WEBVTT - Litvak Sentenced to 2 Years in Insider Trading Case (Audio)

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<v Speaker 1>After four years and two trials, former Jeffreys trader Jesse

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<v Speaker 1>Litvak has been sentenced to two years in prison again.

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<v Speaker 1>Litvak was convicted of lying to customers about the prices

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<v Speaker 1>of mortgage backed bonds and sentenced to two years in prison.

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<v Speaker 1>In that conviction was reversed, but Litvak was convicted again

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<v Speaker 1>and given the same sentence, although the judge up the

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<v Speaker 1>fine to two million dollars from one point seventy five

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<v Speaker 1>million the first time. His attorney compared Litvak's tactics to

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<v Speaker 1>the puffery of a used car salesman. But a chat

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<v Speaker 1>transcript that Litvak edited to make it look like one

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<v Speaker 1>customer had paid more for bonds was hard to explain away.

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<v Speaker 1>Our guest is David Bissinger, a partner at Bissinger, Oshman

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<v Speaker 1>and Williams Dave. The second trial, Litvak was found guilty

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<v Speaker 1>of one count of securities fraud. First trial convicted of

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<v Speaker 1>fifteen counts of securities fraud. Yet his sentence was the

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<v Speaker 1>same and his fine was a quarter of a million

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<v Speaker 1>dollars higher. The sec in time, why uh, June, there's

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<v Speaker 1>uh about five or six reasons that the government gave

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<v Speaker 1>and that the judge in Connecticut appeared to agree with UH.

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<v Speaker 1>First UH a lack of remorse. There were texts that

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<v Speaker 1>were discovered by Mr Litvac in which he blamed his

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<v Speaker 1>alleged victims. He criticized jurors as as being less than intelligent. Um.

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<v Speaker 1>He uh then moved to Florida, you know, established himself

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<v Speaker 1>and what most folks would consider to be a pretty

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<v Speaker 1>palatial environment and just in general appeared to show a

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<v Speaker 1>certain degree of arrogance that the court uh seemed to

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<v Speaker 1>agree with the government and its brief UH warranted a

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<v Speaker 1>an upward or a greater amount of sentencing, even though,

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<v Speaker 1>like you say, the charge, Uh, the single conviction was

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<v Speaker 1>far uh you know, less of a victory on the

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<v Speaker 1>technical merits. And in the first trial, Dave, what what

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<v Speaker 1>sort of a message do you think comes out of

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<v Speaker 1>this this conviction, in this sentence? I mean it, you know,

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<v Speaker 1>the much of the discussion during the trial was about

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<v Speaker 1>whether this was a commonplace practice, what that he engaged

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<v Speaker 1>in the puffery. Do you think other folks on Wall

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<v Speaker 1>Street are are looking at us in and changing their conduct. Yeah,

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<v Speaker 1>it's I think it's pretty clear that the firms are

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<v Speaker 1>looking at it very seriously in terms of their compliance policies,

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<v Speaker 1>the way they manage their people. Um, and I think

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<v Speaker 1>the counterparties, for example, the insurance companies and pension funds

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<v Speaker 1>and so forth that depend on uh, the Jesse lit

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<v Speaker 1>Backs of the world are looking at the brokers with

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<v Speaker 1>you know, a more of a jaundiced eye. But I

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<v Speaker 1>think it's a mixed bag because there was enough evidence

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<v Speaker 1>that lit Back and his lawyers presented at the trial

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<v Speaker 1>that you know, some of these same victims, you know,

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<v Speaker 1>made misrepresentations of their own and that some of these

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<v Speaker 1>same victims or where that Litfac was exaggerating, or at

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<v Speaker 1>least that it was common for people like LITFAC to exaggerate.

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<v Speaker 1>I think it's really difficult to measure any deterrent effect,

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<v Speaker 1>but I think in this case, maybe it's as much

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<v Speaker 1>of a reaction to these particular facts by this court

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<v Speaker 1>than it is any sort of measured or or you know,

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<v Speaker 1>cert of statistically balanced deterrence analysis. Dave, there are some

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<v Speaker 1>more trials coming up of this nature. But lit FAC

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<v Speaker 1>started this crackdown on shady sales tactics in this opaque

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<v Speaker 1>world of securities backed by assets such as home loans,

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<v Speaker 1>why were they able to escape any kind of investigations

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<v Speaker 1>before this. Well, I think that a couple of things

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<v Speaker 1>that drove the lit Fac prosecution First was Mr Litfac

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<v Speaker 1>in the evidence itself, it was I think more egregious

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<v Speaker 1>perhaps than in a lot of the other cases. A

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<v Speaker 1>second driver that at least permeates in the government's brief

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<v Speaker 1>thing is the fact that what instruments Mr Litfack was

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<v Speaker 1>trading in we're really a product of TARP. In other words,

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<v Speaker 1>the government bailout basically made all of this possible. And

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<v Speaker 1>I think in the eyes of the Justice Department and

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<v Speaker 1>then either the jurors and ultimately the court sensing Mr

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<v Speaker 1>Litfac again, I think is a subjective matter in terms

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<v Speaker 1>of weighing the equities, UH, that did not help Mr

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<v Speaker 1>Litfax cause whereas if Mr Litfack we're dealing with purely

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<v Speaker 1>private parties and instruments that were purely you know, privately created,

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<v Speaker 1>um it, I don't think had the same uh sort

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<v Speaker 1>of upsetting or offensive quality that the government was able

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<v Speaker 1>to give it, you know, with the sort of bailout

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<v Speaker 1>money part money UH generated bonds that we had in

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<v Speaker 1>this case. In about twenty seconds here Dave do you

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<v Speaker 1>do you believe that it's fair to use a person's

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<v Speaker 1>conduct in between trials against them at a center sing Well, yeah,

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<v Speaker 1>in a way, June, I think it is somewhat unfair,

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<v Speaker 1>but I don't think that that's going to change. First

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<v Speaker 1>of all, Mr Littack became a quasi public figure. Uh. Second,

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<v Speaker 1>the government does have the power to continue to subpoena

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<v Speaker 1>him and get records. So is a practical matter. I

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<v Speaker 1>think anyone in his shoes ought to have had a

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<v Speaker 1>little more uh caution. I mean, even his own counsel,

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<v Speaker 1>and the briefing kind of acknowledged. I think at one

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<v Speaker 1>point they acknowledged that his comments about jurors and stuff

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<v Speaker 1>were flippant. Well, we'll let you go with that, Dave,

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<v Speaker 1>and it's a pleasure to have you back on Bloomberg Law.

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<v Speaker 1>That's Dave Bissinger, partner at Bissinger, Oshman and Williams