Bloomberg News

Jefferies Ordered to Pay Ex-Employee’s Costs in Fraud Case (1)

October 04, 2013

Jefferies & Co. was ordered to pay expenses including legal fees of Jesse C. Litvak, a former managing director accused of defrauding customers on trades of 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 in response to the financial crisis.

Litvak filed a petition in New York State Supreme Court in Manhattan yesterday seeking to confirm an award made by Financial Industry Regulatory Authority arbitrators last month. The three-member Finra panel ordered Jefferies to pay all expenses, including attorneys’ fees, incurred by Litvak “in defending all third-party proceedings related to his activities” while employed there, according to court filings.

Richard Khaleel, a spokesman for New York-based Jefferies LLC, declined to comment on the arbitration award. Leucadia National Corp. (LUK:US) acquired the investment bank earlier this year.

U.S. District Judge Janet C. Hall in New Haven, Connecticut, last month ordered the government to turn over any communications it had with Jefferies relating to legal fees the firm paid in connection with the case.

Legally Entitled

Litvak says he is legally entitled to have Jefferies pay his legal costs for the case. He has accused the government of pressuring the company to cut off funding, denying him rights to counsel and due process, according to court filings.

Assistant U.S. Attorney Jonathan Francis at a hearing last month said the dispute is between Litvak and his former employer and that the government did nothing to pressure Jefferies.

Litvak was hired by Jefferies in April 2008 and was fired on Dec. 21, 2011, according to the indictment. He previously worked for RBS Greenwich Capital, according to Finra records.

Prosecutors accuse Litvak of misrepresenting the asking price of sellers of residential mortgage-backed securities to buyers or vice versa, keeping the difference for Jefferies.

He is charged with 11 counts of securities fraud and may face as long as 20 years in prison on each count if convicted. He is 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 much as five years in prison.

Litvak, who asked Hall last month to dismiss the charges against him, is free on a $1 million bond. He is scheduled to go to trial in February.

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

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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