Convicted Ex-Jefferies Trader Litvak's Second Appeal Is Deja Vu

(Bloomberg) -- Former Jefferies Group LLC managing director Jesse Litvak argued the first time he was convicted of lying to clients about the prices of mortgage bonds that he’s really no different from a used car salesman.

After being found guilty a second time, Litvak returned Monday to the same federal appeals court that let him off two years ago to warn again that if making misstatements while haggling with a client is a crime, Wall Street would have to make some big changes.

Allowing the conviction to stand would “criminalize all sorts of garden variety negotiations," Kannon Shanmugam, an attorney for Litvak, told a three-judge appeals panel in Manhattan, citing an example of an automobile dealer who lies to a customer about how much he paid for a car.

Litvak was convicted of one of 10 counts of securities fraud in January after a second trial on charges that he lied to Jefferies’ customers about how much mortgage bonds had been bought for or sold for in order to increase how much the firm made on trades. In April, he was sentenced to two years in prison and ordered to pay a $2 million fine, and he reported to a Florida facility to begin serving his punishment in September.

Shanmugam argued that the jury’s verdict was based solely on the statement of one counterparty who testified that he believed Litvak was working as his agent, on his behalf. He faced pointed questions from the panel, including U.S. Circuit Judge Denny Chin, who asked why a false acquisition cost wouldn’t be "material," or relevant to an investor’s decision to take part in a transaction.

"Puffery, sales chatter and the like does not rise to the level of materiality," Shanmugam said. The judges didn’t immediately rule on Litvak’s request.

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