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UPDATE 1-Ex-Jefferies trader's emails reviewed in U.S. fraud trial

Richard Weizel
Tuesday, 25 Feb 2014 | 5:55 PM ET

NEW HAVEN, Conn., Feb 25 (Reuters) - Jesse Litvak, a former trader at Jefferies Group Inc, made extra commissions and profits by defrauding big Wall Street firms such as JPMorgan Chase & Co and AllianceBernstein Holding LP on bond trades, a U.S. Treasury Department agent testified at Litvak's fraud trial.

The testimony came as Litvak's lawyers filed a request to dismiss the case, saying the government had failed to prove any crimes were committed.

Chief Judge Janet Hall of the U.S. District Court in New Haven, Connecticut, said outside the jury's presence that she would not rule immediately.

Prosecutors are expected to finish presenting their case on Wednesday after U.S. Special Agent James O'Connor, a senior white collar crime investigator and former FBI agent who testified on Tuesday, leaves the witness stand.

Litvak's lawyer, Patrick Smith, said he may need three days to offer a defense, meaning that closing arguments could be made next week.

Litvak, 39, went on trial last week, accused of defrauding investors in a more than $2 million scheme by lying and misrepresenting the prices of trades on mortgage-backed securities.

The case is crucial to the government, the first brought under a 2009 law banning major fraud against the United States through the $700 billion federal bailout known as the Troubled Asset Relief Program, or TARP.

In seeking to dismiss the case, lawyers for Litvak said the government failed to prove that their client intended to defraud anyone, made any alleged material misstatements, committed a major fraud against the United States, or made false statements that could support a guilty verdict.

O'Connor told jurors on Tuesday that at the prosecutors' request he reviewed emails to and from Litvak over bond trades. One such exchange occurred on May 5, 2010 between Litvak and a JPMorgan representative, he said.

"It just sucks. I can't even win when I win," Litvak wrote, according to O'Connor. "Don't have to tell you how hard it is the buy bonds right."

"Sorry buddy, but just think how much $$$$$$$ you are making," the JPMorgan representative replied.

"But I want more ???????" Litvak responded. "This is torture."

Prosecutors then presented charts on various deals in 2009 and 2010 that they said show how Litvak routinely told clients he was buying bonds at one price, only to then sell them for significantly higher prices, and collect the profits.

The government said the charts showed that Litvak made nearly $400,000 in extra profit in one deal alone, more than $71,000 in another trade, and $44,500 in a third.

O'Connor told Assistant U.S. Attorney Jonathan Francis that the charts reflected the "actual profit difference" that Litvak was realizing on his trades.

UNFAMILIAR WITH TERMINOLOGY

Under cross-examination by Smith, O'Connor conceded he had been unfamiliar with some terminology used in bond trading before getting involved in the case.

Hall abruptly dismissed jurors for the day as Smith questioned O'Connor about his familiarity with trading jargon. "It's wrong to question this agent about what these words mean; he's not an expert witness in that area," she said.

Smith has repeatedly said that while his client lied and misled investors on bond trades, the government cannot prove a crime was committed.

Some witnesses have previously testified that some of Litvak's activities were considered common practices in the industry, as the defense has suggested.

Among the defense witnesses expected to be called is Johan Eveland, a Jefferies managing director.

Litvak worked for Jefferies in its Stamford, Connecticut, office from 2008 until he was fired in December 2011.

He was arrested in January 2013, and now faces criminal charges on 10 counts of securities fraud, four counts of making false statements and one count of fraud connected to TARP.

Litvak has pleaded not guilty, and faces up to 20 years in prison on each securities fraud count if convicted. He also faces a U.S. Securities and Exchange Commission civil lawsuit.

Jefferies is now part of Leucadia National Corp. Neither firm was charged.

The cases are U.S. v. Litvak, U.S. District Court, District of Connecticut, No. 13-cr-00019; and SEC v. Litvak in the same court, No. 13-00132.

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