George Conway III has been cataloguing the reverberations of Morrison v. National Australia Bank, 130 S. Ct. 2869, ever since he successfully argued the case at the U.S. Supreme Court in 2010, persuading the court to rein in the extraterritorial reach of U.S. securities law. Since then Conway, a partner at Wachtell, Lipton, Rosen & Katz, has seen the decision used to curtail all sorts of claims involving overseas conduct, from antitrust to racketeering.
Now Conway is looking to ensure that Morrison‘s effects also extend to criminal conduct—an area where the ruling’s holding against extraterritoriality has butted up against a much older Supreme Court decision. On Sept. 25, Conway and his colleagues at Wachtell filed a 30-page amicus brief at the U.S. Court of Appeals for the Second Circuit on behalf of the New York City Bar, arguing that federal prosecutors misinterpreted both Morrison and the Supreme Court’s 1922 decision in United States v. Bowman, 260 U.S. 94, while pressing charges that a group of brokers fraudulently manipulated a sub-market of the London Stock Exchange.
The amicus comes in the case of Ross Mandell, who in May was sentenced to 12 years in prison by Southern District Judge Paul Crotty after a July 2011 trial in which Mandell and his codefendants were found guilty of using Sky Capital as a front for a securities scam that the government claimed bilked investors out of over $140 million. United States v. Mandell, 09-cr-00662.
The Wachtell lawyers dispute the government’s assertion that under Bowman, the presumption against extraterritoriality doesn’t apply to criminal securities fraud claims. “In civil cases, as the Government does not dispute, Morrison governs, and Section 10(b) only applies to domestic transactions,” the brief states. “[T]he Government’s assertion that Morrison does not apply to criminal charges brought under Section 10(b) contradicts a simple and commonsensical principle of statutory interpretation: the text of a statute can have only one authoritative meaning.” (See also, “Applying Morrison: Statutory ‘Focus’ and ‘Context,’” by George Conway, NYLJ, May 30).
Conway was unavailable for comment. Wachtell partner John Savarese said, “We hope our brief speaks for itself and we look forward to the argument and seeing what the court does.”
The Wachtell and city bar brief in Ross Mandell v. United States, 12-1967: 12-2090, noted that members of the city bar’s special committee on white-collar crime who are employed by the federal government recused themselves from the decision to submit the brief. The government’s brief in the Second Circuit had not been filed as of Oct. 2.
Mandell’s lawyer, Matthew Brissenden of Garden City, N.Y., argued in his opening appellate brief that the government sensed that its case against Mandell was “on shaky legal ground” after Morrison because it centered on allegations that mostly overseas investors were defrauded in overseas trading.
“Despite the clear dictates of the Morrison decision, the lower Court refused to exclude evidence relating to foreign transactions, or even to instruct the jury on the need to find a domestic, as opposed to foreign, securities transaction,” Brissenden wrote.
Brissenden suggested that the appeal shouldn’t just interest white-collar and securities litigators. “I think it’s an important issue, one that has potential implications beyond [SEC rule] 10(b) 5,” Brissenden said. “At some level it raises the question of whether all criminal statutes…are subject to the assumption against extraterritoriality. We’ve argued that the answer here should be an emphatic yes.”
@|Ross Todd, a reporter for The American Lawyer, be reached at email@example.com.