Sky Capital Trial's Greatest Hits

There is a fascinating trial going on in lower Manhattan with the Sky Capital trial of Ross Mandell and Adam Harrington.  If convicted, the two would face up to 25 years in prison.  The trial has been colorful and also informative as to some of the problems that there are on Wall Street….above all, it has been entertaining.

Here are a few of the highlights from the testimony in the trial:

1) Government prosecuting attorney Katherine Goldstein questioning former Sky Broker, McKyle Clyburn, cooperating witness who has pled guilty:

Goldstein. Did your drug and alcohol use impact your decision-making as a broker?

Clyburn. I would say yes.

2) Robert Grabowski, former Sky Broker who has pled guilty and government cooperating witness under cross examination by Jeffrey Hoffman (defense counsel for Ross Mandell):

Hoffman. When did you first start churning [generation of excessive commissions through trading]?

Grabowski. I don't know.  Early in my brokerage career.  It was very typical for stockbrokers to do that every month.  I churned whenever I was having a bad month and needed to do some business in order to generate a paycheck.

3) Federal Judge Paul Crotty opening court on June 28, 2011:

Judge Crotty: Good morning.  Please be seated. I see there was another story in the New York Post this morning.  I'm going to instruct the jury, again, as I have in the past, they should pay attention only to what's going on in the courtroom and not pay any attention to publicity. Mr. Hoffman [counsel for Ross Mandell], I want to give you something, an extract from the Wall Street Journal, which records conversation attributable to your client. I know we are all concerned about trial publicity, but it doesn't help if your client is talking to the press and commenting upon whether or not he is going to take the stand and commenting further on his assessment whether Mr. Grabowski [government informant] was telling the truth.

4) McKyle Clyburn, former Sky employee who has pled guilty, under cross examination by Jeffrey Hoffman (defense counsel for Ross Mandell):

Hoffman. Weren't these customers [Sky investors], as we said earlier, sophisticated substantial investors with high net worth?

Clyburn. I won't call them sophisticated, but they were wealthy.

5) Federal prosecutor Katherine Goldstein questioning former Sky stockbroker and government witness who has pled guilty, Michael Passaro, on the incentives he received for buying and selling Sky Capital Holdings’ stock:

Goldstein. Was going out for dinner and going to strip clubs like String Fellows one of the perks of being supportive of Sky stock?

Passaro. Yes.

Goldstein. How was it a perk?

Passaro. Well, it's an amazing place.  The food is phenomenal, actually, one of the best steaks in London, and the women are just amazing.

6) Exchange during the cross-examination of James Hankins (investor in various Sky Capital investments) and Jeffrey Hoffman (defense counsel for Mandell):

Hoffman. Okay.  And would it be safe to say in general terms that between the time you got involved in the year 2000 and sometime in March of 2004, you spent most of your time stoned?

Hankins. Stoned or looking to get stoned.  Yeah, I think that would be safe to say.

7) Jeffrey Hoffman (defense counsel for Mandell) spoke directly to Judge Paul Crotty after a contentious cross-examination with government witness and former Sky Capital investor, Sean Costelloe, who had just left the courtroom:

Hoffman. I would ask the Court to ask the government to have this last witness [Costelloe] available for Tuesday, for examination of the witness.  As he left the courtroom, he made an obscene gesture to me as he was standing here.  I think that shows a prejudice that I would like to bring out in front of the jury.

8) Katherine Goldstein questioning FBI Agent Jessica Krueger who had prepared several spreadsheets of expenditures on a Sky Capital American Express Card:

Goldstein.  How much money was charged to American Express cards at these particular venues [adult strip clubs]?

Krueger. $162,475.26.

9) Direct Examination of defense witness Stan Schwarzman, former head of compliance for Sky Capital, by Jeffrey Hoffman (counsel for Ross Mandell):

Hoffman: Do firms typically get lots of complaints from customers at the brokerage business?

Schwarzman: Yeah, when you are dealing with the public, anything that can upset somebody, they will write a complaint about.  Some are really valid complaints, the majority are not.  When a client is making money they are very happy, they don't complain about anything.  If they are losing money, they try to find reasons for losing the money.  And a lot of times it is -- they're pretty much annoyed with the firm.

10) Witness for the government and former Sky Capital investor from England, Barry Whitehead, during testimony on his experience with Sky:

Whitehead. …the name Ross Mandell came up pretty well in every conversation.  He was lauded as the "King of Wall Street", effectively.  “Genius” was the word used the most, I would suggest.  And that he was the mastermind behind the whole thing.

The trial should go to the jury next week….unless Ross Mandell himself decides to testify.  And that will be some STORY!!!

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