Southern District of New York Limits Application of Morrison in Criminal Case

Originally published July 26, 2011

Keywords: Morrison, mail and wire fraud, private placement shares, securities, fraud

On March 16, 2011, Judge Paul A. Crotty of the District Court of the Southern District of New York rejected US defendants' motion to dismiss an indictment based on Morrison, finding that the securities, mail and wire fraud allegations did not require extraterritorial application of US laws because the crimes were ultimately committed in the United States. U.S. v. Mandell, Case No. 09-0662 (S.D.N.Y. Mar. 16, 2011).

While most lower courts deciding cases under Morrison have focused on the true territorial location of the transactions at issue—as required by Morrison—Judge Crotty focused on the defendants' conduct and the location of the parties involved. In Morrison, the US Supreme Court held that Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") applies only to "the purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States."

The crux of the indictment in Mandell involved allegations that Ross Mandell and Adam Harrington fraudulently secured investor money and used it for their own benefits. Specifically, Mandell, used Thornwater Company (Thornwater) to solicit investors to purchase private placement shares in US companies, though none of the Thornwater...