Court Enters Final Judgments in Sky Capital Boiler Room Case
The Securities and Exchange Commission (“SEC”) announced that on April 8th the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York entered final judgments on consent against defendants Stephen Shea, the former Chief Operating Officer of Sky Capital LLC a/k/a Granta Capital Group LLC (“Sky Capital”), and three registered representatives (“RRs”) at Sky Capital, Adam Harrington Ruckdeschel, Michael Passaro, and Robert Grabowski, permanently enjoining them from violating the antifraud provisions of the federal securities laws. These judgments fully resolve the enforcement action before Judge Crotty as to these defendants.
In its complaint filed on July 8, 2009, the SEC alleged that Shea, Harrington, Passaro, and Grabowski used fraudulent boiler room tactics to raise more than $61 million from investors in two related companies – Sky Capital Holdings Ltd. and Sky Capital Enterprises, Inc. (the “Sky Entities”). The complaint alleged that the defendants orchestrated and participated in the extremely profitable scheme designed to fraudulently induce numerous individuals to invest in the Sky Entities. Additionally, the complaint alleged that the defendants prevented investors from selling their Sky Entities’ stocks that were otherwise publicly traded on the Alternative Investment Market of the London Stock Exchange, which had the effect of artificially inflating the price of the Sky Entities’ stocks. As a result of these fraudulent sales practices, investors were unable to sell their shares in the Sky Entities before trading in those stocks was suspended thereby rendering the investments worthless.
In the parallel criminal action brought by the U.S. Attorney’s Office for the Southern District of New York, the defendants received significant criminal sanctions, including incarceration for Shea and Harrington:
- Shea, age 43, is incarcerated at the Otisville Federal Correction Institution in Otisville, New York. Shea was the Chief Operating Officer of Sky Capital from 2001 until January 2009. Shea pled guilty to one count of conspiracy to commit securities fraud. He was sentenced to 30 months in prison followed by three years of supervised release, and over $74 million in forfeiture and restitution on a joint and several basis with the other defendants.
- Harrington, age 45, is incarcerated at the Miami Correctional Facility in Miami, Florida. Harrington was an RR at Sky Capital from 2002 to 2005. Harrington was convicted of conspiracy to commit securities fraud. He was sentenced to 60 months in prison followed by three years of supervised release, and over $74 million in forfeiture and restitution on a joint and several basis with the other defendants.
- Passaro, age 52, was credited for his cooperation and sentenced to three years of supervised release and substantial financial penalties. From 2001 until December 2008, Passaro was an RR at Sky Capital and worked out of the firm’s Boca Raton, Florida, office. On November 12, 2014 the Court sentenced Passaro to three years of supervised release, and over $74 million in forfeiture and restitution on a joint and several basis with the other defendants.
- Grabowski, age 48, was credited for his cooperation and sentenced to three years of supervised release and substantial financial penalties. Grabowski was an RR at Sky Capital from 2003 to 2008. On October 28, 2014, the Court sentenced Grabowski to three years of supervised release, and over $74 million in forfeiture and restitution on a joint and several basis with the other defendants.
Shea, Harrington, Passaro, and Grabowski consented to final judgments which permanently enjoin them from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC dismissed its claims against Sky Capital as the entity is defunct. The SEC’s litigation against Ross Mandell, who was sentenced to 144 months imprisonment and over $74 million in forfeiture in the related criminal action, is ongoing.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.