United States v. Litvak

Jesse Litvak (defendant) bought and sold residential mortgage-backed securities (RMBS). Litvak was negotiating a sale of RMBS to Brian Norris, who worked for another company, Invesco. Litvak lied to Norris about the price he paid for the RMBS he was offering. Specifically, Litvak told Norris that he paid about $73,000 more than he actually did. This misrepresentation likely resulted in Norris offering Litvak more for the RMBS than he otherwise would have. The United States government (plaintiff) charged Litvak with securities fraud. The government sought to introduce Norris’s testimony that he believed Litvak was working as his agent. The government believed that doing so would assist its claim that Litvak’s misrepresentation was material to the RMBS transaction. Litvak filed a motion to bar the testimony. The district court denied the motion, and Norris testified that he believed Litvak to be his agent. The evidence indicated, however, that an RMBS broker-dealer was never an agent for those to whom he sold RMBS. In fact, the district court instructed the jury to this effect, despite Norris’s testimony. The court convicted Litvak. Litvak appealed, arguing that his misrepresentations to Norris were not material, and thus could not support a finding of fraud under Section 10(b) of the Securities Exchange Act of 1934. Litvak argued that the district court should not have permitted Norris’s testimony about a purported agency relationship, because that testimony served to confuse the jury.