Court of Appeals Finds Sufficient U.S. Conduct to Support Conviction

The World in U.S. Courts: Summer 2014 - Securities Law | May.16.2014

United States v. Mandell, U.S. Court of Appeals for the Second Circuit, May 16, 2014

Two individuals were convicted of securities fraud and mail and wire fraud. Apparently the defrauded purchasers were not in the U.S., and as relevant here the defendants argued that there was insufficient contact with the U.S. to support a securities fraud conviction.

The Court of Appeals in New York stated that the test for applying U.S. securities laws to conduct occurring in part outside the country was settled in the prior case of U.S. v. Vilar [discussed in the Fall 2013 issue of World in U.S. Courts]. Specifically, that case held that U.S. laws apply in criminal cases where there has been fraud in connection with a security listed on a U.S. exchange or purchased or sold in the U.S. With respect to the latter inquiry, a security is deemed to have been purchased or sold in the U.S. where the parties incurred “irrevocable liability” to consummate the transaction or title passed in the U.S.

In the case at bar, prospective purchasers were required to submit applications to a U.S. company, which could then accept or reject them. Additionally, there apparently were purchases of securities in the U.S. The Court of Appeals concluded that in both of the foregoing situations the U.S. securities laws would apply.

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