Mandell, Ross - $140 million Wall Street scam
Self-described ‘bad boy’ of Wall Street stands trial
Ross H. Mandell arrested on charges he was central to a $140 million securities fraud scam
By Tom Hays - June 23, 2011
NEW YORK —Ross Mandell has embraced his billing as Wall Street's "bad boy" investment manager — a shameless self-promoter who brags about how he over-indulged in fast-lane excesses before getting sober, bulking up and becoming rich during the dot-com binge in the late 1990s and early 2000s.
The FBI abruptly rewrote the script in 2009 by arresting him on charges he was central to a $140 million securities fraud scheme. Fast forward to Wednesday, when an admitted co-conspirator who took the witness stand against Mandell was asked what some of the cash raised from investors was spent on.
"Strip clubs and prostitutes," the ex-trader told jurors at Mandell's trial in federal court in Manhattan.
In a courthouse where Bernard Madoff pleaded guilty and a jury recently convicted a former hedge fund manager in a massive fraud prosecutors say was the largest of its kind, Mandell's case is far from the highest profile white-collar case in recent memory. However, its star defendant could the most colorful — and probably first to proudly post photos of his perp walk on his promotional website.
Mandell, 53, has pleaded not guilty to securities fraud charges that carry a maximum penalty of 20 years in prison.
He's been free on $5 million bond. But rather than hunker down with his lawyers to quietly fight the charges, he's worn the case like a custom-made suit — on rossmandell.com, Facebook, YouTube, a guest spot on a cable talk show and anywhere else he can get an audience.
"I'm coming to you live, uncut, unedited, uncensored, unfiltered and ... I am still under arrest," he says in infomercial intonations on one of several pretrial clips shot for his website.
On video, a preening Mandell covers Charlie Sheen's flameout — "Now he's beating up hookers in the Plaza Hotel. Does anyone see a pattern?" — the benefits of altruism — "There's something about helping another person that allows a grace to envelop us" — and the key to closing deals — "You can't quit. Quitters never win anything. It's about a sincere will to win."
Another Mandellism: "Hollywood is lovely. Wall Street is a rough place, baby."
By contrast, the government has portrayed the Brooklyn-born Mandell and a co-defendant as ordinary con-men who took advantage during the frenzy over internet tech stocks by using their broker-dealer operation to solicit private investments in startups.
"Everything with 'dot-com' attached to it was going through the roof," said Robert Grabowski, the broker who pleaded guilty in exchange for his testimony.
One of the cheesier pitches cooked up by Mandell for a failed Priceline.com knockoff called Ticketplanet.com. was how the new company would overcome the popularity of Priceline pitchman William Shatner.
"We're going to do one better," Grabowski said investors were told. "We're going to get Mr. Spock."
Leonard Nimoy was never beamed up. Nor did the company go public as promised. But prosecutors claim an illicit spending spree with investor money went on unabated until two brokerage operations went bust.
Rather than deliver the sure-thing returns promised investors, the defendants "put much of their money directly into their own pockets and spent it on luxury items like fancy cars and flashy watches" Assistant U.S. Attorney Pablo Quinones said in opening statements earlier this week.
Grabowski testified that about $3,000 went for a birthday party for Mandell's daughter. Prosecutors say thousands more went into redecorating a Mandell's condo in Manhattan and a Boca Raton, Fl. home he shares with his wife and two young daughters.
The defendants also splurged on private jets and expensive vacations, and also provided "adult entertainment" on junkets organized by Mandell for a crew of brokers who were in on his fraud, prosecutors say. The broker also got kickbacks disguised as loans, advances or bonuses.
The scheme continued until one of the crooked brokers was caught lying to an FBI undercover officer. The broker agreed to secretly tape conversations with Mandell, including one that captured the defendant instructing the broker to continue deceiving investors, prosecutors say.
The defense team has countered by attacking Grabowski's credibility, claiming he was the one in charge of the investment operation and controlled its purse strings. The clients, it adds, were told all along that the investments were risky, and that they could lose all their money.
Mandell insists he's a recovering alcoholic, fitness freak and family man who left behind a lifestyle he likens to that of the diabolical Gordon Gekko in the film "Wall Street."
He failed his clients by getting in "way above his head," and felt "crushed" when he learned his business was going under, defense attorney Jeffrey Hoffman said in his opening.
"You'll hear that he lost it all," the lawyer said. "You won't hear that he went back to the bottle. You won't hear that he fell apart. You'll hear that he remained sober."