Ex-Sky Capital Executive Gets 30 Months Prison for Scam
By Erik Larson Nov 13, 2014 3:35 PM ET
The former chief operating officer of Sky Capital LLC, a brokerage firm raided by federal agents probing a $140 million fraud, was sentenced to 30 months in prison after prosecutors rebuffed his bid to cooperate.
Stephen Shea, 42, who pleaded guilty in 2011 to conspiracy and securities fraud, asked U.S. District Judge Paul Crotty in New York for five years of probation instead of prison time, citing his attempt to aid authorities. The judge refused.
“I recognize Mr. Shea is not going to commit this crime again, but others may be tempted and they need to be deterred as well,” Crotty said at today’s hearing. “This is the minimum punishment I can impose.”
Shea and five others were charged in June 2009, three years after FBI agents raided the New York-based brokerage to probe the use of high-pressure sales tactics and false statements to sell the company’s stock. Sky Capital’s founder, Ross Mandell, is serving 12 years for defrauding investors.
Shea’s offer to aid prosecutors was rejected because he “didn’t fully accept” responsibility for his actions, Assistant U.S. Attorney Katherine Goldstein said after court.
Widowed Mother Shea, who lives in New York City with his widowed mother, is divorced and doesn’t have children, defense lawyer Julie Clark said after the hearing. Shea, who must report to prison on Jan. 5, was also ordered to forfeit $50 million and pay restitution of $24 million.
According to prosecutors, the defendants misled investors, who put cash in private investments, and then used that money to enrich themselves, pay excessive fees and commissions to brokers and pay off victims of earlier schemes.
The scam included inflating the prices of two Sky Capital units -- Sky Capital Holdings Ltd. and Sky Capital Enterprises Inc. -- to raise tens of millions of dollars from investors, prosecutors said.
Mandell was convicted at a trial in July 2011. Jurors heard several recordings made by the Federal Bureau of Investigation, including one in which Mandell was heard telling brokers, “You have to lie, you have to paint a rosy picture.”
Adam Harrington, a former broker at Sky Capital who was tried with Mandell, was found guilty of the same four counts and sentenced to 60 months. Also convicted in the case were Arn Wilson, Robert Grabowski and Michael Passaro.
The case is U.S. v. Mandell, 09-cr-00662, U.S. District Court, Southern District of New York ( Manhattan).
To contact the reporter on this story: Erik Larson in Manhattan federal court at elarson4@bloomberg.net
To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net David Glovin, Sophia Pearson |
