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Jefferies LLC will pay $25 million to resolve U.S. criminal and civil investigations into its mortgage bond trading operations after one of its former traders was convicted for defrauding clients, and authorities said they are investigating whether other individuals broke the law, Reuters reported yesterday. The settlements announced on Wednesday by the U.S. Attorney in Connecticut, the U.S. Securities and Exchange Commission and the FBI resolve charges that Jefferies failed to properly supervise traders who cheated clients that took part in a federal program to kick-start bond markets after the 2008 financial crisis. The payout includes $14 million in fines and $11 million in restitution to customers, authorities said. Now part of Leucadia National Corp., Jefferies agreed to a non-prosecution agreement with U.S. Attorney Deirdre Daly in Connecticut in exchange for its cooperation and improved oversight of its employees.

Four former executives of Dewey & LeBoeuf LLP were charged by New York prosecutors yesterday with orchestrating a nearly four-year scheme to manipulate the firm’s books to keep it afloat during the financial crisis, and prosecutors said that the men talked openly in emails about “fake income,” “accounting tricks” and their ability to fool the firm’s “clueless auditor,” the New York Times DealBook blog reported today. The messages were included in a 106-count indictment against Steven Davis, Dewey’s former chairman; Stephen DiCarmine, the firm’s former executive director; Joel Sanders, the former chief financial officer; and Zachary Warren, a former client relations manager. They were charged with larceny and securities fraud. One of the men even used the phrase “cooking the books” to describe what they were doing to mislead the firm’s lenders and creditors in setting the stage for a $150 million debt offering that was supposed to solve the firm’s financial woes, according to the messages.

The judge in the trial of former Jefferies Group LLC bond trader Jesse Litvak sent the case to the jury, which will weigh whether statements he made to clients were inconsequential or aggressive sales tactics that constituted fraud, the Wall Street Journal reported today. The federal government argues that Litvak committed securities fraud by misrepresenting to clients the prices of certain residential mortgage-backed securities he was selling and buying on their behalf, in a bid to boost his trading revenue. The verdict in Litvak's trial will be closely watched, as it could set a precedent for a government probe launched after Litvak was arrested last year. Investigators in that probe are looking at whether traders at other banks acted similarly.

Five former members of Bernard L. Madoff’s inner circle told a “staggering” number of lies to prop up their boss’s $17.5 billion Ponzi scheme, a prosecutor said during closing arguments in their criminal trial, Bloomberg News reported yesterday. “Day after day, year after year, these defendants told an avalanche of different lies that allowed Madoff to steal billions from investors,” Assistant U.S. Attorney John Zach told jurors in Manhattan federal court. They each “made the fraud possible in their own way.” Testimony in the case ended yesterday. The criminal trial, now in its fifth month, is the first stemming from the swindle, which collapsed after Madoff’s arrest in December 2008 revealed his investment advisory unit hoarded customer cash for decades instead of using it to buy securities. Prosecutors say that the five were driven by greed to create millions of fake trading confirmations, bogus customer statements and falsified internal records to trick customers and regulators. Defense lawyers claim the group was duped into unwittingly aiding Madoff’s plot. All deny wrongdoing.

Madoff trustee Irving Picard, who will try to reinstate hundreds of lawsuits through an appeal to be argued on March 5, had his chances of success dealt a blow last week when the U.S. Supreme Court decided a case involving R. Allen Stanford’s Ponzi scheme, according to a Bloomberg News analysis today. Picard is appealing a federal district court decision barring him from suing to recover transfers made more than two years before bankruptcy. Were Picard to succeed on appeal, he might eventually be able to pay defrauded customers in full. Customers’ recoveries currently are in the 56 percent range. In last week’s decision in Chadbourne & Parke LLP v. Troice, the Supreme Court ruled in favor of defrauded customers, allowing them to sue firms and individuals who helped sell Stanford’s fraudulent securities. At first blush, Troice seems to help the Madoff trustee because the high court allowed defrauded investors to sue. Looking at the Troice opinion in detail, though, it’s at best unhelpful for Picard and customers who are suing third parties to recover their losses.

A bankruptcy petition preparer was ordered on Tuesday to serve nearly four years in prison for criminal contempt in a case that brought Bankruptcy Judge Steven Rhodes to the witness stand, the Detroit News reported yesterday. Inkster, Mich., resident Derrick Hills, 54, was sentenced by U.S. District Judge Sean F. Cox to serve 46 months after being convicted by a jury in September of five counts of criminal contempt following a five-day trial in federal court in Detroit. Hills violated five court orders from Judge Rhodes barring him from assisting in personal bankruptcy filings. Hills was facing any number of years in federal prison, since the charge has no statutory maximum penalty.

The Supreme Court ruled yesterday that victims of former Texas tycoon R. Allen Stanford's massive Ponzi scheme can go forward with class-action lawsuits against the law firms, accountants and investment companies that allegedly aided the $7.2 billion fraud, the Associated Press reported yesterday. The decision is a loss for firms that claimed federal securities law insulated them from state class-action lawsuits and sought to have the cases thrown out. But it offers another avenue for more than 21,000 of Stanford's bilked investors to try to recover their lost savings. Federal law says class-action lawsuits related to securities fraud cannot be filed under state law, as these cases were. But a federal appeals court said the cases could move forward because the main part of the fraud involved certificates of deposit, not stocks and other securities. The high court agreed in a 7-2 decision, with the two dissenting justices warning that the ruling would lead to an explosion of state class-action lawsuits.

The watchdog in charge of monitoring TARP recipients on Tuesday announced criminal charges against a former official of Anchor Bancorp Wisconsin Inc. for allegedly orchestrating a fraudulent real estate deal, the Wall Street Journal reported today. David Weimert was indicted in the U.S. District Court in Madison, Wis., on six counts of wire fraud relating to a real-estate development transaction he worked on as senior vice president of lending administration and as a president of an Anchor subsidiary that invested in real estate developments. The charges are the result of a probe conducted by the Federal Bureau of Investigation and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Weimert faces a maximum penalty of 30 years’ imprisonment on each count of wire fraud. According to SIGTARP, Weimert used his position at Anchor to mislead his superiors into believing a sale of the Anchor subsidiary’s share of a Texas industrial park was contingent on him purchasing a minority interest in the park. The Anchor unit agreed to the deal, giving Weimert both a minority stake in the development as well as more than $300,000 in commission fees.

Eric A. Bloom, who was at the helm of Sentinel Management Group Inc.’s collapse seven years ago, began a trial yesterday in federal court for his role in what prosecutors claim was a $500 million fraud with more than 70 victims, Bloomberg News reported yesterday. While prosecutors say that it was one of the largest frauds in Chicago’s history, Bloom contends the implosion was the fault of market forces beyond his control. Sentinel’s downfall was among the first of a swarm as the worst financial crisis since the Great Depression took hold. As a futures commission merchant, Northbrook, Ill.-based Sentinel managed short-term investments for commodity pools, hedge funds, a pension fund and other customers, prosecutors said in announcing the charges in 2012. Heading into August 2007, it had about $2 billion under management, its liquidation trustee, Frederick Grede, said in an interview. Citing credit market volatility, on Aug. 14 the firm froze client accounts preventing withdrawals. Over the next six days, Sentinel was sued by customers demanding access to their money, filed for bankruptcy and was accused by the U.S. Securities and Exchange Commission of co-mingling client funds with its own.

The hedge fund of Alphonse Fletcher Jr. has been described described by a court-appointed bankruptcy trustee as having elements of a Ponzi scheme, and four retirement systems are fighting to recover their money, the New York Times DealBook blog reported yesterday. A federal judge is scheduled to rule in March on a plan to liquidate the fund’s assets, which the trustee deemed “virtually worthless” in a report last November. The pension funds, which handle the retirement benefits for thousands of public employees in Louisiana, can only hope to get their money back through various civil lawsuits, the most recent of which was filed in the middle of January.