By Jonathan Stempel and Nate Raymond
NEW YORK, Feb 18 (Reuters) – The U.S. government has urged a federal appeals court not to throw out a former Jefferies Group Inc managing director’s conviction for defrauding mortgage bond investors after the financial crisis, which the court had warned it might do.
In a Tuesday filing with the 2nd U.S. Circuit Court of Appeals, U.S. Attorney Deirdre Daly of Connecticut said jurors could have reasonably concluded that defendant Jesse Litvak intentionally lied to customers from 2009 to 2011 about trades he handled for them.
Daly said the government also presented “overwhelming” evidence that Litvak’s lies were material to the U.S. Department of the Treasury, which was trying to bail out the economy through the $700 billion Troubled Asset Relief Program.
“The evidence was sufficient for the jury to convict Litvak of securities fraud, TARP fraud, and making false statements,” Daly said. She also said jurors were properly instructed on the law.
Litvak, 40, was sentenced to two years in prison following his conviction last March by a federal jury in New Haven, Connecticut, on all 15 counts he faced.
But the married father of two is free on bail after the 2nd Circuit in October said his appeal raised “a substantial question of law or fact likely to result in reversal.”
Prosecutors said Litvak defrauded customers, including participants in TARP’s Public-Private Investment Program, about prices of mortgage-backed securities he bought and sold.
They said this helped increase Jefferies’ profit by more than $2.25 million and boost Litvak’s own pay, which he thought too low.
Defense lawyers have said Litvak’s conduct was known to his supervisors and common at Jefferies and that his customers had the experience to know if he were cheating them.
They also said the trial judge instructed jurors incorrectly, and wrongly excluded a variety of testimony.
A decision by the 2nd Circuit could come this year.
Jefferies, a unit of Leucadia National Corp, in March agreed to enter a non-prosecution agreement and pay $25 million to end U.S. criminal and civil probes into its supervision of Litvak and other traders.
The case is Litvak v. U.S., 2nd U.S. Circuit Court of Appeals, No. 14-2902.
(Reporting by Jonathan Stempel and Nate Raymond in New York; Editing by Lisa Von Ahn and Cynthia Osterman)
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