United States v. Mandell

• Decision Date: 16 May 2014
• Docket Number: 12–2090.,Docket Nos. 12–1967
• Citation: 752 F.3d 544
• Parties: UNITED STATES of America, Appellee, v. Ross H. MANDELL, Adam Harrington, Defendants–Appellants. Stephen Shea, Arn Wilson, Robert Grabowski, Michael Passaro, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

752 F.3d 544

UNITED STATES of America, Appellee,

v. Ross H. MANDELL, Adam Harrington, Defendants–Appellants.Stephen Shea, Arn Wilson, Robert Grabowski, Michael Passaro, Defendants.

Docket Nos. 12–1967, 12–2090.

United States Court of Appeals, Second Circuit.

Argued: May 2, 2013.

Decided: May 16, 2014.

Katherine R. Goldstein, (Michael Gerber and Brent S. Wible, on the brief), Assistant U.S. Attorney, for Appellee Preet Bharara, United States Attorney for the Southern District of New York, New York, NY.

Matthew W. Brissenden, Garden City, NY, for Defendant–Appellant Ross H. Mandell.

Scott J. Splittgerber, (Michael F. Bachner and Howard Weiner, on the brief), Bachner & Associates, P.C., New York, NY, for Defendant–Appellant Adam Harrington.

Before: WESLEY, CARNEY, and WALLACE,^* Circuit Judges.

PER CURIAM:

Defendant–Appellants Ross Mandell and Adam Harrington appeal from judgments of conviction entered on May 7, 2012, in the United States District Court for the Southern District of New York (Paul A. Crotty, Judge ), following a five-week jury trial. The jury found both Mandell and Harrington guilty of all four of the counts charged against them: (1) conspiracy to commit securities fraud, wire fraud, and mail fraud, in violation of 18 U.S.C. § 371; (2) securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff, 17 C.F.R. § 240.10b–5, and 18 U.S.C. § 2; (3) wire fraud, in violation of 18 U.S.C. § 1001; and (4) mail fraud, in violation of 18 U.S.C. §§ 1343 & 2. As to Mandell, the district court imposed a term of 144 months imprisonment, and ordered him to pay forfeiture in the amount of $50 million, a $10,000 fine, and a $400 mandatory special assessment. As to Harrington, the district court imposed a term of 60 months imprisonment, and ordered him to pay forfeiture in the amount of $20 million and a $400 mandatory special assessment. In this appeal, both Mandell and Harrington contend that their convictions should be overturned on a variety of grounds. In addition, Mandell challenges his sentence as procedurally unreasonable.

The principal challenge raised by both Mandell and Harrington is that their convictions for securities fraud should be reversed, insofar as there was insufficient evidence of domestic securities transactions occurring within the statute of limitations. This argument is governed by our recent opinion in United States v. Vilar, 729 F.3d 62 (2d Cir.2013), in which we concluded, following the Supreme Court's decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010), that “a defendant may be convicted of securities fraud under Section 10(b) [of the Securities Exchange Act of 1934] and Rule 10b–5 only if he has engaged in fraud in connection with (1) a security listed on a U.S. exchange, or (2) a security purchased or sold in the United States.” Vilar, 729 F.3d at 67. Thus, we held that Section 10(b) does not “apply extraterritorially in criminal cases.” Id. at 74.

Having made clear that Section 10(b) and Rule 10b–5 cannot apply to “extraterritorial criminal conduct in light of Morrison,” we explained how to determine “whether a security not listed on an American exchange was purchased or sold in the United States.” Id. at 76. As we stated, our test is: “[a] securities transaction is domestic when the parties incur irrevocable liability to carry out the transaction within the United States or when title is passed within the United States.” Id., citing Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 69 (2d Cir.2012). We went on to explain that a “domestic transaction has occurred when the purchaser [has] incurred irrevocable liability within the United States to take and pay for a security, or ... the seller [has] incurred irrevocable liability within the United States to deliver a security.” Id. (internal quotation marks and citation omitted).

With Vilar's holding in mind, we turn to the facts of this case. We review de novo challenges to the sufficiency of the evidence, and will “affirm [a conviction] if the evidence, when viewed in its totality and in the light most favorable to the government, would permit any rational jury to find the essential elements of the crime beyond a reasonable doubt.” United States v. Abdulle, 564 F.3d 119, 125 (2d Cir.2009) (internal quotation marks and citation omitted). In reviewing a claim that evidence was insufficient to sustain a defendant's conviction, we draw “all inferences in the government's favor and defer [ ] to the jury's assessments of the witnesses' credibility.” United States v. Sabhnani, 599 F.3d 215, 241 (2d Cir.2010). To succeed on a challenge to the sufficiency of the evidence, a convicted defendant “bears a heavy burden.” Abdulle, 564 F.3d at 125 (internal quotation marks omitted).

Viewing the evidence in this light, we hold that there was sufficient evidence of domestic transactions to sustain Mandell and Harrington's convictions for securities fraud. The jury considered evidence of five private placement offerings relating to three entities—Global Secure, Sky Capital Enterprises, and Sky Capital Holdings. Investors in the Global Secure private placement were required to submit purchase applications and payments to the company in the United States; the company had discretion to accept or reject those applications on receipt. Under Vilar, these were “domestic transactions.” Vilar, 729 F.3d at 76. Investors also made domestic purchases of private placement shares of Sky Capital Enterprises. In light of this evidence of domestic transactions, and viewing the evidence “in the light most favorable to the government,” a “rational jury” could have found the “essential elements” of Mandell and Harrington's convictions beyond a reasonable doubt. Abdulle, 564 F.3d at 125.

Mandell argues in the alternative that even if the evidence of domestic transactions was sufficient to convict him of securities fraud, his conviction should nonetheless be set aside due to the district court's extraterritorial instructional error. We disagree. Where a jury is “instructed on multiple theories of liability, one of which is defective,” our task is to “ascertain whether a flawed instruction had a substantial and injurious effect or influence in determining the jury's verdict.” United States v. Ferguson, 676 F.3d 260, 276 (2d Cir.2011) (internal quotation marks and citations omitted). A defendant is not prejudiced by an “infirm instruction” if “the jury would have necessarily found [him] guilty on one of the properly instructed theories of liability.” Id. at 277 (citations omitted). Here, as stated above, there was sufficient evidence of domestic fraud, which means that if the jury had been instructed as Mandell suggests regarding extraterritorial criminal liability for securities fraud, it would still have necessarily reached the verdict it did.

We also disagree with Mandell's argument that his and Harrington's mail fraud and wire fraud convictions should be overturned because the government failed to introduce evidence, and the district court failed to instruct the jury, about the requirements of English law. As to this issue, Mandell relies upon Pasquantino v. United States, 544 U.S. 349, 125 S.Ct. 1766, 161 L.Ed.2d 619 (2005) and United States v. Pierce, 224 F.3d 158 (2d Cir.2000). However, both Pasquantino and Pierce are not controlling. Pasquantino involved defendants who were convicted of wire fraud for smuggling liquor from the United States into Canada to avoid paying Canadian excise taxes. 544 U.S. at 353, 125 S.Ct. 1766. The Supreme Court held that the right to collect taxes is a property right, and that the defendants' attempt to deprive the Canadian government of that right constituted a deprivation of “property.” Id. at 356–57, 125 S.Ct. 1766. In this context, the Court explained that it would be necessary to offer “proof of foreign law” in order to determine what “property interests” are at stake in a case, insofar as such interests are creatures of “foreign law.” Id. at 371 n. 13, 125 S.Ct. 1766. Here, by contrast, the purpose of the criminal scheme was to deprive its victims of their money, not their more abstruse “property interests” as those would be defined by foreign law. Thus, Pasquantino does not apply. Likewise, Pierce also involved defendants who were charged with wire fraud based on a scheme to smuggle alcoholic beverages across the Canadian border. 224 F.3d at 160. As in Pasquantino, we held that this charge was predicated on the deprivation of a property right—namely, the Canadian government's “right to collect money in tax and duty revenue”—which meant that the “prosecution had to prove the existence of such a right.” Id. at 165. Pierce also does not apply to a situation such as this one, in which the object of the criminal scheme was to defraud its victims of money rather than a “property right.”

Likewise, we reject Mandell and Harrington's arguments that the district court erred in other respects with regard to the jury instructions. First, Mandell contends that the district court erred by instructing the jury that it was not required to find an actual misrepresentation in order to convict for mail or wire fraud. Even if the instruction were erroneous, any error would be harmless, because, as is pointed out below, there was evidence that Mandell made actual misrepresentations, which means that it is “clear beyond a reasonable doubt that a rational jury” would have found him guilty regardless of the allegedly erroneous instruction. See United States v. Pimentel, 346 F.3d 285, 302 (2d Cir.2003) (citation omitted). Second, Mandell contends that the district court erred by charging the jury regarding “implied price representations.” Because there was no objection at trial to this instruction, we review for plain error. See, e.g., United States v. Gomez, 580 F.3d 94, 100 (2d Cir.2009). Such a finding requires “(1) error, (2) that is plain, and (3) that affects the...