The former managing director of Jeffries & Co. who was convicted in March 2014 of defrauding the U.S. Troubled Asset Relief Program and making false statements to the U.S. government has had his conviction overturned.

Jesse Litvak was convicted by a Connecticut federal court of defrauding investors of $2 million by misrepresenting how much securities were being sold for or what customers would pay and pocketing the difference. He was sentenced to two years in prison and appealed that conviction to the U.S. District Court of Appeals for the Second Circuit in Manhattan.

In overturning the conviction, the appeals court said the district court judge erred in barring certain defense evidence, saying that the defendant must be allowed to show that his actions were “business as usual” on Wall Street.

At issue in the case was whether or not it is important for a bond buyer to know what a trader paid for the bond. Government prosecutors argued that when Litvak lied about what he paid for bonds, he committed fraud. The defense compared Litvak to a used-car salesman who is not expected to be honest about what he paid for a car. If a sophisticated bond buyer agrees to the price, the defense asserted, what the trader paid for it is irrelevant.

While the appellate court agreed with the government that “a rational jury could have found that Litvak's misrepresentations were material,” the court still found that the district court judge erred in not allowing the defense to present certain evidence.

During the lower court trial, Litvak admitted that he made misstatements to buyers, but that those statements were not material and he did not believe the other parties in the transaction would be harmed because the bonds were being sold at “fully disclosed and agreed upon fair prices,” below the company's threshold for four percent profit.

The government said it would retry Litvak on the charges.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or [email protected]