Ross Mandell: Trader Act Has Legs in Court

“Indeed, a successful fraud often involves telling sufficient truth so that the half-truth and the non-truth can be fully effective.”  –- U.S. Attorney’s indictment of Ross Mandell in the U.S. District Court for the Southern District of New York.

In a press release describing himself as a “Wall Street trader,” indicted broker Ross Mandell told the world that he is filming a reality show to clear himself of charges in a securities fraud investigation involving the Securities and Exchange Commission, the U.S. Attorney, and the FBI.

It was not immediately clear how access to a medium responsible for coarse, manipulative garbage such as ”Who Wants to Marry a Multi-Millionaire?” and “The Flavor of Love” could influence Mandell’s credibility in a positive manner.

However, Mandell’s reference to Wall Street rings true. The FBI obtained a search warrant for a Mandell property on Wall Street, where the agency obtained information used in charging  the Boca Raton, Fla., resident in what the U.S. Department of Justice alleges is a $140 million fraud scheme.

Mandell’s efforts in court so far involve one showing of an attempt to disqualify evidence found in the searches. That effort was canceled by the judge, who also put a related motion to reconsider on permanent hiatus.

If federal authorities have their way, the setting for Mandell’s show will be a federal correctional facility, where charges of securities fraud and conspiracy could put him on stage for 20 years and five years, respectively.

The indictment against Mandell casts him not as a trader, but as a retail broker running what authorities refer to as a boiler-room operation. From 1998 through 2006 Mandell and associates allegedly used manipulation and lies to market private placements through Sky Capital, which Mandell founded in 1997.

Mandell controlled Sky Capital even though his previous history of disciplinary events involving the National Association of Securities Dealers/Financial Industries Regulatory Authority put the company in a position where it officially could not allow Mandell a supervisory role, according to the indictment. FINRA’s records contain 30 pages of information on settled claims against Mandell going back to 1988, when he resigned from a broker position because of allegations that he lied to clients and engaged in unauthorized trading.

Mandell was also censured and suspended by the New York Stock Exchange  in 1995 for alleged unauthorized trading that included risky short sales.

Federal investigators claim Mandell ran a boiler room touting private companies in which he or Sky Capital had an interest. Mandell manipulated the market for securities issued by Sky Capital, lied, and converted client funds to invest in the private placements, the indictment alleges.

Much of the capital extracted from customers allegedly went to enriching brokers through undisclosed commissions and paying off customers of earlier sales to keep them from complaining to regulators.

Sky Capital allegedly defrauded customers by refusing to take sell orders on touted stocks and engaging in practices such as parking stock, illegally crossing sales to create the appearance of liquidity, and bribing brokers.

Mandell claims the authorities are conspiring against him because he was leading investors and capital away from the U.S. to the London Stock Exchange’s AIM.

The courts have not looked favorably on attempts to sway the outcome of litigation via media exposure.

In a separate case, former Universal Express CEO Richard Altomare responded to SEC allegations of stock manipulation with a blizzard of press releases painting a Byzantine picture of a federal and corporate conspiracy to destroy his luggage handling businesses. The company ultimately failed and went into receivership.

Altomare allegedly continued to sell shares in his company even after regulators ordered him to stop. U.S. District Court Judge Gerard Lynch finally tired of Altomare’s incessant proclamations and refusal to cooperate, according to a 2008 report from the South Florida Business Journal:

Lynch told Altomare that if he doesn’t cooperate or hides behind the Fifth Amendment, he’d better have his toothbrush ready.

Altomare was ultimately jailed on a contempt of court charge.

Mandell continues to plead his case, both in the court and in the media. His attorney did not respond to a request for comment.

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