United States v. Mandell
752 F.3d 544
| 2d Cir. | 2014Background
- Defendants Ross Mandell and Adam Harrington were convicted after a five-week jury trial of conspiracy, securities fraud (§10(b)/Rule 10b-5), wire fraud, and mail fraud; sentences included lengthy prison terms and large forfeiture awards.
- Central criminal conduct involved private-placement offerings for entities (Global Secure, Sky Capital Enterprises, Sky Capital Holdings) where investors purchased shares; some purchases and subscription processes occurred in the United States.
- Defendants challenged sufficiency of evidence for securities fraud on grounds that transactions were extraterritorial and outside the §10(b) reach after Morrison.
- Multiple ancillary challenges were raised on appeal: jury instructions (including extraterritoriality and implied price representations), requirements to prove foreign law for mail/wire fraud, admissibility of certain witness testimony and recorded conversations, Franks suppression claim, sentencing reasonableness, and forfeiture particulars.
- The government conceded one forfeiture defect (failure to make defendants jointly and severally liable); otherwise the Second Circuit reviewed de novo sufficiency claims and abuse-of-discretion for sentencing and evidentiary rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Extraterritorial reach of §10(b)/Rule 10b-5 | Government: §10(b) applies only to U.S.-listed securities or securities purchased/sold in U.S.; domestic transactions existed here | Mandell/Harrington: Transactions were extraterritorial/not domestic within statute of limitations | Court: Sufficient evidence of domestic transactions (investor applications/payments to U.S. company) under Vilar/Absolute Activist; convictions upheld |
| Jury instructions on extraterritoriality and other charges | Govt: instructions were proper and any error harmless | Mandell: defective extraterritorial instruction and other instructional errors prejudiced verdict | Court: Even if an instruction was flawed, sufficient properly instructed theory remained; no reversible prejudice |
| Need to prove foreign law for mail/wire fraud (Pasquantino/Pierce) | Govt: scheme targeted victims’ money; no need to prove foreign property-law interests | Defendants: must prove foreign law to show deprivation of foreign property interests | Court: Pasquantino and Pierce inapplicable because scheme sought victims’ money, not to deprive foreign governments of statutory tax/duty rights; convictions stand |
| Forfeiture order form and amount | Govt: forfeiture based on gross proceeds; (conceded) should state joint-and-several liability | Mandell: required preliminary forfeiture order; forfeiture should be limited to personal gain (direct costs reduce proceeds) | Court: Rejected procedural and amount challenges (defendant bore burden to show direct costs); accepted concession on joint-and-several language—vacated and remanded to amend forfeiture order |
Key Cases Cited
- United States v. Vilar, 729 F.3d 62 (2d Cir. 2013) (§10(b) applies only to U.S.-listed securities or securities purchased/sold in the United States; domestic-transaction test)
- Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247 (U.S. 2010) (limits extraterritorial application of §10(b))
- Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012) (defines domestic securities transaction: irrevocable liability or pass of title in U.S.)
- Pasquantino v. United States, 544 U.S. 349 (U.S. 2005) (foreign-tax-avoidance scheme required proof of foreign law to identify property rights)
- United States v. Santoro, 302 F.3d 76 (2d Cir. 2002) (broker’s duty to disclose receipt of excessive commissions)
- United States v. Contorinis, 692 F.3d 136 (2d Cir. 2012) (forfeiture among co-conspirators should be joint and several)