After four years and two trials, former Jeffreys trader Jesse Litvak has been sentenced to two years in prison again. Litvak was convicted of lying to customers about the prices of mortgage backed bonds and sentenced to two years in prison. In that conviction was reversed, but Litvak was convicted again and given the same sentence, although the judge up the fine to two million dollars from one point seventy five million the first time. His attorney compared Litvak's tactics to
the puffery of a used car salesman. But a chat transcript that Litvak edited to make it look like one customer had paid more for bonds was hard to explain away. Our guest is David Bissinger, a partner at Bissinger, Oshman and Williams Dave. The second trial, Litvak was found guilty of one count of securities fraud. First trial convicted of fifteen counts of securities fraud. Yet his sentence was the same and his fine was a quarter of a million
dollars higher. The sec in time, why uh, June, there's uh about five or six reasons that the government gave and that the judge in Connecticut appeared to agree with UH. First UH a lack of remorse. There were texts that were discovered by Mr Litvac in which he blamed his
alleged victims. He criticized jurors as as being less than intelligent. Um. He uh then moved to Florida, you know, established himself and what most folks would consider to be a pretty palatial environment and just in general appeared to show a certain degree of arrogance that the court uh seemed to agree with the government and its brief UH warranted a an upward or a greater amount of sentencing, even though, like you say, the charge, Uh, the single conviction was
far uh you know, less of a victory on the technical merits. And in the first trial, Dave, what what sort of a message do you think comes out of this this conviction, in this sentence? I mean it, you know, the much of the discussion during the trial was about whether this was a commonplace practice, what that he engaged in the puffery. Do you think other folks on Wall
Street are are looking at us in and changing their conduct. Yeah, it's I think it's pretty clear that the firms are looking at it very seriously in terms of their compliance policies, the way they manage their people. Um, and I think the counterparties, for example, the insurance companies and pension funds and so forth that depend on uh, the Jesse lit Backs of the world are looking at the brokers with
you know, a more of a jaundiced eye. But I think it's a mixed bag because there was enough evidence that lit Back and his lawyers presented at the trial that you know, some of these same victims, you know, made misrepresentations of their own and that some of these same victims or where that Litfac was exaggerating, or at least that it was common for people like LITFAC to exaggerate.
I think it's really difficult to measure any deterrent effect, but I think in this case, maybe it's as much of a reaction to these particular facts by this court than it is any sort of measured or or you know, cert of statistically balanced deterrence analysis. Dave, there are some
more trials coming up of this nature. But lit FAC started this crackdown on shady sales tactics in this opaque world of securities backed by assets such as home loans, why were they able to escape any kind of investigations before this. Well, I think that a couple of things that drove the lit Fac prosecution First was Mr Litfac in the evidence itself, it was I think more egregious
perhaps than in a lot of the other cases. A second driver that at least permeates in the government's brief thing is the fact that what instruments Mr Litfack was trading in we're really a product of TARP. In other words,
the government bailout basically made all of this possible. And I think in the eyes of the Justice Department and then either the jurors and ultimately the court sensing Mr Litfac again, I think is a subjective matter in terms of weighing the equities, UH, that did not help Mr Litfax cause whereas if Mr Litfack we're dealing with purely private parties and instruments that were purely you know, privately created, um it, I don't think had the same uh sort
of upsetting or offensive quality that the government was able to give it, you know, with the sort of bailout money part money UH generated bonds that we had in this case. In about twenty seconds here Dave do you do you believe that it's fair to use a person's conduct in between trials against them at a center sing Well, yeah, in a way, June, I think it is somewhat unfair, but I don't think that that's going to change. First
of all, Mr Littack became a quasi public figure. Uh. Second, the government does have the power to continue to subpoena him and get records. So is a practical matter. I think anyone in his shoes ought to have had a little more uh caution. I mean, even his own counsel, and the briefing kind of acknowledged. I think at one point they acknowledged that his comments about jurors and stuff were flippant. Well, we'll let you go with that, Dave, and it's a pleasure to have you back on Bloomberg Law.
That's Dave Bissinger, partner at Bissinger, Oshman and Williams