traders who are alleged to have engaged in the same conduct with civil fines. The government decided not to prosecute two other ex-Jefferies employees who also lied in negotiations, both of whom faced only minor sanctions, the defense said.

Litvak has moved to Florida with his wife and is the primary caregiver for his two children, his attorneys said.

"A term that exceeds what the court imposed the last time would not only be unreasonable, but unconstitutional as well," his attorneys said. "At bottom, 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."

Nomura Trial

The case has been closely watched on bond-trading desks. Litvak was the first to be arrested in a crackdown on deceptive practices that led to the departure of dozens of traders and criminal charges against at least eight people, three of whom have agreed to cooperate.

Litvak’s sentencing comes a week before three former Nomura Holdings Inc. traders -- Ross Shapiro, Michael Gramins and Tyler Peters -- are set to go on trial in Hartford. Shapiro asked his judge last month to block prosecutors from introducing evidence about Litvak’s case, saying it could inflame and improperly sway jurors.

Prosecutors want to introduce a chat of a customer urging Peters in a chat not to “litvak” him, which the government says shows that misrepresentations in price negotiations matter to investors.

"All three defendants are charged with post-Litvak trades, and Gramins and Shapiro were both specifically reminded in the 2013 compliance meeting that lying was wrongful," the government said in a court filing.

The case is U.S. v. Litvak, 13-cr-00019, U.S. District Court, District of Connecticut (New Haven). The other case is U.S. v. Shapiro, 15-cr-00155, U.S. District Court, District of Connecticut (New Haven).

(Updates with date of next filing in fourth paragraph.)
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