Now that's a low blow!
A former Jefferies Managing Director charged with defrauding customers out of $2m, using tactics said by one U.S. official to be unworthy of a used-car salesman, will be the subject of a novel trial tied to the $700bn Wall Street bailout.
Bloomberg News reports that jury selection in New Haven, Connecticut, federal court begins today in the case of Jesse Litvak, charged with fraud in connection with a U.S. program that used bailout funds to spur investment in mortgage-backed securities.
Litvak allegedly misrepresented how much sellers were asking for the securities, or what customers were willing to pay, keeping the difference for Jefferies. Though prosecutors said this is one of the first cases tied to the program, the facts may be less than unique.
'It’s kind of a garden variety high-pressure sales tactics case', Yale Law School Professor Jonathan Macey said in an interview. 'While the investments were complicated, the lies weren’t that complicated that this guy is alleged to have told'.
Litvak is also accused of telling some buyers that the bonds in Jefferies’s inventory were being offered for sale by a third-party seller that didn’t exist. Prosecutors said the claim allowed Litvak to charge an extra commission and increase the profitability of his trades as his trading revenue declined.
'The kind of false claims made by Mr Litvak repeatedly were unfit for a used car lot let alone the marketplace for mortgage-backed securities', George Canellos, deputy director of the SEC’s enforcement division, said at the time of Litvak’s arrest.
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image: © Bogdan Suditu