United States District Court, S.D. New York
ROSS H. MANDELL, Petitioner,
UNITED STATES OF AMERICA, Respondent.
OPINION & ORDER
HONORABLE PAUL A. CROTTY, United States District Judge.
26, 2011, following a five-week trial, the jury convicted
pro se petitioner Ross Mandell of (1) conspiracy to
commit securities, wire, and mail fraud, (2) securities
fraud, (3) wire fraud, and (4) mail fraud. He was sentenced
to a term of 144 months in prison. The Second Circuit
affirmed his conviction and sentence, United States v.
Mandell, 752 F.3d 544 (2d Cir. 2014), and the Supreme
Court denied certiorari, Mandell v. United States,
135 S.Ct. 1402 (2015).
now petitions, pursuant to 28 U.S.C. § 2255, for
reversal of his conviction and vacation of his sentence. He
argues that his trial attorney, Jeffrey Hoffman, suffered
from an actual and potential conflict of interest because he
simultaneously represented and had a close relationship with
an unindicted coconspirator, and that Hoffman was ineffective
because he did not file an interlocutory appeal after the
Court denied Mandell's motion to dismiss.
does not plausibly establish either a lapse in Hoffman's
representation, or that Hoffman's representation was
objectively unreasonable and that Mandell was prejudiced as a
result. The Court therefore denies Mandell's Petition.
Relevant Procedural History
2009, a grand jury indicted Mandell along with five
co-defendants, Stephen Shea, Adam Harrington, Arn Wilson,
Robert Grabowski, and Michael Passaro. See Dkt.
On December 14, 2010, a superseding indictment charged
Mandell with four crimes: (1) conspiracy to commit
securities, wire, and mail fraud, (2) securities fraud, (3)
wire fraud, and (4) mail fraud. Dkt. 96.
December 2, 2010, Mandell moved to dismiss the securities
fraud and conspiracy to commit securities fraud charges based
on the Supreme Court's decision in Morrison v.
National Australia Bank Ltd., 561 U.S. 247 (2010). Dkt.
91. Mandell argued that Morrison precluded the
extraterritorial application of the anti-fraud provisions of
the Securities Exchange Act. According to Mandell, because
the conduct alleged in the indictment related to securities
sales that occurred outside of the United States and not on
an American exchange, dismissal of the securities fraud and
conspiracy to commit securities fraud charges was required.
The Court denied Mandell's motion on March 16, 2011. Dkt.
January 25, 2011 and February 14, 2011, defendants Grabowski,
Passaro, Wilson, and Shea pleaded guilty to certain counts in
the superseding indictment. The remaining two defendants,
Mandell and Harrington, did not plead guilty, and instead
proceeded to trial. Trial commenced on June 20, 2011, and
concluded on July 26, 2011, when the jury found Mandell and
Harrington guilty of all charges against them.
their convictions, Mandell and Harrington moved pursuant to
Fed. R. Crim. P. 29 for a judgment of acquittal and
alternatively pursuant to Fed. R. Crim. P. 33 for a new
trial. Dkt. 161, 163. They contended, among other things,
that the government failed to prove intent to engage in a
scheme to defraud, intentionally false or fraudulent
representations, or fraudulent domestic securities
transactions within the applicable limitations period. The
Court denied their motions on November 2, 2011. Dkt. 173. On
May 3, 2012, the Court sentenced Mandell to a total term of
144 months of imprisonment. See Dkt. 204. The Court
also ordered Mandell to make forfeiture of $50 million, pay a
fine of $10, 000, and pay a mandatory special assessment of
appealed his judgment of conviction and sentence on May 10,
2012. Dkt. 208. He challenged, among other things, his
securities fraud conviction based on the Supreme Court's
decision in Morrison. See United States v.
Mandell, 752 F.3d 544 (2d Cir. 2014). The Second Circuit
rejected Mandell's argument, and on May 16, 2014,
affirmed Mandell's conviction and sentence. Id. On
February 23, 2015, the Supreme Court denied certiorari.
Mandell v. United States, 135 S.Ct. 1402 (2015).
Summary of Trial
the course of a five-week trial, the government introduced
evidence that Mandell and Harrington were guilty of
conspiracy to commit securities, wire, and mail fraud; and
substantive counts of securities, wire, and mail fraud. The
trial involved more than twenty witnesses, hundreds of
exhibits, and a transcript spanning nearly 4, 000 pages.
The Government's Case
substance of the government's case against Mandell was
that Mandell used two Wall Street brokerage firms, the
Thornwater Company (“Thornwater”) and Sky
Capital, LLC (“Sky Capital”), to defraud foreign
and domestic investors out of millions of dollars. The
evidence showed that the scheme started in 1998 with
Thornwater. Grabowski wanted to start his own brokerage firm.
Mandell helped Grabowski do so, and Grabowski was eventually
installed as president of Thornwater. Grabowski testified,
however, that Mandell, despite having no documented ownership
interest in or power to have control over Thornwater, ran the
show from behind the curtain. For instance, Mandell
controlled who was hired and fired; the spending of funds;
and what private placements to offer to investors. Mandell
also directed brokers on how to pitch several private
placements that purportedly would bring certain companies
public, instructing the brokers to lie about the potential
risks and rewards associated with the investments. The
Thornwater brokers lied about the certainty that the
companies would go public; the returns the investors would
earn; and the way the investors' money would be spent.
2000-2001, Mandell decided that he wanted to open a new
brokerage firm that would appear unrelated to Thornwater.
Thornwater was running out of cash, and investor complaints
were steadily increasing. But even as Mandell was purportedly
separating from Thornwater, he continued to exercise control
from behind the scenes. He resigned from Thornwater on or
about January 30, 2001, and entered into a sweetheart deal to
extract tens of thousands of dollars from Thornwater. He
moved across the street from Thornwater, opened Sky Capital,
and started hiring Thornwater brokers to work at Sky Capital.
He also continued to use Thornwater to raise money through a
private placement called Dorchester Holdings. Dorchester
Holdings served to keep Thornwater open while money was being
raised for Sky Capital to get off the ground.
2002, Sky Capital offered stock in the initial public
offering (“IPO”) of an affiliated company, Sky
Capital Holdings Ltd. (“Sky Capital Holdings”).
Sky Capital Holdings was listed on the Alternative Investment
Market (“AIM”) in London, a smaller market of the
London Stock Exchange. Sky Capital represented that a British
brokerage firm would handle the initial placement of stocks,
but Mandell and Harrington used their own brokers from
Thornwater to sell the shares in London. Then, because
investor money went to the British brokerage firm, the
Thornwater brokers were paid commissions out of the
Dorchester Holdings bank account. In March 2004, another
related company, Sky Capital Enterprises, was also listed on
stock trading on the AIM, the scope of the fraud scheme
expanded. In order to entice investors to part with their
money, the brokers offered investors the chance to purchase
the publicly traded Sky Capital stock at a
“discount” through private stock offerings. They
had to artificially prop up the stock price of the shares on
the AIM in order for the investors to feel that they were
getting a bargain. The brokers crossed stock trades, operated
under a no net sales policy, and received undisclosed
commissions (really bribes) as a reward for perpetuating the
scheme. The evidence showed that Mandell was aware of the
market manipulation, and why the market was being
manipulated. Additionally, investors were told, at
Mandell's direction, that there was a big liquidity event
just around the corner; but of course, no liquidity event
trial, Mandell argued that the government failed to meet its
burden of proving his guilt beyond a reasonable doubt. His
attacks focused on the (supposed) lack of evidence of his
control at both Thornwater and Sky Capital. He stressed that
Grabowski controlled and was the owner of Thornwater, not
Mandell; that Grabowski had the authority at Thornwater to
disburse money, not Mandell; that Grabowski's name was on
Thornwater documents filed with the Federal Trade Commission
and the National Association of Securities Dealers
(“NASD”), not Mandell's; and that Grabowski
had the power to fire Mandell. Mandell was just a broker at
Thornwater looking to represent his clients, not some puppet
master operating in the shadows. In other words,
Grabowski's testimony was all a lie. At Sky Capital,
Mandell highlighted that he was not the president; that he
could not and did not run the company; and that there was a
legitimate board of directors that made decisions relating to
respect to the brokers' pitches, Mandell argued that the
brokers chose to lie to investors and potential investors on
their own, and now that they had been caught, they sought to
make Mandell the fall guy. They lied at trial about
Mandell's involvement in order to provide substantial
assistance to the government so they could get the benefit of
their cooperation agreements and potentially lower sentences.
And the investors who took the stand and explained how they
were defrauded were all in fact sophisticated and understood
the risks associated with their investments. Mandell claimed
that he played by the rules. He spent millions on lawyers to
ensure that his actions did not violate any laws, and that
was why, for example, the private placements were accompanied
by memoranda that identified risks associated with the
investments. He successfully brought two companies public on
the AIM, and certain investors in fact were able to make
jury rejected Mandell's defense. On July 26, 2011, after
two and a half days of deliberation, the jury found Mandell
guilty of all four counts against him. As the Court explained
in considering Mandell and Harrington's Rule 29 and Rule
33 motions, “the jury's verdict was based on
overwhelming evidence that defendants had defrauded investors
and enriched themselves at the investors' expense.”
Dkt. 173 at 6.
Altman was an uncharged participant in the criminal scheme.
He did not testify, but his role was discussed throughout the
trial. Altman was a close friend of Mandell, and was an
attorney for both Thornwater and Sky Capital. Altman, his
firm, Ziegler, Ziegler and Altman (“ZZA”), and
his partner Steve Ziegler were involved in several of the
Thornwater private placements. Ziegler or Altman would help
set up the private placements, and investors would wire money
into a ZZA escrow account. Altman also coached employees to
lie under oath to the NASD and state that Grabowski-not
Mandell-controlled Thornwater. Additionally, Altman dealt
with disgruntled investors and offered them deals that were
less favorable than what the investors were originally
promised in order to keep them from complaining. Altman
directed at least one broker to sign a promissory note that
served to conceal that the broker was receiving undisclosed
commissions. Finally, Altman told at least one broker that
crossing stocks was legal and proper and that Sky
Capital's conduct was consistent with industry rules and
February 11, 2016, Mandell filed his § 2255 Petition. He
contends that his Sixth Amendment right to conflict-free
counsel was violated because Hoffman's loyalties were
divided between Mandell and Altman. Mandell asserts that
while Hoffman was representing Mandell, Hoffman and Altman
had a very close relationship: Altman referred at least two
high-paying clients to Hoffman, including Mandell; Hoffman
and Altman shared office space; and Hoffman and Altman had a
father/son relationship. Mandell also asserts that he learned
after trial that Hoffman had been simultaneously representing
Altman in connection with a Securities and Exchange
Commission (“SEC”) proceeding. That proceeding,
however, had nothing to do with any of the facts at issue in
Mandell's case. Rather, it dealt with Altman's
conduct as a lawyer for a friend who had been discharged by a
company she worked for.
November 10, 2010, the SEC found that Altman had offered to
have one of his clients “evade the [Division of
Enforcement's] service of a subpoena and/or testify
falsely in exchange for a financial package from two
respondents in the proceeding.” In re Steven
Altman, Esq., Release No. 63306, 2010 WL 5092725, at *1
(Nov. 10, 2010). Consequently, the SEC permanently denied
Altman the right to practice or appear before it. See
Id. Hoffman represented Altman during the SEC
proceeding, including before the Administrative Law Judge, as
well as in an action Altman later filed against the SEC.
See id.; Affidavit of Jeffrey C. Hoffman, Esq.
(“Hoffman Aff.”), Dkt. 326, ¶ 3; Altman
v. S.E.C., 10 Civ. 9141 (RJH) (S.D.N.Y.). On December 7,
2010, Altman brought an action against the SEC in the
Southern District of New York for declaratory and preliminary
and permanent injunctive relief (“Altman
Action”). Altman v. S.E.C., 10 Civ. 9141
(RJH), Dkt. 1 (S.D.N.Y.). Altman argued that the SEC lacked
the power to discipline lawyers appearing before it and
requested, among other things, that the SEC's November
10, 2010 order against him be vacated. Id. United
States District Judge Richard J. Holwell dismissed the action
for lack of jurisdiction on March 8, 2011, id., Dkt.
15, and the Second Circuit affirmed on June 12, 2012,
id., Dkt. 19. Altman also petitioned the D.C.
Circuit to review the SEC's order, but did so pro
se. The court denied the petition. Altman v.
S.E.C., 666 F.3d 1322, 1324 (D.C. Cir. 2011).
not really a conflict in which counsel appears in the same
case on behalf of multiple parties with different interests.
Nonetheless, Mandell claims that because of Hoffman's
divided loyalties, Hoffman chose to shield Altman from
potential liability to Mandell's detriment. Mandell
catalogs a laundry list of events that should have happened;
and “if only” they did, Mandell would have not
been convicted. Specifically, Hoffman should have allowed
Mandell to testify at trial and meet with the government,
proffer, cooperate, or plead guilty; Hoffman should have
called Altman and others as witnesses; and Hoffman should
have more vigorously cross-examined government witnesses
about Altman's role in the scheme. Many of the arguments
are contradictory and fanciful. Altman, for example, would
exonerate Mandell by inculpating himself; and Mandell would
proffer or cooperate, but would not admit guilt.
Additionally, Mandell asserts that Hoffman was ineffective
because he did not file an interlocutory appeal after the
Court ruled on Mandell's motion to dismiss pursuant to
the Supreme Court's decision in Morrison. This
argument is dismissed out of hand because it was raised on
appeal and rejected by the Second Circuit. It does not fare
better in the § 2255 Petition.
February 23, 2016, the Court ordered the government to
respond to Mandell's Petition. Dkt. 318. On June 2, 2016,
the government requested that the Court enter an order that
Hoffman submit an affidavit or affirmation addressing
Mandell's assertions and send Mandell an informed consent
form waiving the attorney-client privilege. 16 Civ. 1186
(S.D.N.Y.), Dkt. 9. On June 7, 2016, the Court entered the
order. Dkt. 321. Mandell's signed attorney-client
privilege waiver was filed on the docket on July 8, 2016.
Dkt. 322. On July 25 and July 26, 2016 respectively, the
Government filed its opposition to Mandell's Petition and
Hoffman's affidavit addressing the claims in
Mandell's Petition. Dkt. 324, 325, 326. On September 23,
2016, Mandell's reply, including his affidavit
(“Mandell Aff.”), was filed on the docket. Dkt.
October 20, 2016, the government filed a letter requesting
that the Court consider an e-mail chain in reviewing
Mandell's Petition. 16 Civ. 1186 (S.D.N.Y.), Dkt. 15,
refiled as Dkt. 18. The e-mail chain includes e-mails between
Altman and Mandell from December 7, 2010. 16 Civ. 1186
(S.D.N.Y.), Dkt. 18-1. In the first e-mail, Altman appears to
have attached a document filed in the Altman Action before
United States District Judge Holwell (see page 8,
supra). Altman states: “The attached was filed
today. You may find it interesting. It is the work of my good
friend Mitch Stein and I though Jeff [Hoffman] remains
involved for good order.” Id. at 2. Mandell
responds: “Congratulations! I will read through it
tonight!” Id. Altman replies: “Argument
on our motion for a stay/TRO/etc tomorrow at noon. Prayers
welcome!” Id. And Mandell then says:
“I'll pray hard!” Id. The government
contends that this shows that Mandell was aware of
Hoffman's involvement in representing Altman in
connection with the SEC proceeding. 16 Civ. 1186 (S.D.N.Y.),
Dkt. 18. Mandell objects to the Court considering the