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Robert Rosenthal

Robert Rosenthal

Posted: September 21, 2010 03:04 PM

At precisely 7 A.M. on July 8th, 2009, Ross Mandell turned himself in to the FBI at their headquarters in downtown Manhattan.

A devoted husband, loving father and multimillionaire Wall Street stockbroker, Mandell was happily "living the dream," semi-retired in Boca Raton, Florida. Now free on $5 million bond and facing 25 years in jail, he has been indicted on two counts of committing securities fraud in a scheme to swindle investors. Conventional wisdom in complex securities cases like this suggests a simple strategy: "lawyer up" and shut up. But if Mandell is going down, it won't be quietly. Instead, the combative, controversial and contentious Mandell is actively pitching a TV reality show called Facing Life.

His journey begins in a middle class suburban community on the South Shore of Long Island, a few miles from JFK airport. Mandell attended Lawrence High School, where I knew him, although I had not seen him since. We only recently reacquainted on Facebook where the urgency of his posts caught my attention. We arranged a meeting to talk face-to-face.

Mandell's high school experience was fairly typical. He describes himself as a "good kid, decent student, a lot of friends" from a "family on the go." But his life changed dramatically when his father died from a sudden heart attack, sending a 16-year old Mandell into a state of shock. The day of his dad's funeral someone handed him a joint and said, "Dude, you're really a wreck, why don't you just try this?" He took one hit and his pain went away. For 17 straight years he was stoned almost every day.

Ross was graduated from the University of Maryland and set off for Wall Street just at the outset of a bull market that the SEC had only recently opened up to telemarketers. Ambitious and hardworking, he proved to be extremely effective at cold calling, at times spending up to 18 hours a day pushing buttons, literally. He became known as a "super salesman," as he tells it, working at companies like E.F. Hutton, Oppenheimer and DH Blair. As the market experienced a boom, Mandell made millions, but when the market crashed in October of 1987, so did he.

"I hit my first bottom. You see, I'm an alcoholic and a drug addict. And I have been since I'm 17 years old." Between 1987 and 1990, he drifted from firm to firm. "Wall Street was very unsettled. The big crash was something that no one had ever anticipated. I lost about $20 million in that period of time, personally, and found myself at 33 years old, in 1990, a million dollars in debt. I was unable to perform in business for the first time and couldn't show up. And I was just bankrupted on a spiritual, physical and emotional basis."

In October of 1990 he checked himself into the Silver Hill Psychiatric Foundation and completed its 28-day program. He was introduced to the concepts of abstinence, service and Alcoholics Anonymous. Determined to make amends and become a contributing, positive member of society, he has been a sober member since October 11th, 1990.

Although he returned to the financial industry as "damaged goods," by the mid 90's he had managed to open his own brokerage firm and build an impressive business, becoming a millionaire again. Then in March of 1996, the Wall Street Journal wrote a front-page story about him, citing past customer complaints, his succession of job terminations and a suspension by the New York Stock Exchange for unauthorized trading. "Bad boy" Mandell was essentially painted as the poster child for all that was wrong with Wall Street regulation.

"It was a hatchet job," he declares. "Very serious, influential people felt threatened because of my new brokerage firm, so they tried to bury me." Mandell becomes animated when discussing what he sees as a corrupt system. "The gatekeepers, the regulators, the people that were supposed to stop Madoff from stealing $60 billion, that governed and regulated AIG and Lehman Brothers and Bear Stearns, all the banks, these are the people that are saying I'm guilty of something. They're charging me. Meanwhile, on their watch this country was raped, looted and the wealth of this country was eviscerated." He continues, "So not only are they charging innocent people, just to make headlines, they should be charged and should be found guilty now for what's happened to this country."

Disheartened but undeterred by the brutal press coverage, Mandell went on to form his own international brokerage firm that he eventually took public on the London Stock Exchange in 2002. It was a very ambitious undertaking in difficult economic times. He explains, "It had never been done and everywhere I went people would laugh and say, 'can't be done' and 'it's never been done.' Ultimately, he created a way to get it done, claiming to be the first American to bring two regulated American businesses public on the London Stock Exchange. "The stock was up 40 percent the first day. And it became the number one performing financial stock in Europe for two years. I became a rock star in the industry."

Almost a decade after the Wall Street Journal article, Mandell was back on top, this time as Chief Executive of Sky Capital, the company he founded. Forbes wrote a positive story about him in 2005. Entitled "Second Act," it declared that "Wall Street's "bad-boy" broker Ross Mandell is back with a flair -- pushing stock and courting politicians." But Mandell is convinced that there were dire consequences to his international success.

"That Wall Street Journal article put my face on the wall of every regulator since 1996. When I went public in London with an American business and showed the world it could be done, for a fraction of the cost of going public in America, and for half the regulation, 250 companies then followed the footprint I created, meaning 250 companies that would have went public in America are now going public in London. And London is now being touted as the financial capital of the world, all because of Ross Mandell and the footprint that he created. One of the things that became very apparent was that I became public enemy number one."

Certain of his innocence, Mandell sees himself as a convenient scapegoat. "Do you know why they weren't investigating Bernie Madoff at the SEC? Because they were in my place -- in three years, (there were) 14 investigations from all the different agencies sitting in my little place, 110 Wall Street. Bernie Madoff is down the block looting $60 billion, and by the way, he was the president of NASDAQ. People don't understand that he was the president. He was part of the club. When you're part of the club you do not get investigated. You tell the corrupt who to investigate. 'Go get Ross Mandell. Go get this one, go get that one.' Meanwhile, Lehman Brothers is going bankrupt. AIG is beyond bankrupt. Merrill Lynch. And they're all pointing fingers at guys like Ross Mandell. It's horrible. It's pathetic."

"Everything I say can and will be used against me in a court of law. I'm not sitting with a lawyer. I didn't bring my lawyer. He's not advised me what to say. I don't have any creative control or editing control. They can twist this interview around and do what they want with it. That's a little frightening."

Then why is he actively taking his case to TV? "I'm out there because I didn't do what I'm accused of doing. And I'm not gonna hide under a rock and I'm not gonna let the system steamroll me and bury me, which it does to most people, even innocent people that are charged."

After being perp-walked and paraded in front of reporters and news crews -- "like a red carpet event, except I'm in handcuffs" -- his photograph was featured in hundreds of newspapers around the world. Before he had even said a word publicly, "I'm a scumbag, evil, wrongdoing, bad guy. Papers like the Times of London were quoting me, as if they interviewed me. Never spoke to me. I have already been arrested, tried and found guilty. This is the government's play."

The Securities and Exchange Commission sees it differently, alleging that Mandell and six others ran a fraudulent transatlantic boiler room scheme that raised millions of dollars from U.K and U.S. investors who were then restricted from selling their stock, and their investments later became worthless. The SEC's complaint further claims that between 2002 and 2006, Sky Capital raised over $61 million from investors and that Mandell used the investor funds to subsidize his own lifestyle with first-class travel, five-star hotel stays, expensive meals, adult entertainment, and child-care expenses.

The U.S. Southern District of New York, where Rudy Giuliani made his name, is involved in orchestrating the government's case against Mandell. Their conviction rate is exceptionally high, but that likely has something to do with their selective prosecution of those cases they feel most certain to win. In fact, according to a recent Bloomberg article, headlined "Reputations Don't Return When Prosecutors Drop Charges", there have been "a growing number of executives who have been indicted for corporate crimes in recent years and then had the charges dropped. From 2006 to 2008, the most recent period available, U.S. prosecutors dismissed charges against 42 such defendants for which the most serious charge was securities fraud."

Naturally, Mandell is outraged. "42 people that they charged, they caused to be Grand Jury indicted after dragging them through the process, two, three years. Right before the trial is scheduled, they just drop the charges against these men. 42 innocent men were dragged through the process and not even tried. They didn't ask them to plead to a misdemeanor, take a little fine. They just discharged them completely. And that only happens when someone is innocent. I hate to say it -- they prosecute innocent people all the time. In a complex securities white-collar matter, your legal fees are in the millions of dollars. Can't work. Your phone stops ringing. People assume you're guilty 'cause you've been charged. Much like me, all of them were tried in the papers and found guilty in the court of public opinion, even though they never had a defense and never spoke. I'm not gonna lie down and disappear. I'm not made of that. I'd rather stand up and fight than live on my knees."

"These are the same people that were standing over Madoff, Lehman Brothers, AIG. Goldman Sachs, which by the way, just admitted that they didn't label one of their investments properly and are giving $550 million to the SEC when the Treasury just gave them $10 billion in TARP money. That's a nice trade. You give me $10 billion and I give you back $550 million. I don't admit wrongdoing; I just say I didn't label it properly. It's a pretty good deal. If you hold that $10 billion for the nine months they did, you get your $500 million right there at one percent interest."

The worst part of his experience was being humiliated on television and all over Google for his daughters to see. "I'm raising two little girls to be honest and good, to love this country. I love America. I'm proud to be an American, which is why I gotta speak out, because what's going on in this country is just not acceptable, it's just not palatable. My children see what's going on with me. And it's killing me because I didn't do these things and I'm not that guy and they don't understand. "But daddy, daddy you would never -- you didn't..." I was never arrested before. I don't have a criminal record. I might have had run-ins with customers over the years, that's part of the business. Never been even accused of a crime, let alone charged with a crime. What I hope to do is clear the record."

"I want my children to be able to read about me some day. They already know who I am. You can't sway them because they're with me every day. I sleep with them every night. And they know who daddy is, but they don't understand why other people feel this way."

How does one endure the dreadful possibility of spending the rest of his life behind bars? "It's the hardest thing to do. It's my reality right now. It's undeniable. That's why this show and this story's so compelling because I don't know how it's gonna turn out. I'd like to believe I do. My attorney would like to believe he does. The truth is nobody knows what's gonna be. This is really real life drama. You can't buy this kind of situation. Day to day if you focus on this negative outcome, if you live in an outcome that hasn't happened yet, you cannot survive. And it will break you. And this is what happens to most people."

Unbroken, but human, Mandell has contemplated the worst-case scenario. "From time to time I get weak, I get tired and I become overwhelmed with fear. I'm gonna lose my family, I'm never gonna own anything ever again, I'm gonna be living in a cell or a cage separated from the people that I love. I'll be unable to take care of my wife and my children. My biggest fears in life. And people joke, they say, 'Oh, you in jail yet?' Or, you know, 'How much time do you think you're gonna get?' And it really hurts me. But in my heart I know that I'm not guilty and that there's going to be a resolution that's favorable both for me and my family. And that I'm gonna be okay. God has never let me down and if I was a guilty man I would not be talking to you right now. I would probably be a shell of a person."

Fit, healthy and feeling righteous, Mandell believes the path he's taking is not his will. "I am convinced that I'm either insane, going insane or I am literally acting on God's will. And what's gonna happen is what's gonna happen and that it's already, to some extent, been determined. I could choose to fight it or not."

But Mandell does question the TV show and the interviews. "I have a message, a very important message to deliver that represents something extremely important. And if I have to be that guy, you know, which I do not want to be, but if I've got to be that guy under arrest, on bail, bringing to the attention of the American people the corruption that's going on in the system, because I'm living it, a small part of it, but it's representative of it all, then I'll be that guy."

He has agreed to put cameras in his home and in his car, 24/7, saying he's got nothing to hide. Four months of the reality show has already been shot by a major production company and there are interested buyers. But it was a very hard decision to do this with enormous downside risk. "Prosecutors can take things and twist things and everything can be used against you to influence a jury, a judge and all that. The evidence is the evidence, it's not gonna change. And I know what I did and didn't do. When I finally made the decision to do this, I said it's about public opinion now. I got nothing to hide. Open the record."

Mandell has been charged with conspiracy to commit securities fraud and the fraud itself. If his case comes to trial, a jury of his peers will determine Mandell's fate. Until then, Mandell knows that "I'm in love with my wife. I'm in love with my children. I know that I'm gonna beat these charges and I'm gonna be exonerated."

"I am a sober man. I am an innocent man. I can't take it anymore."

 

Follow Robert Rosenthal on Twitter: www.twitter.com/shortorderdad