Ross Mandell Begins a New Life

Ross Mandell, a former broker and the owner of Sky Capital LLC and Sky Capital Holdings Ltd. was released from federal home confinement in early January of this year. He isn’t letting grass grow under his feet: he began working on plans for his new life well before his release. A cheerful and energetic Mandell plans to start new ventures, putting his lengthy struggles with the legal system behind him, though he still insists he committed no crimes.

We’ve written several times about his long journey through the courts. It all began back in 1998 when Mandell became involved with a broker-dealer called The Thornwater Company, L.P., and, after the dissolution of Thornwater, carried on with his own creation, Sky Capital, a brokerage that was active primarily in the U.K. and operated under the Sky Capital Holdings umbrella. 

Sky specialized in offering private placements, most of them involving the stock of two related companies, Sky Holdings, which traded as “SKH” on the Alternative Investment Market (“AIM”) of the London Stock Exchange, and in a sister company called Sky Enterprises, which traded on the AIM as “SKE.” Both companies were incorporated in Delaware in 2001 and 2002; branches of both were incorporated in New York at the same time. The stock they offered was not registered with the SEC but issued pursuant to Regulation S, which requires that it cannot originally be sold to U.S. residents. As the holding period that comes with Reg S placements expired for investors, the stocks could trade freely on the AIM. Sky Capital Holdings was the sales agent for the stock in SKH and SKE.

Sky Capital headquarters were in New York. In November 2006, the FBI, which had been helping with an investigation begun by the Securities and Exchange Commission, raided Sky’s New York headquarters. The AIM suspended trading in SKH and SKE; they did not trade again. An unintended consequence was that investors’ positions became worthless. Sky Capital, however, continued to operate. Several of its employees continued to work there until 2008; its COO, Stephen Shea, was the last to leave in early 2009. 

On July 8, 2009, the Department of Justice indicted Mandell and six others employed by the brokerages on two counts: conspiracy to commit securities, wire and mail fraud; and securities fraud. According to the DOJ, they had fraudulently raised $140 million from investors, and on the same day, the SEC brought a parallel civil lawsuit against the same individuals. Mandell and one of his co-defendants, Adam Harrington, lawyered up and prepared to fight; the others eventually pled guilty but were not immediately sentenced. The lawyer Mandell chose to represent him was Jeffrey Hoffman, a friend of one of Sky’s corporate attorneys. That turned out to be a mistake he would long regret. 

As the FBI continued its investigation, Mandell felt he needed a criminal attorney to protect his interests. He asked the Sky corporate attorney, Steven Altman, for suggestions. Altman recommended Jeffrey C. Hoffman. Mandell knew that Altman had provided many referrals to Hoffman and even rented an office from him but thought nothing of it. They were friends who worked together and did favors for each other.

When Hoffman told Mandell he had reason to believe an indictment was coming from the U.S. Attorney’s Office for the Southern District of New York, Mandell asked him to stay on. The two men negotiated a price for representation. Mandell swore, “I was told repeatedly that I was paid up and ENTIRELY covered up to the trial.”

But to his surprise, in November 2010, not long before the trial was to begin, Hoffman told him that he’d need “another million dollars or so.” When Mandell objected, Hoffman filed a motion to withdraw from the case, stating that he had not been paid the agreed-upon amount. Judge Paul Crotty, presiding over the case, agreed with Mandell, saying, “The fee dispute is largely irrelevant to Jeffrey Hoffman’s ethical duties undertaken from the time of his appearance on Ross Mandell’s behalf.  Under the law of this Circuit, there is a presumption that appearance means full retention which prohibits mid-case withdrawal solely because of a client’s nonpayment of fees or exhaustion of the retainer.”

Mandell had won the battle but at considerable cost. He was facing a trial at which he could be sentenced to as much as 25 years in prison; should that happen, he would be well into his 70s upon release. His lawyer was uninterested in representing him; the hostility between them would work against him. 

Mandell, characteristically upbeat, had what he believed was a strong defense to the conspiracy to commit securities fraud and the securities fraud charges lodged against him. On December 2, 2010, he and Harrington filed a motion to dismiss them based on the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., which had recently been handed down. He argued that Morrison precluded the extraterritorial application of the anti-fraud provisions of the Securities Exchange Act. Because the securities involved in the conduct alleged against him had occurred on the AIM, not a U.S. exchange, the charges against him should be dismissed. Judge Crotty disagreed, and the motion was not granted.  

Around the same time, in late January and early February 2011, all Mandell’s co-defendants except for Adam Harrington made deals with the U.S. Assistant Attorneys (“AUSAs”) assigned to the case and pled guilty. They would not be sentenced until the trial was over. The trial began on June 20, 2011, and ended on July 26, 2011. The jury found Mandell and Harrington guilty of all charges. 

Mandell was not surprised, but he had no intention of giving up and began preparing for an appeal. He was sentenced on May 3, 2012, to 12 years in prison, followed by three years of supervised release, and ordered to forfeit $50 million and pay a $10,000 fine.

On May 10, only days after his sentencing, he and Harrington filed an appeal with the Second Circuit. In his brief, he relied heavily on the argument he’d used in the motion to dismiss the DOJ’s case against him: that the Supreme Court had ruled in Morrison v. National Australian Bank, Ltd. that Rule 10b-5 of the Exchange Act is not extraterritorial. Mandell had been charged with securities fraud under Rule 10b-5. His appellate attorneys argued that extraterritorial reach does not apply in cases where a statute “criminalizes conduct that does not directly victimize the United States.”

The Amicus Brief

Unusually, the Association of the Bar of the City of New York filed a brief for amicus curiae in support of the appellants. The City Bar was founded in 1870 and is one of the oldest bar associations in the country. Its Special Committee on White Collar Crime felt the Mandell case raised important issues, including “the correct determination of the territorial scope of Section 10(b) of the Securities Exchange Act of 1934 and other federal statutes in criminal cases.”

The brief’s author was George T. Conway III, who had successfully argued the case for the respondents in Morrison. Conway, better known today as a political activist, wrote in support of Mandell’s appeal. The government claimed that Morrison governs in civil cases, but in criminal cases, it does not. It added that Dodd-Frank’s Section 929(P)(b) amended the jurisdictional provision of the Exchange Act to specify that U.S. district courts have jurisdiction over actions brought by the SEC or the U.S. involving “conduct within the United States that constitutes significant steps in furtherance of the violation even if the securities transaction occurs outside the United States and involves only foreign investors…”

In Mandell’s case, the government further argued that the legislative history of that provision reflects a “pre-existing intention to permit the Exchange Act to apply to criminal offenses involving significant conduct in the United States.” Conway disagreed, noting that the Dodd-Frank Act cannot be applied retroactively. The conduct described in the DOJ’s case against Mandell and his co-defendants took place between 1998 and 2006; Dodd-Frank was signed into law on July 21, 2010. 

Unfortunately for the appellants, the Second Circuit panel was not convinced by the prestigious amicus brief. For the occasion of its response to the appeal, the U.S. attorney’s office for the SDNY had found and added all the U.S. transactions they were able to find. Only 15 in number, they had not been part of the original case. Because of that, none of the allegedly harmed investors testified, so there is no record of whether they believed themselves to have been defrauded. While the appellate judges agreed that “Section 10(b) does not ‘apply extraterritorially in criminal’” cases, they ruled that the relatively scant evidence of domestic transactions was sufficient to convict Mandell and Harrington “beyond a reasonable doubt.” Mandell’s objection that the jury in the lower court had received a flawed jury instruction—one that failed to inform them that extraterritorial transactions should be disregarded—was disregarded. The appellate panel decided that the jury would have reached the same conclusions even if instructed differently. If the jury instructions were in any way lacking, it was a “harmless error.”

Mandell did enjoy one win. He argued that his co-defendants should have been found jointly and severally liable for forfeiture. The district court was ordered to issue an amended forfeiture order, which it did on May 22, 2014. 

Petition for Certiorari, the § 2255 Petition, and a Lawsuit

Ross Mandell had been free on bond during his trial and his appeal. Once the appeal was rejected, he had no choice but to surrender for incarceration in mid-2014. He had, however, no intention of giving up on finding a way to reduce his sentence. 

First, in 2015, he and Harrington filed a petition for a writ of certiorari with the Supreme Court. Certiorari—from the Latin for “to be made more certain”—is a process by which a person whose prior appeals have been denied can ask the Supreme Court to reexamine his case. If the Court “grants cert,” to which four of the justices must agree, the case will be scheduled for the filing of briefs and oral argument. Unsurprisingly, a great many petitions are submitted each term; only about 1.1 percent are accepted. The most likely cases to be heard are those involving constitutional questions and those that would resolve a circuit split. 

The petition is a refined version of the argument used in Mandell and Harrington’s pretrial motion to dismiss and their appeal: that the Supreme Court’s ruling in Morrison v. National Australia Bank Ltd. required that the jury be instructed that the extraterritorial transactions described at trial should have been disregarded. The Second Circuit had, as we’ve seen, ruled that to the extent that may have happened, it was a “harmless error” that would not have affected the jury’s verdict. 

As the petition put it:

The Appellate Court reached this conclusion by casting itself in the role of a post hoc jury, and combing the record (with the assistance of the Government) in order to find the very facts which the jury was never asked to find.  In doing so however, it failed to hold itself to the same standards which applied to the jury. Instead, it permitted itself to find “sufficient” facts by a mere preponderance of the evidence, while viewing such evidence in the light most favorable to the Government. Throughout the process, the Appellate Court studiously ignored the impact which the erroneous instruction likely had upon the jury, in light of the evidence and arguments which were actually before it.

In short, the Appellate Court’s determination of “harmless error” was almost entirely divorced from the reality of what actually happened at trial, and serves as poor consolation to the Petitioners in this case, both of whom are now serving lengthy prison terms.

We feel that it is indeed impossible to guess whether the error here was “harmless” or not, given that no one knows what the jury would have concluded if the extraterritorial transactions had been left unconsidered. 

The petition was rejected. 

Next, Mandell, acting only for himself this time, filed a § 2255 petition, which is a motion to vacate, set aside, or correct a sentence by a person in federal custody. In it, he revived the issues surrounding Sky corporate attorney Steven Altman and his own attorney, Altman’s friend and sometime partner Jeffrey Hoffman, alleging “Ineffective Assistance of Counsel.” This time, Mandell was representing himself, which is always difficult for a non-lawyer. 

A petitioner claiming ineffective assistance of counsel in violation of the Sixth Amendment must show that “(1) counsel’s representation fell below an objective standard of reasonableness;” and (2) “there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different.”

Those familiar with the course of Mandell’s case knew he’d believed since shortly before the trial began that Hoffman no longer wished to represent him because he felt he hadn’t been adequately compensated, though Mandell had been certain they’d agreed on the terms of that compensation. The judge ordered Hoffman to continue representing Mandell because it was his ethical duty so close to the start of the trial. It seemed unlikely that Hoffman was in the mood to give the case his all. 

There was something else Mandell says he didn’t know about Hoffman: that while he was handling the aftereffects of the FBI raid on Sky Capital headquarters in New York and keeping up with the investigation that was developing, he was also representing Altman in an administrative proceeding brought against him by the SEC. The matter began when an administrative law judge “found that Altman offered to have his client evade the Division’s service of a subpoena and/or testify falsely in exchange for a financial package from two respondents in the proceeding. The law judge further found that Altman did so with scienter.” 

Altman was disciplined by the imposition of a nine-month suspension of his privilege to appear or practice before the Commission. That was seen by others at the SEC as so lenient a punishment that they decided to make the suspension a permanent bar. He then went to federal court, claiming the agency “ha[d] wrongfully sought to ‘federalize’ the subject of attorney ethics discipline” by imposing its bar. Altman protested and tried to take the case to the D.C. Circuit Court of Appeals. His brief was rejected.

What did this have to do with Mandell’s case? He later came to believe, and then to know with certainty, that Altman was a “person of interest” in his own case, though Altman was never prosecuted. That is very relevant indeed. At the time, Hoffman represented Altman. He must surely have known Altman was under investigation but never breathed a word. 

Mandell also argued that Hoffman’s failure to file an interlocutory appeal when the district court denied his motion to dismiss based on the Supreme Court’s decision in Morrison. He further objected that Hoffman should have cross-examined witnesses about Altman’s role in the scheme. He saw actual conflicts of interest in Hoffman’s association with Altman and added that Hoffman should have called Altman to testify at trial. He also said Hoffman should have called him, Mandell, to testify, though it seems to be made clear in the petition that it was Mandell who ultimately decided not to take the stand. He also claimed that Hoffman never suggested he explore a plea bargain, cooperation, or a proffer, though Mandell himself has consistently said, from the start of the investigation to the present day, that he is innocent. 

The petition was heard by Paul Crotty, the district court judge, who concluded that:

Mandell fails to establish a plausible claim of ineffective assistance of counsel based on Hoffman’s purported actual or potential conflict of interest, or Hoffman’s supposed failure to file an interlocutory appeal. His Petition is denied in all respects, and no hearing is necessary.

Mandell, however, was still convinced that Altman had something going on with the government that may have damaged him. To that end, he filed several FOIA requests, hoping to receive documents that would shed more light on Altman’s role in the Sky case. Those requests were consistently rejected for no specific reason. In 2018, Mandell sued the SEC, the FBI, and the DOJ for withholding information that would help him overturn his conviction. 

While that may sound extreme, he was represented in the action by Mark G. Astor, a government transparency and media lawyer, and by Matthew Topic, another government transparency lawyer. The government said Altman has a right to privacy. But at whose expense? Walter Pavlo, who’s written about Mandell a number of times for Forbes, asked Topic, who replied:

Even if there was a privacy interest, it must outweigh the public interest in disclosure. Here, the extent to which prosecutors attempt or succeed in using criminal defendants’ prior attorneys to further a prosecution represents important public policy questions about respect for the attorney-client relationship and how the DOJ carries out substantive law enforcement policy. That is exactly the kind of public interest that’s well recognized in FOIA case law.

However, the suit didn’t work out as Mandell had hoped. Though there was, according to his attorneys, good reason to think Altman had been an unindicted co-conspirator in the Sky case, once again, Mandell did not prevail. On April Fool’s Day 2019, the FBI, DOJ, and SEC filed a motion for summary judgment. Mandell responded with a motion for summary judgment of his own. Briefs were filed; a hearing before the magistrate judge took place; more briefs were filed. In the end, on March 18, 2020, the Court adopted the magistrate’s report, granting the government defendants’ motion for summary judgment and denying Mandell’s motion for summary judgment. The case was over.

Altman is still a registered attorney; he practices on Long Island now, in Suffolk County. 

Four Years Later

Ross Mandell served out his term and was released to home confinement in February 2023. Just short of a year later, in early January 2024, the confinement ended, and he was ready to go.

He now has a website with a biography to introduce him to a generation younger than the one he left behind in 2014. He’s started a podcast called “It’s Our Time,” where he says he discusses “business, investments, & the Real World.”  Mandell will also be teaching an online course called “The Wealth Forumla,” which will be available in 2 weeks.

He also has a new book called Rock Solid. Overcome Your Obstacles… Achieve Your Dreams, is prepared to do motivational speaking and is available for media appearances. He has accounts on X, Instagram, Facebook, and LinkedIn. He isn’t using all of them to the fullest of their capabilities yet, but it seems likely that will come. Only yesterday, on X, he introduced some of the Miami Dade College business students to whom he’d be giving a talk. Three days ago, he posted that he’d been recognized by South Florida Magazine and the Luxury Chamber of Commerce as Person of the Month. 

He’s just finding his feet, but he’s clearly willing to get out there and talk to just about anyone as he works his way back, and he seems to find the process fun. He clearly enjoys the company of young people and says he believes his generation can learn a lot from them. That’s a good and hopeful attitude: generations learning from and with each other can only improve the world.

For more information about Ross Mandell, please visit Mr. Mandell is currently accepting offers to speak at universities and law schools.

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 and compliance 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. Hamilton & Associates Law Group, P.A. provides ongoing corporate and securities counsel to private companies and public companies listed and publicly traded on the Frankfurt Stock Exchange, London Stock Exchange, NASDAQ Stock Market, the NYSE MKT and OTC Markets. The firm’s services include SEC reporting requirements, corporate law matters, securities law and going public matters.

For further information about this securities law blog, please contact Brenda Hamilton, Securities Attorney, at 200 E. Palmetto Park Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].

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