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My Take
PUBLISHED : Monday, 08 October, 2012, 12:00am
UPDATED : Monday, 08 October, 2012, 4:53am

Ross Mandell fraud case exposes double standards of US

The US is often accused of imperial overreach. But when it comes to going after American fraudsters defrauding foreigners, it may well suffer from "underreach" or not reaching at all. Depending on an appeals court decision, it may be legal for Americans to cheat foreign investors so long as the securities involved are traded overseas.

Here is a name you should know: Ross Mandell. Despite his self-styled moniker as the "bad boy of Wall Street", he's not in the same league as such luminaries as Ivan Boesky, Michael Milken, Bernard Madoff and Allen Stanford. But how a top court in the US decides about his criminal fraud could have worldwide repercussions.

In July, the former head of Sky Capital was jailed for 12 years after being found guilty of securities fraud, wire fraud and mail fraud. Prosecutors believed his firm bilked investors out of more than US$140 million. However, though he worked in the US, most of his victims were British and the securities were traded in London.

Now he is free on bail, pending an appeal. The powerful New York City Bar Association is supporting his case and many experts believe the US Court of Appeals for the Second Circuit is likely to uphold his appeal. This is because in 2010, the US Supreme Court ruled in a civil case that the US has no jurisdiction when it comes to foreign investors involved or cheated in the trading of foreign securities. The appeals court is likely to rule the 2010 judgment applies to criminal cases like Mandell's as well.

This is how it looks to a foreigner like me. US prosecutors and regulators have no compulsion going after foreign financial institutions and investors even if their transactions were merely routed through the US while their origin and destination were overseas and the clients all reside outside of the US. They claim jurisdiction as long as these institutions have an office address in the US. Given it is impossible for such institutions not to have a presence in the US, they effectively claim jurisdiction over most major financial players in the world. The latest targeted was Standard Chartered, which was fined US$340 million for transacting for Iran under US sanctions.

But if Americans want to cheat foreigners, hell, it's a free country, so long as no US securities are involved.


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(continued) ...
Not since US v Frank Quattrone back in 2005 has there been amicus support from a prestigious organiziation like this (I believe Quattrone had amicus briefs written on behalf of the NACDL) .
Mr. Quattrone had his conviction reversed on appeal and is back working in the financial world succeeding and making millions.
You may also want to bring your readers the attention of the Alberto Vilar case. Mr. Vilar was ordered to be released this week, by the very Judge (Judge Richard Sullivan ) who put him there 4 years ago!!! Why??? Because of the Morrison law which has not been Bright Light Tested until Mandell's Bail motion which was denied by District Court Judge Paul Crotty olny to be overthrown by the 2nd Circuit court of Appeals within two days.
Alberto Vilar was in the playing leagues with the guys you mentioned in your article, I believe at one time he was a billionaire and was The MET in NY biggest benefactor....this week, he will walk out of Federal Prison...pretty crazy stuff!
A reader
(Posting on behalf of reader who wishes to remain anonymous, by email request)
I enjoyed reading your article about Ross Mandell.
This is unprecedented in this new world of financial/criminal prosecutions via the Dept. Of Justice post-Madoff.
To my knowledge, the "powerful" NYC Bar Association has never filed an amicus brief on behalf of a high profile criminal defendant such as Ross Mandell. You mentioned Madoff, Stanford, and Boesky in your article....although Mandell was not in their playing leagues, these convicted Infamous White Collar Fraudsters that you named either pled guilty to their crimes, were NEVER granted bail prior to their convictions, and or were all sentenced and is serving jail time.
What you forgot to mention was that Mandell wasn't even charged with a crime in London( where the majority of his investors dwell) ....why you ask??? Because he didn't break the law. What gives the US the right to charge and American doing business and complying with the laws of another country when taht very country NEVER cried foul??? Mind Boggling isn't it?
If you research Mr. Mandell he appeared on national TV screaming his innocence on FOX TV and Jesse Ventura's Conspiracy Theory. It's clear to me and you Mr. Lo from following this case that the Southern District of NY have overreached any legal authority in the prosecution and conviction of this guy. Apparently, the NYC Bar ****. agrees... (to be continued)
Mr. Lo may be excused of not understanding the complexity of U.S. securities laws which are the most comprehensive in the world, notwithstanding far from being "perfect". If a fraudster deals in foreign securities to foreigners outside of the U.S., it is clearly under most common laws that the U.S. has no jurisdiction on the fraudster of fraud committed outside of the U.S. jurisdiction. However, it appears purposeless of picking on such a subject and writing it on SCMP. labelling it as "double standard". It seems Mr. Lo is running out of things to say but reverting to meaningless burbbling.
And what about foreign companies that get scammed and cheated in places like China where local "courts" and government are in bed with the local companies that cheated the foreigners thus making trials just for show with the usual predictable outcomes?
Sure this case stinks but you can never truly know how a judge might interpret a law because judges are independent (or at least appear more so than in places like China) in the US. At least this guy has an appeal and appeal process. Not like the recent cases of Gu Kailai or the young lady billionaire who defrauded many people in the Mainland because she needed to borrow from individuals and banks don't loan to anyone except connected state run companies or the son/daughter of a "revolutionary hero".
Where would you want YOUR trial to be?
One and, perhaps, two appeal courts to go. Alex Lo should try gritting his teeth in the meantime.


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