SEC v. Sky Capital LLC a/k/a Granta Capital LLC; Ross Mandell; Stephen Shea; Adam Harrington Ruckdeschel; Arn Wilson; Michael Passaro, et al., Southern District of New York (July 8, 2009) — Complaint

SANJAYWADHWA 
Cftl

Assistant Regional Director 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
3 World Financial Center, Suite 400 
New York, New York 10281-1022 
(212) 336-0181 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW 
YORK 
------------------------------------------------------------------------x 
SECURITIES AND EXCHANGE COMMISSION, 
Plaintiff, 
- against­
09Civ. __( 
) 
SKY CAPITAL LLC a/k/a 
GRANTA CAPITAL 
LLC, ROSS MANDELL, STEPHEN SHEA, ADAM 
HARRINGTON RUCKDESCHEL, ARN WILSON, 
MICHAEL PASSARO and ROBERT GRABOWSKI 
COMPLAINT 
Defendants. 
------------------------------------------------------------------------x 
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against 
defendants Sky Capital LLC a/k/a Granta Capital LLC ("Sky Capital"), Ross Mandell 
("Mandell"), Stephen Shea ("Shea"), Adam Harrington Ruckdeschel ("Harrington"), 
Am Wilson 
("Wilson"), Michael Passaro ("Passaro"), and Robert Grabowski ("Grabowski") (collectively, 
the "Defendants"), alleges 
as follows: 
SUMMARY 
1. The Defendants perpetrated a long-running scheme to defraud investors in two 
related companies: Sky Capital Holdings Ltd. ("Sky Holdings") and Sky Capital Enterprises, 

Inc. ("Sky Enterprises," and together with Sky Holdings, the "Sky Entities"), uSIng boiler room 
tactics. 
2. Mandell, Sky Capital's founder, orchestrated the scheme with the assistance of 
Shea, the former Chief Operating Officer ofSky Capital, and registered representatives at Sky 
Capital, including Harrington, Wilson, Passaro, and Grabowski (collectively, the "RRs"). 
3. Mandell commenced his scheme in 2001 and directed Sky Capital brokers, 
including Sky Capital Broker A ("Broker A") and Sky Capital Broker B ("Broker B") 
to make 
material misrepresentations and omissions to their customers to persuade them to buy shares in 
the Sky Entities' private placements. To incentivize the Sky Capital brokers to sell the Sky 
Entities' private placement stocks to their customers, Mandell paid, and directed Shea to pay, 
additional, undisclosed commissions to the brokers. Mandell also personally made material 
misrepresentations and omissions to Sky Capital customers in soliciting them to buy shares in 
the Sky Entities' private placements. 
4. Sky Holdings' and Sky Enterprises' stocks'began to trade publicly in 2002 and 
2004, respectively. In an effort 
to support the price ofthe publicly traded stocks, Mandell and 
Shea enforced a "no net sales" policy, which restricted Sky Capital's customers' ability to sell 
their publicly traded stocks in the Sky Entities. The RRs complied with this policy, and 
routinely crossed stock between their customers' accounts, without disclosing the policy 
to 
their customers. Additionally, Mandell continued to pay, and directed Shea to pay, undisclosed 
commissions to the RRs 
to incentivize them to continue to sell the Sky Entities' stock. 
5. Mandell's scheme was very profitable. Between September 2002 and November 
2006, Sky Capital raised over 
$61 million by selling stock in the Sky Entities. The fraudulent 
scheme was also profitable for Mandell. Mandell used Sky Enterprises' and Sky Capital's 
2
 

funds to pay for his lavish lifestyle, and Mandell ensured Shea, the RRs, and others were richly 
compensated. 
6. By virtue 
ofthe conduct alleged herein, Sky Capital, Mandell, Shea, Harrington, 
Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, engaged in acts, 
practices, transactions, 
or courses ofbusiness that violated Section 17(a) ofthe Securities Act 
of 1933 ("Securities Act") [15 U.S.c. §§ 77q(a)], and Section lO(b) ofthe Securities Exchange 
Act 
of 1934 ("Exchange Act") [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 
240.lOb-5]. 
In the alternative, Shea aided and abetted Sky Capital's, Mandell's, Harrington's, 
Wilson's, Passaro's, and Grabowski's violations 
ofSection 10(b) ofthe Exchange Act [15 
U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.10b-5]. 
7. By virtue ofthe conduct alleged herein, Sky Capital also violated Section 15(c) of 
the Exchange Act [15 U.S.c. § 780(c)], and Mandell aided and abetted Sky Capital's violation 
ofSection 15(c) ofthe Exchange Act [15 U.S.c. §780(c)]. 
8. Unless each ofthe Defendants is pennanently restrained and enjoined, they will 
again engage in the acts, practices, transactions, or courses 
ofbusiness set forth herein and in 
acts, practices, transactions, 
orcourses ofbusiness ofsimilartype and object. 
NATURE 
OF THE PROCEEDINGS AND RELIEF SOUGHT 
9. The Commission brings this action pursuant to the authority conferred upon it by 
Section 20(b) 
ofthe Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) ofthe Exchange Act 
[15 U.S.C. § 78u(d)]. The Commission seeks to pennanently restrain and enjoin: (a) Sky 
Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski from future violations 
of 
Section 17(a) ofthe Securities Act [15 U.S.c. §§ 77q(a)], and Section 10(b) ofthe Exchange 
Act [15 U.S.c. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.l0b-5]; and (b) Sky 
3
 

Capital and Mandell from primary or secondary future violations of Section 15(c) ofthe 
Exchange Act 
[15 U.S.C. § 78o(c)]. The Commission also seeks a final judgment ordering the 
Defendants 
to disgorge their ill-gotten gains and to pay prejudgment interest thereon, to pay 
civil money penalties pursuant to Section 20(d) 
of the Securities Act [15 U.S.c. § 77t(d)] and 
Section 2l(d)(3) 
of the Exchange Act [15 U.S.C. § 78u(d)(3)], and to permanently prohibit 
Mandell from acting 
as an officer or director ofany issuer that has a class ofsecurities 
registered pursuant 
to Section 12 ofthe Exchange Act [15 U.S.c. § 781], or that is required to 
file reports pursuant to Section 15  (d) 
ofthe Exchange Act [15 U.S.C. § 78o(d)] pursuant to 
Section 
21 (d)(2) ofthe Exchange Act [15 U.S.C. § 78u(d)(2)]. Finally, the Commission seeks 
all other just and appropriate relief. 
JURISDICTION AND VENUE 
10. This Court has jurisdiction over this action pursuant to Sections 20(d) and 22(a) 
of 
the Securities Act [15 U.S.c. §§ 77t(d) and 77v(a)], and Sections 21(e) and 27 ofthe Exchange 
Act [15 U.S.c. 
§§ 78u(e) and 78aa]. 
11. Venue lies in this Court pursuant to Section 22(a) 
ofthe Securities Act [15 U.S.C. § 
77v(a)] and Section 27 of-the Exchange Act [15 U.S.c. § 78aa]. The Defendants, directly or 
indirectly, have made use 
of the means or instrumentalities of, or the means or instruments of 
transportation or communication in, interstate commerce, or of the mails, in connection with 
thetransactions,acts,practices,andcourses 
ofbusinessallegedherein. Certain ofthese 
transactions, acts, practices, and courses 
ofbusiness occurred within the Southern District of 
New York. For instance, Sky Capital maintained its principal place ofbusiness in New York, 
New York, and Mandell, Shea, Hariington, Wilson, Passaro, and Grabowski engaged in at least 
4
 

some ofthe conduct alleged h~rein while working at Sky Capital's office located in New York, 
New York. 
DEFENDANTS 
12. Sky Capital was registered with the Commission as a broker-dealer on May 13, 
2002, pursuant to Section 15(b) ofthe Exchange Act [15 U.S.c. § 780(b)]. Sky Capital, which 
recently changed its name to Granta Capital LLC, withdrew its registration as a broker-dealer 
effective April 6, 2009. Sky Capital is a New York limited liability company, and has offices 
in New York, New York, and Boca Raton, Florida. Sky Capital was formed in June 2001 by 
Mandell, and is majority owned 
by Sky Holdings, an entity that was publicly traded on the 
Alternative Investment Market ofthe London Stock Exchange ("AIM") until November 2006. 
13. Mandell, age 52, is a resident 
ofBoca Raton, Florida. Mandell founded Sky 
Capital 
in June 2001, and was its President, CEO and majority shareholder until April 2008. 
Mandell was also the president 
ofSky Holdings from its formation in June 2001 until April 
2008. Mandell was also the 
CEO of Sky Enterprises from its formation in August 2002 until 
April 2008. While at Sky Capital, Mandell held Series 7, 24 and 63 licenses. 
14. Shea, age 37, is a resident 
ofBrooklyn, New York. Shea was the Chief Operating 
Officer 
of Sky Capital from 2001 until January 2009, when he left Sky Capital. While at Sky 
Capital, Shea held Series 24, 62 and 
63 licenses. 
15. Harrington, age 39, is a resident ofNew York, New York. Harrington was a 
registered representative at 
Sky Capital from 2002 to 2005. Harrington has a disciplinary 
history. In September 2002, Harrington was fined $128,496.31 and barred from being licensed 
by the Utah Division ofSecurities for, among other things, unauthorized trading, unsuitability, 
and churning. In the Matter 
ofAdam Harrington Ruckdeschel, CRD #2481064, SD-02-0139, 
5
 

September 23,2002. While at Sky Capital, Harrington held Series 7, 24 and 63 licenses. 
Harrington is currently a partner at a hedge fund. 
16. Wilson, age 45, is a resident 
ofDix Hills, New York. Wilson was a registered 
representative at Sky Capital from 2002 to 2008. Wilson holds Series 7 and 
63 licenses. 
Wilson is currently employed as a registered representative at another broker-dealer. 
17. Passaro, age 46, is a resident 
ofBoca Raton, Florida. From 2001 until December 
2008, Passaro was a registered representative at Sky Capital and, during the relevant period, 
worked out 
ofthe firm's Boca Raton, Florida, office, as well as, at times, its New York, New 
York, office. Passaro holds Series 7, 24 and 
63 licenses. Currently, Passaro is employed as a 
registered representative at another broker-dealer. 
18. Grabowski, age 42, 
is a resident of Staten Island, New York. Grabowski was a 
registered representative at Sky Capital from 2003 to 2008. Grabowski holds Series 7, 
8, 24 
and 63 licenses. In September 2002, Grabowski was fined $75,000 and barred from being 
licensed 
by the Utah Division of Securities for failure to supervise and failure to grant auditors 
access to books and records. In the Matter 
ofRobert J. Grabowski, CRD #1639890, SD-02­
0140, September 23,2002. Currently, Grabowski is employed as a registered representative at 
another broker-dealer. 
RELATED PERSONS AND ENTITIES 
19. Sky Capital UK Ltd. ("Sky Capital UK") was a broker-dealer in London that was 
a wholly-owned subsidiary 
of Sky Holdings. Sky Capital UK registered with the Financial 
Services Authority in October 2003. Sky Capital 
UK is now in liquidation. 
20. 
Sky Enterprises (fi'kla Sky Capital Ventures, Inc.) is a Delaware company Mandell 
formed in August 2002 purportedly to invest in emerging growth companies. Sky Holdings 
6
 

had access to Sky Enterprises funds through a revolving credit line of£3 million. Sky 
Enterprises began trading on the AIM on March 29,2004. On November 
7,2006 the London 
Stock Exchange suspended trading in Sky Enterprises' stock. To date, Sky Enterprises' stock 
has not resumed trading on the AIM. During the period that it was trading 
on the AIM, Sky 
Enterprises' average daily trading volume was 16,573 shares. 
21. 
Sky Holdings is  a Delaware company Mandell fonned in June 2001. Sky Holdings 
ownS at least 75% of Sky Capital stock. Mandell was the President ofSky Holdings and 
owned a portion 
ofSky Holdings. Sky Holdings also owned Sky Capital UK prior to its 
liquidation. Sky Holdings began trading on the AIM on July 15,2002. On November 
7,2006 
the London Stock Exchange suspended trading in Sky Holdings' stock. To date, Sky 
Holdings' stock has not resumed trading on the 
AIM:. DUring the period that it was trading on 
the AIM, Sky Holdings' average daily trading volume was 12,341 shares. 
FACTS 
A. Sky Capital's Role as Sales Agent for Related Entities 
22. From 2002 to 2006, Sky Capital sold stock in private placements ofseveral related 
entities, including the Sky Entities, 
to investors. 
23. Although Sky Capital solicited investors in the United States, most 
of Sky Capital's 
brokers' solicitation efforts were directed towards investors in the United Kingdom. 
24. From September 2002 
to August 2003, Sky Capital acted as the sales agent for Sky 
Enterprises' private placement. Sky Enterprises raised approximately $20.7 million from over 
80 investors. 
7
 

25. From February 2003 through July 2003, Sky Capital acted as a sales agent for an 
offering 
of Sky Holdings' Series A convertible preferred stock. Sky Holdings raised 
approximately $9.2 million from more than 50 investors. 
26, From September 2003 through January 2004, Sky Capital acted as a sales agent for 
an offering 
of Sky Holdings' Series B convertible preferred stock to more than 240 investors.. 
Sky Holdings raised over $32 million in this offering. 
27. After public trading in Sky Enterprises and Sky Holdings commenced, Sky Capital 
continued to act as the sales agent for subsequent private placements, and also facilitated Sky 
Capital customers' public trading 
ofthese stocks. 
B.	 Sky Capital, Mandell and the RRs Made Material Misrepresentations and Omissions 
in Connection 
With the Sky Entities' Private Placements 
28. Mandell directed Sky Capital brokers to make material misrepresentations, omit 
material infonnation, and use high pressure sales tactics 
to induce their Sky Capital customers 
to purchase stock in the Sky Entities' private placements. 
29. Throughout the time that Sky Capital served as the sales agent for the Sky Entities' 
private placements, Mandell instructed Sky Capital brokers to pressure their customers 
to sell 
their positions in liquid stocks and invest the proceeds in Sky Enterprises or Sky Holdings. 
30. Based on this directive from Mandell, Sky Capital brokers, including Broker A and 
Broker B, told their customers that investing in the Sky Entities, as opposed to holding the 
stock that the customers then owned, was a better investment even though there was no basis 
for the brokers to make such assertions. 
3 L For example, although neither Sky Enterprises nor Sky Holdings had any operating 
history or revenues, Sky Capital brokers, including Broker A and Broker B, made baseless 
8
 

price predictions regarding the Sky Entities' stocks and misrepresented the value ofthe 
investments to their customers. 
32. Mandell personally examined Sky Capital brokers' customers' portfolios, and when 
Mandell found customers who hel9 liquid stocks, Mandell instructed the brokers to convince 
those customers to sell the liquid stocks and invest the proceeds 
in the Sky Entities. 
33. Sky Capital brokers also used scripts to solicit investors for the Sky Entities' private 
placements, and they based their sales pitches on what Mandell told them. 
34. Mandell personally made material misrepresentations to Sky Capital customers to 
convince 
themto invest in the Sky Entities. For example, beginning in 2002, Mandell 
personally solicited Investor 1 and Investor 2, both ofManchester, England, to invest in the 
Sky Enterprises private placements. Mandell convinced Investor 1 and Investor 2 to invest 
approximately 
$1 million in Sky Enterprises by promising them the stock price would at least 
double in value, and that they would be able to sell their shares to capture this profit in six 
months. 
35. Prior to July 2003, Mandell solicited Investor 1 and Investor 2 to invest in the Sky 
Holdings private placement as well. Mandell met with Investor 
1, and assured Investor 1 that 
Investor 1 would be getting the 
Sky Holdings stock "cheap," that there was no doubt that 
Investor 1 would make a significant profit from his Sky Holdings investment, and that there 
was no risk 
of losing money on the investment. Mandell persuaded Investor 1 and Investor 2 
to 
buy 900,000 shares ofSky Holdings' Series A convertible preferred stock for approximately 
£600,000. 
36. After Sky Holdings' preferred stock was converted into common stock, Investor 1 
and Investor 2 met with Mandell 
in approximately September 2004 to discuss selling all their 
9
 

Sky Holdings shares. At the meeting, in or around September 2004, Mandell told them that it 
would be "ridiculous" for them to sell their Sky Holdings stock because in a few weeks 
Mandell was going 
to sell Sky Holdings to a German Bank for £4 per share, a price that 
constituted a premium 
of nearly 100% over £2.01, the highest price at which Sky Holdings' 
stock traded in September 2004. 
37. In fact, there was no such sale transaction in the works. Investor 1 and Investor 2, 
however, continued to hold their Sky Holdings stock. Soon thereafter, the price 
of Sky 
Holdings stock began to decline. 
38. Mandell later told Investor 1 and Investor 2 that the Sky Holdings acquisition was 
cancelled because the German 
bank: had wanted Mandell to work for the bank for three years 
as part 
of the deal, but because he was Jewish, Mandell could not work for a German bank. In 
fact, the 
bank: never proposed any employment arrangement ofany type to Mandell. 
39. Contrary 
to Mandell's indications to Investor 1 and Investor 2 that they would be 
able to sell their Sky Entities' stocks profitably because a liquid market would exist, as 
Mandell knew, or was reckless 
in not knowing, the Sky Entities' stocks were illiquid stocks, 
and there was 
no reasonable basis to make these predictions. 
40. Investor 1 and Investor 2 continued to hold a substantial amount 
oftheir Sky
 
Entities' stock until November 7, 2006 when trading in these stocks was suspended.
 
C.	 Sky Capital and Mandell Paid Additional Commissions in Connection With the Sky 
Entities' Private Placements That Were Not Disclosed to Investors 
41. In order 
to motivate Sky Capital brokers to sell the Sky Entities' private placement 
stocks to their customers, Mandell paid the brokers additional commissions that were not 
disclosed. While the disclosed commission rates in the private placement memoranda 
10
 

("PPMs") for the Sky Entities' offerings were 8% to 10%, Mandell authorized Sky Capital to 
pay brokers, including Broker A and Broker B, additional commissions beyond such rates. 
42. Despite the language in the PPMs, Mandell instructed Sky Capital brokers to tell 
investors, 
if asked about commissions, that the investors would not be charged for 
commissions. However, the funds raised from investors in the private placements were, in 
fact, used to 
pay commissions to Sky Capital brokers. 
43. For example, Sky Capital and Mandell paid Broker A and Broker B additional 
commissions following each private placement for Sky Holdings 
or Sky Enterprises for which 
they sold stock to investors. Broker A and Broker 
B did not disclose these additional 
commissions to investors. 
D.	 Sky Capital, Mandell, Shea and the RRs Made Material Misrepresentations and 
Omissions After the Sky Entities' Stocks Became Publicly Traded 
Failure to Disclose the "No Net Sales" Policy 
44. Throughout the time that the Sky Entities' stocks were publicly trading on the AIM, 
in an effort to support the price 
of the stocks, Sky Capital had a "no net sales" policy. The 
policy prohibited Sky Capital brokers from submitting sell order tickets for the Sky Entities' 
stocks unless they had lined 
up Sky Capital customers to buy an equivalent amount ofshares at 
the same price so that the sell order did not drive the stock price down. Therefore, in order for 
a broker to sell a customer's stock in one 
of the Sky Entities, the broker had to find another 
Sky Capital customer to buy the stock being sold. 
45. Mandell enforced the "no net sales" policy. Mandell held meetings with Sky 
Capital brokers to inform them that they needed to find buyers for the Sky Entities' stocks 
being sold by other Sky Capital customers to alleviate the "selling pressUre" on the stocks. 
In 
11
 

addition, Mandell told brokers, including Broker A and Broker B, that they had to find a buy~r 
before the broker could submit a sell ticket. 
46. Mandell bullied brokers who submitted customer sell orders without first lining up 
a buyer, and accused them 
ofnot being a ''team player." Mandell also denied perks to brokers 
who did not follow the "no net sales" policy. Sky Capital often paid for parking, cell phones, 
and other personal expenses incurred 
by the brokers, but ifa broker did not "support the 
stock," Mandell would take away the broker's perks. 
47. Shea also enforced the "no net sales" policy. When Sky Capital brokers were 
unable 
to find a buyer to match a customer sell order for the Sky Entities' stocks, the broker 
would give the customer sell order to Shea who would then attempt to find a buyer for that 
stock from another Sky Capital broker. This practice was also called "crossing stock." 
48. Sky Capital's trading records reveal numerous instances 
of cross-trades or 
"crossing-stock"
intheSkyEntities' stocks byeachoftheRRs,eitheractingaloneorin 
concert with other Sky Capital brokers. For example: 
•	 On April 27, 2004, Harrington earned a commission resulting from the sale by a Sky 
Capital customer, Investor 3, 
of 2,000 shares of Sky Holdings stock at £4.61 per share. 
On that same day, Harrington also earned a commission by causing an account held by a 
Sky Capital customer, Investor 
4, to purchase 2,000 shares of Sky Holdings stock at 
£4.64 per share. 
•	 On May 7, 2004, Harrington earned a commission resulting from the sale by a
 
Sky Capital customer, Investor 5, 
of 15,000 shares of Sky Enterprises stock at
 
$3.01 per share. On that same day, Harrington and two other Sky Capital.
 
brokers also shared commissions by causing two Sky Capital customer
 
accounts -  Investor 6 (4,000 shares) and Investor 7 (11,000 shares) -
to
 
purchase, in the aggregate, 15,000 shares of Sky Enterprises stock at $3.04 per
 
share.
 
•	 On July 27, 2004, Wilson and Grabowski shared a commission resulting from
 
the sale 
by a Sky Capital customer, Investor 8, of 15,000 shares ofSky
 
Enterprises stock at $3.02 per share. On that same day, Wilson and
 
Grabowski shared a commission by causing an account held by a Sky Capital
 
12 

customer, Investor 9, to purchase 15,000 shares of Sky Enterprises stock at 
$3.07 
per share. 
• 
On August 20, 2004, Wilson and Grabowski shared a commission resulting 
from the sale 
by a Sky Capital customer, Investor 10, of3,000 shares ofSky 
Holdings stock at £3.81 per share. On that same day, Wilson and Grabowski 
shared another commission 
by causing an account held by a Sky Capital 
customer, Investor 11, to purchase 3,000 shares 
of Sky Holdings stock at 
£3.85 
per share. 
• 
On November 18, 2004, Passaro earned a commission resulting from the sale 
by a Sky Capital customer, Investor 12, of 10,000 shares ofSky Enterprises 
stock at $1.57 
per share. On that same day, Passaro earned another 
commission 
by causing four Sky Capital customer accounts -  Investor 13 
(8,600 shares), Investor 14 (340 shares), Investor 15 (640 shares), and 
Investor 16 (420 shares) -  to purchase, in the aggregate, 10,000 shares 
ofSky 
Enterprises stock at $1.60 per share. 
• 
On February 22,2005, Harrington earned a commission resulting from the 
sale 
by a Sky Capital customer, Investor 17, of6,000 shares ofSky Holdings 
stock at £3.15 
per share. On that same day, Wilson and Grabowski shared a 
commission 
by causing an account held by a Sky Capital customer, Investor 
18, to purchase 5,000 shares 
ofSky Holdings stock at £3.21 per share. 
• 
On March 3 and 4,2005, Wilson and Grabowski shared commissions 
resulting from the sales 
by Investor 8 of20,000 shares (sold in equal parts 
over the two days) ofSky Enterprises stock, at $2.27 per share. On March 3, 
Wilson and Grabowski caused 
an account held by a Sky Capital customer, 
Investor 19, to purchase 10,000 shares 
ofSky Enterprises stock at $2.30 per 
share, and on March 4, Wilson and Grabowski caused an account held by 
another Sky Capital customer, Investor 20, to also purchase 10,000 shares of 
Sky Enterprises stock at $2.30 per share. Wilson and Grabowski shared the 
commissions resulting from the two 
buy transactions. 
• 
On March 7, 2005, Wilson and Grabowski shared commissions resulting from 
the sale 
by two Sky Capital customers -  Investor 8 (60,000 shares) and 
Investor 
21 (20,000 shares) -of 80,000 shares ofSky Enterprises stock, at 
$2.34 
per share. On that same day, Wilson and Grabowski shared an 
additional commission 
by causing an account held by a Sky Capital customer, 
Investor 22, to purchase 80,000 shares 
ofSky Enterprises stock at $2.37 per 
share. 
• 
On August 31, 2005, Broker B earned commission resulting from the sale by a 
Sky Capital customer, Investor 23, of3,000 shares ofSky Enterprises stock at 
$2.73 per share.· 
On that same day, Passaro earned commission by causing an 
13
 

account held by a Sky Capital customer, Investor 24, to purchase 3,000 shares 
of Sky Enterprises stock at $2.77 per share. 
•	 On May 23,2006, Wilson and Grabowski shared a commission resulting from the sale 
by 
Investor 21 of 16,000 shares of Sky Holdings stock at £0.94 per share. On that same day, 
Wilson and Grabowski earned additional commissions by causing three Sky Capital 
customer accounts 
-Investor 23 (9,000 shares), Investor 25 (4,000 shares), and Investor 
19 (3,000 shares) -to purchase, in the aggregate, 16,000 shares of Sky Holdings stock at 
£0.95 per share. 
49. In some cases, 
if Sky Capital brokers could not dissuade a customer from selling, 
and were unsuccessful in finding a buyer to cross the sell order, Shea and the sales managers 
told other brokers that the stock was "at the desk." Shea and the sales managers used the 
phrase 
"at the desk" to mean either that sell tickets for Sky Holdings or Sky Enterprises stock 
were literally at the trading desk waiting to be executed against buy orders from other Sky 
Capital customers, or that Sky Capital's "desk" -
i.e., its proprietary account -  had purchased 
the stock so that it would not 
be up for sale on the open market without a buyer, which might 
cause the price to fall. Shea directed the Sky Capital brokers to find Sky Capital customers 
who would buy the stock that had been purchased by the proprietary account. 
50. At times, Mandell directed Sky Capital brokers whose customers wanted 
to sell 
their Sky Entities stocks 
to inform such customers that because the Sky Enterprises and Sky 
Holdings stocks were thinly traded, the customers had 
no option but to sell their shares to Sky 
Capital at a discount from the publicly listed price. 
51. The Sky Capital desk made several purchases 
of Sky Holdings and Sky Enterprises 
stocks from its customers at  a "discount," a price below the stock's listed price on the AIM. 
52. Sky Capital brokers, including Broker A and Broker B, then resold the discounted 
shares to other Sky Capital customers at the publicly listed price, thereby making a profit for 
14
 

Sky Capital on the difference between the two prices, or the "spread." Mandell was aware of, 
and condoned, this practice. 
53. Sky Capital also offered its brokers, including Broker A and Broker B, additional 
commissions to find buyers 
ofSky Enterprises' publicly traded stock to "keep the stock price 
up" while Sky Capital was soliciting investors to invest in a Sky Enterprises private placement. 
54. Because 
ofthe "no net sales" policy being in effect, investors had extreme difficulty 
selling their stock in the 
Sky Entities, and, as a result, many ofthem continued to remain 
shareholders in the Sky Entities until November 7, 2006 when the stocks were delisted from 
the 
AIM and trading in the shares was haIted. 
55. Mandell, Shea, the RRs, Broker A and Broker B did not tell their customers that
 
Sky Capital had a "no net sales" policy.
 
E.	 Sky Capital, Mandell, and Shea Paid Additional Commissions in Connection With the 
Sky Entities' Publicly Traded Stock and the RRs Did Not Disclose these Commissions 
56. Mandell and Shea offered Sky Capital brokers additional commissions in the form 
ofbonuses for getting Sky Capital customers to buy the Sky Entities' publicly traded stocks that 
other Sky Capital customers sold. 
57. Shea, acting under 
Mandell's direction, led meetings with Sky Capital's brokers to 
let them know when there was stock 
"at the desk" and let them know that that there was a 
"credit" 
or "special bonus" available for them to resell it. This "credit" or "special bonus" was 
often a portion ofthe profit, or spread, that Sky Capital earned when it resold to its customers 
the publicly traded Sky Entities stocks it had purchased at a discount from other Sky Capital 
customers. 
58. At Mandell's direction, Harrington led a meeting with Sky Capital's brokers in
 
which he said that Sky Capital would 
be giving out what he called "performance bonuses"
 
15
 

because, he explained, Sky Capital was not permitted to pay extra commission for selling the 
stock 
of Sky Enterprises or Sky Holdings. Harrington described the performance bonuses as 
being bonuses for dressing nicely, coming to work on time, and being a team player. It was 
clear to the brokers that Harrington was telling them in this meeting that they could earn 
additional commissions. 
59. The brokers called their customers to find buyers for the Sky Entities' stocks "at the 
desk," and when they sold it, they received additional commissions in an amount equal to 50% 
of the spread, with the other 50% remaining at Sky Capital. These commissions were not 
disclosed to the Sky Capital customers. 
60. Mandell and, in some cases, Shea approved these additional commission payments, 
which were made by check. 
61. For example, in January 2005 Broker A received a check from Sky Capital dated 
January 
6,2005 in the amount of $8,682.00. The January 6,2005 check was additional, 
undisclosed commissions for Broker 
A's sales of a total of 80,000 shares of Sky Enterprises' 
stock to two 
ofhis customers during October and December of2004. Broker A did not inform 
his customers 
ofthe additional commissions. 
62. Mandell ignored complaints from customers about the behavior 
of Sky Capital's 
brokers in connection with the sales 
ofthe Sky Entities' publicly traded stocks. For example, a 
Sky Capital broker gave Mandell several customer complaints concerning Broker B, including 
allegations 
of unauthorized trading in the Sky Entities' stocks. Mandell did not, however, file 
notice 
ofthe complaints with the NASD, and did nothing to address the customers' concerns. 
16
 

F. Mandell Profited from the Scheme 
63.· Under Mandell's leadership, Sky Capital raised over $61 million for Sky
 
Enterprises and Sky Holdings.
 
64. Mandell squandered the funds 
on a lavish lifestyle for himself and the Sky Capital 
brokers. For example, Mandell made frequent trips to London to pitch the Sky Enterprises and 
Sky Holdings private placements to prospective investors. These trips were extravagant, and 
included first-class flights, five-star hotel suites, expensive meals, adult entertainment, and 
personal spending. Mandell authorized the 
Sky Entities to pay the expenses for these trips. 
65. Mandell was also handsomely compensated, 
not only by Sky Capital, but also by 
Sky Enterprises and Sky Holdings, throughout the period ofthe fraudulent scheme. For 
example, in 2006, Mandell's overall cash compensation from Sky Capital, the Sky Entities, and 
related companies exceeded $1.5 million. 
66. During the period 
ofthe fraudulent scheme, the Sky Entities suffered significant 
financial losses. For example, for the fiscal year ended March 2004, Sky Holdings publicly 
reported that it lost over $33 million, and in a period ofless than three years, from August 2002 
to June 2005, Sky Enterprises publicly reported that it lost over $15 million. 
67. Mandell also used 
Sky Capital's funds to pay for personal expenses. For example, 
Mandell paid a decorator from checks drawn on Sky Capital's bank account for work done on 
Mandell's penthouse apartment at the Trump UN Plaza in Manhattan, New York. Sky Capital 
also paid for Mandell's child-care expenses. 
17
 

FIRST CLAIM FOR RELIEF
 
Violations of Section 17(a) of the Securities Act
 
(Sky Capital, Mandell, Shea, 
Harrington,
 
Wilson, Passaro, and Grabowski)
 
68. The Commission repeats and realleges paragraphs 1 through 67, as though fully set 
forth herein. 
69. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro,and Grabowski, directly 
or indirectly, singly or in concert, by use ofthe means or instruments oftransportation or 
communication in, or the means or instrumentalities of, interstate commerce, or by the use of 
the mails, in connection with the offer or sale of securities, knowingly or recklessly: (a) 
employed devices, schemes, 
or artifices to defraud; (b) obtained money or property by means 
ofuntrue statements ofmaterial fact or have omitted to state material facts necessary in order 
to make the statements made, in light ofthe circumstances under which they were made, not 
misleading; and/or (c) engaged 
in acts, transactions, practices, and courses ofbusiness which 
operated or would have operated as a fraud or deceit upon the purchasers ofthe securities 
offered and sold 
by the Defendants and other persons. 
70. As part 
ofand in furtherance ofa fraudulent scheme, Sky Capital, Mandell, Shea, 
Harrington, Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, 
employed the deceptive devices, schemes, artifices, contrivances, acts, transactions, practices, 
and courses 
ofbusiness and/or made misrepresentations and/or omitted to state the facts 
alleged above. 
71. The false and misleading statements and omissions made by Sky Capital, Mandell, 
Shea, Harrington, Wilson, Passaro, and Grabowski were material. 
72. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski knew, or 
were reckless in not knowing, that these material misrepresentations and omissions were false 
18
 

or misleading. 
73. The material misrepresentations and omissions were made 
in connection with the 
offer 
or sale ofsecurities. 
74. 
By reason ofthe foregoing, Sky Capital, Mandell, Shea, Harrington, Wilson, 
Passaro and Grabowski, directly or indirectly, singly or in concert, violated Section 17(a) ofthe 
Securities Act [15 U.S.C. § 77q(a)]. 
SECOND CLAIM FOR RELIEF 
Violations 
of Section 1O(b) of the Exchange Act
 
and Rule 10b-5 Thereunder (Sky Capital, Mandell,
 
Shea, Harrington, Wilson, Passaro, and Grabowski)
 
75. The Commission repeats and realleges paragraphs 1 through 74 as though fully set 
forth herein. 
76. From at least 2001 through November 2006, 
or at various times during such period, 
Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski, directly or 
indirectly, singly or in concert, by use ofthe means or instruments oftransportation or 
communication in, 
or the means or instrumentalities of, interstate commerce, or by the use of 
the mails, in connection with the purchase or sale ofsecurities, knowingly or recklessly: (a) 
employed devices, schemes, or artifices to defraud; (b) made untrue statements 
ofmaterial fact 
or omitted to state material facts necessary in order to make the statements made, in light of the 
circumstances under which they were made, not misleading; and/or (c) engaged in acts, 
transactions, practices, and courses of business which operated or would have operated as a 
fraud 
or deceit upon the purchasers ofthe securities offered and sold by the Defendants and 
other persons. 
77. As part 
ofand in furtherance ofthis violative conduct, Sky Capital, Mandell, Shea, 
Harrington, Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, 
19
 

employed the deceptive devices, schemes, artifices, contrivances, acts, transactions, practices, 
and courses 
ofbusiness and/or made misrepresentations and/or omitted to state the facts 
alleged above. 
78. The false and misleading statements and omissions made 
by Sky Capital, Mandell, 
Shea, Harrington, Wilson, Passaro, and Grabowski were material. 
79. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski knew, or 
were reckless in not knowing, that these material misrepresentations and omissions were false 
or misleading. 
80. The material misrepresentations and omissions were in connection with the 
purchase or sale 
ofsecurities. 
81. 
By reason ofthe foregoing, Sky Capital, Mandell, Shea, Harrington, Wilson, 
Passaro and Grabowski, singly or in concert, directly or indirectly, violated Section 1
O(b) of 
the Exchange Act [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.lOb-5]. 
THIRD CLAIM FOR RELIEF
 
Aiding and Abetting Violations of Section 1O(b)
 
of the Exchange Act and Rule lOb-S Thereunder (Shea)
 
82. The Commission repeats and realleges paragraphs 1 through 
81 asthough fully set 
forth herein. 
83. 
By reason ofthe foregoing, Sky Capital, Mandell, Harrington, Wilson, Passaro, and 
Grabowski, directly or indirectly, singly or in concert, violated Section 10(b) 
ofthe Exchange 
Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.lOb-5]. 
84. As part 
of and in furtherance of this violative conduct, Shea provided knowing and 
substantial assistance to Sky Capital, Mandell, Harrington, Wilson, Passaro, and Grabowski. 
85. 
By reason ofthe foregoing and pursuant to Section 20(e) of the Exchange Act [15 
20
 

u.S.c. § 78t(e)], Shea, directly or indirectly, singly or in concert, aided and abetted Sky 
Capital's, Mandell's, Harrington's, Wilson's, Passaro's and Grabowski's primary violations 
of 
Section 10(b) ofthe Exchange Act [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. 
§ 240.10b-5]. 
FOURTH CLAIM FOR RELIEF 
Violations of Section 15(c) of the Exchange Act 
(Sky 
Capital) 
86. The Commission realleges and incorporates by reference paragraphs 1 through 85, 
as though fully set forth herein. 
87. Sky Capital, directly or indirectly, singly or in concert, made use 
ofthe mails or 
means 
or instrumentalities ofinterstate commerce to effect transactions in, or to induce or 
attempt to induce the purchase or sale 
of securities, by means ofa manipulative, deceptive, or 
other fraudulent device 
or contrivance as prohibited by SeCtion 15(c) of the Exchange Act [15 
U.S.c. § 780(c)]. 
88. As part and in furtherance 
of this violative conduct Sky Capital engaged in a 
fraudulentschemetosellitscustomersshares 
oftheSkyEntities' stock. 
89. 
By reason ofthe foregoing, Sky Capital, directly or indirectly, singly or in concert, 
violated Section 15(c) 
of the Exchange Act [15 U.S.c. § 780(a)]. 
FIFTH CLAIM FOR RELIEF
 
Aiding and Abetting Violations of Section 15(c)
 
of the Exchange Act (Mandell)
 
90. The Commission realleges and incorporates by reference paragraphs 1 through 89, 
as though fully set forth herein. 
91. Sky Capital, directly or indirectly, singly or in concert, made use 
ofthe mails or 
means or instrumentalities 
ofinterstate commerce to effect transactions in, or to induce or 
21
 

attempt to induce the purchase or sale of securities, by means of a manipulative, deceptive, or 
other fraudulent device or contrivance as prohibited by Section 15(c) ofthe Exchange Act [15 
U.S.C. 
§ 780(c)]. 
92. As part ofand in furtherance ofthis violative conduct, Mandell provided lrn.owing and 
substantial assistance to Sky Capital 
by means ofa manipulative, deceptive, or other fraudulent device 
or contrivance. 
93. 
By reason ofthe foregoing and pursuant to Section 20(e) ofthe Exchange Act [15 
U.S.C. 
§ 78t(e)], Mandell, directly or indirectly, aided and abetted Sky Capital's primary
 
violations of Section 15(c) ofthe Exchange Act [15 U.S.c. § 780(a)].
 
PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that this Court enter a Final 
Judgment: 
I. 
Permanently restraining and enjoining 
Sky Capital, Mandell, Shea, Harrington, Wilson, 
Passaro, and Grabowski, and their officers; agents, servants, employees, and attorneys, and all 
persons 
in active concert or participation with them who receive actual notice ofthe injunction 
by personal service or otherwise, and each of them, from violating Section 17(a) of the Securities 
Act [15 U.S.C. § 77q(a)], and Section 
lOeb) ofthe Exchange Act [15 U.S.c. § 78j(b)] and Rule 
lOb-5 thereunder [17 C.F.R. § 240.lOb-5]. 
II. 
Permanently restraining and enjoining Sky Capital and its officers, agents, servants, 
employees, and attorneys, and all persons in active concert or participation with it who receive 
actualnotice 
oftheinjunction bypersonal serviceorotherwise, andeach ofthem, from violating 
22
 

Section 15(c) ofthe Exchange Act [15 U.S.C. § 780(c)], and permanently restraining and 
enjoining Mandell and any 
ofhis agents, servants, employees, and attorneys and all persons in 
active concert or participation with him who receive actual notice ofthis injunction by personal 
service or otherwise, and each ofthem, from aiding and abetting or causing violations of Section 
15(c)
oftheExchangeAct[15 U.S.c. §780(c)].. 
III. 
Ordering each ofthe Defendants to disgorge the ill-gotten gains they received as a result 
oftheir violations alleged herein, and to pay prejudgment interest thereon; 
IV. 
Ordering each ofthe Defendants to pay civil money penalties pursuant to Section 20(d) 
ofthe Securities Act [15 U.S.C. § 77t(d)] and/or Section 21(d)(3) ofthe Exchange Act [15 
U.S.c. § 78u(d)(3)]. 
V. 
Permanently prohibiting Mandell from acting as an officer or director of any issuer that 
has a class 
ofsecurities registered pursuant to Section 12 ofthe Exchange Act [15 U.S.c. § 781] 
or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 
780(d)] pursuant to Section 21 (d)(2) ofthe Exchange Act [15 U.S.C. § 78u(d)(2)]: 
23
 

VI. 
Granting such other and further relief as this Court may deem just and proper. 
Dated: 
New York, NY 
July 8,2009 
.5'~ W~~ 
SANJAy1;ADHWA 
o 
, 
Assistant Regional Director 
Attorney for the Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
3 World Financial Center, Suite 400 
New York, New York 10281-1022 
(212) 336-0181 
Email: [email protected] 
Of Counsel:
 
Amelia Cottrell·(cottrella@sec.
gOY)
 
Kay L. Lackey* ([email protected])
 
Shannon 
A. Keyes* ([email protected])
 
* not admitted in New York 
24
 

SANJAYWADHWA Cftl

Assistant Regional Director 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
3 World Financial Center, Suite 400 
New York, New York 10281-1022 
(212) 336-0181 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

------------------------------------------------------------------------x 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

- against­ 09Civ. __( ) 

SKY CAPITAL LLC a/k/a GRANTA CAPITAL 
LLC, ROSS MANDELL, STEPHEN SHEA, ADAM 
HARRINGTON RUCKDESCHEL, ARN WILSON, 
MICHAEL PASSARO and ROBERT GRABOWSKI 

COMPLAINT 

Defendants. 

------------------------------------------------------------------------x 

Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against 

defendants Sky Capital LLC a/k/a Granta Capital LLC ("Sky Capital"), Ross Mandell 

("Mandell"), Stephen Shea ("Shea"), Adam Harrington Ruckdeschel ("Harrington"), Am Wilson 

("Wilson"), Michael Passaro ("Passaro"), and Robert Grabowski ("Grabowski") (collectively, 

the "Defendants"), alleges as follows: 

SUMMARY 

1. The Defendants perpetrated a long-running scheme to defraud investors in two 

related companies: Sky Capital Holdings Ltd. ("Sky Holdings") and Sky Capital Enterprises, 



Inc. ("Sky Enterprises," and together with Sky Holdings, the "Sky Entities"), uSIng boiler room 

tactics. 

2. Mandell, Sky Capital's founder, orchestrated the scheme with the assistance of 

Shea, the former Chief Operating Officer ofSky Capital, and registered representatives at Sky 

Capital, including Harrington, Wilson, Passaro, and Grabowski (collectively, the "RRs"). 

3. Mandell commenced his scheme in 2001 and directed Sky Capital brokers, 

including Sky Capital Broker A ("Broker A") and Sky Capital Broker B ("Broker B") to make 

material misrepresentations and omissions to their customers to persuade them to buy shares in 

the Sky Entities' private placements. To incentivize the Sky Capital brokers to sell the Sky 

Entities' private placement stocks to their customers, Mandell paid, and directed Shea to pay, 

additional, undisclosed commissions to the brokers. Mandell also personally made material 

misrepresentations and omissions to Sky Capital customers in soliciting them to buy shares in 

the Sky Entities' private placements. 

4. Sky Holdings' and Sky Enterprises' stocks'began to trade publicly in 2002 and 

2004, respectively. In an effort to support the price of the publicly traded stocks, Mandell and 

Shea enforced a "no net sales" policy, which restricted Sky Capital's customers' ability to sell 

their publicly traded stocks in the Sky Entities. The RRs complied with this policy, and 

routinely crossed stock between their customers' accounts, without disclosing the policy to 

their customers. Additionally, Mandell continued to pay, and directed Shea to pay, undisclosed 

commissions to the RRs to incentivize them to continue to sell the Sky Entities' stock. 

5. Mandell's scheme was very profitable. Between September 2002 and November 

2006, Sky Capital raised over $61 million by selling stock in the Sky Entities. The fraudulent 

scheme was also profitable for Mandell. Mandell used Sky Enterprises' and Sky Capital's 

2
 



funds to pay for his lavish lifestyle, and Mandell ensured Shea, the RRs, and others were richly 

compensated. 

6. By virtue of the conduct alleged herein, Sky Capital, Mandell, Shea, Harrington, 

Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, engaged in acts, 

practices, transactions, or courses ofbusiness that violated Section 17(a) of the Securities Act 

of 1933 ("Securities Act") [15 U.S.c. §§ 77q(a)], and Section lO(b) of the Securities Exchange 

Act of 1934 ("Exchange Act") [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 

240.lOb-5]. In the alternative, Shea aided and abetted Sky Capital's, Mandell's, Harrington's, 

Wilson's, Passaro's, and Grabowski's violations of Section 10(b) ofthe Exchange Act [15 

U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.10b-5]. 

7. By virtue of the conduct alleged herein, Sky Capital also violated Section 15(c) of 

the Exchange Act [15 U.S.c. § 780(c)], and Mandell aided and abetted Sky Capital's violation 

ofSection 15(c) of the Exchange Act [15 U.S.c. §780(c)]. 

8. Unless each ofthe Defendants is pennanently restrained and enjoined, they will 

again engage in the acts, practices, transactions, or courses ofbusiness set forth herein and in 

acts, practices, transactions, or courses ofbusiness of similar type and object. 

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

9. The Commission brings this action pursuant to the authority conferred upon it by 

Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act 

[15 U.S.C. § 78u(d)]. The Commission seeks to pennanently restrain and enjoin: (a) Sky 

Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski from future violations of 

Section 17(a) ofthe Securities Act [15 U.S.c. §§ 77q(a)], and Section 10(b) of the Exchange 

Act [15 U.S.c. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.l0b-5]; and (b) Sky 

3
 



Capital and Mandell from primary or secondary future violations of Section 15(c) of the 

Exchange Act [15 U.S.C. § 78o(c)]. The Commission also seeks a final judgment ordering the 

Defendants to disgorge their ill-gotten gains and to pay prejudgment interest thereon, to pay 

civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.c. § 77t(d)] and 

Section 2l(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], and to permanently prohibit 

Mandell from acting as an officer or director of any issuer that has a class of securities 

registered pursuant to Section 12 ofthe Exchange Act [15 U.S.c. § 781], or that is required to 

file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)] pursuant to 

Section 21 (d)(2) ofthe Exchange Act [15 U.S.C. § 78u(d)(2)]. Finally, the Commission seeks 

all other just and appropriate relief. 

JURISDICTION AND VENUE 

10. This Court has jurisdiction over this action pursuant to Sections 20(d) and 22(a) of 

the Securities Act [15 U.S.c. §§ 77t(d) and 77v(a)], and Sections 21(e) and 27 of the Exchange 

Act [15 U.S.c. §§ 78u(e) and 78aa]. 

11. Venue lies in this Court pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 

77v(a)] and Section 27 of-the Exchange Act [15 U.S.c. § 78aa]. The Defendants, directly or 

indirectly, have made use of the means or instrumentalities of, or the means or instruments of 

transportation or communication in, interstate commerce, or of the mails, in connection with 

the transactions, acts, practices, and courses ofbusiness alleged herein. Certain of these 

transactions, acts, practices, and courses ofbusiness occurred within the Southern District of 

New York. For instance, Sky Capital maintained its principal place ofbusiness in New York, 

New York, and Mandell, Shea, Hariington, Wilson, Passaro, and Grabowski engaged in at least 

4
 



some of the conduct alleged h~rein while working at Sky Capital's office located in New York, 

New York. 

DEFENDANTS 

12. Sky Capital was registered with the Commission as a broker-dealer on May 13, 

2002, pursuant to Section 15(b) of the Exchange Act [15 U.S.c. § 780(b)]. Sky Capital, which 

recently changed its name to Granta Capital LLC, withdrew its registration as a broker-dealer 

effective April 6, 2009. Sky Capital is a New York limited liability company, and has offices 

in New York, New York, and Boca Raton, Florida. Sky Capital was formed in June 2001 by 

Mandell, and is majority owned by Sky Holdings, an entity that was publicly traded on the 

Alternative Investment Market of the London Stock Exchange ("AIM") until November 2006. 

13. Mandell, age 52, is a resident ofBoca Raton, Florida. Mandell founded Sky 

Capital in June 2001, and was its President, CEO and majority shareholder until April 2008. 

Mandell was also the president of Sky Holdings from its formation in June 2001 until April 

2008. Mandell was also the CEO of Sky Enterprises from its formation in August 2002 until 

April 2008. While at Sky Capital, Mandell held Series 7, 24 and 63 licenses. 

14. Shea, age 37, is a resident of Brooklyn, New York. Shea was the Chief Operating 

Officer of Sky Capital from 2001 until January 2009, when he left Sky Capital. While at Sky 

Capital, Shea held Series 24, 62 and 63 licenses. 

15. Harrington, age 39, is a resident ofNew York, New York. Harrington was a 

registered representative at Sky Capital from 2002 to 2005. Harrington has a disciplinary 

history. In September 2002, Harrington was fined $128,496.31 and barred from being licensed 

by the Utah Division of Securities for, among other things, unauthorized trading, unsuitability, 

and churning. In the Matter of Adam Harrington Ruckdeschel, CRD #2481064, SD-02-0139, 

5
 



September 23,2002. While at Sky Capital, Harrington held Series 7, 24 and 63 licenses. 

Harrington is currently a partner at a hedge fund. 

16. Wilson, age 45, is a resident ofDix Hills, New York. Wilson was a registered 

representative at Sky Capital from 2002 to 2008. Wilson holds Series 7 and 63 licenses. 

Wilson is currently employed as a registered representative at another broker-dealer. 

17. Passaro, age 46, is a resident ofBoca Raton, Florida. From 2001 until December 

2008, Passaro was a registered representative at Sky Capital and, during the relevant period, 

worked out of the firm's Boca Raton, Florida, office, as well as, at times, its New York, New 

York, office. Passaro holds Series 7, 24 and 63 licenses. Currently, Passaro is employed as a 

registered representative at another broker-dealer. 

18. Grabowski, age 42, is a resident of Staten Island, New York. Grabowski was a 

registered representative at Sky Capital from 2003 to 2008. Grabowski holds Series 7, 8, 24 

and 63 licenses. In September 2002, Grabowski was fined $75,000 and barred from being 

licensed by the Utah Division of Securities for failure to supervise and failure to grant auditors 

access to books and records. In the Matter ofRobert J. Grabowski, CRD #1639890, SD-02­

0140, September 23,2002. Currently, Grabowski is employed as a registered representative at 

another broker-dealer. 

RELATED PERSONS AND ENTITIES 

19. Sky Capital UK Ltd. ("Sky Capital UK") was a broker-dealer in London that was 

a wholly-owned subsidiary of Sky Holdings. Sky Capital UK registered with the Financial 

Services Authority in October 2003. Sky Capital UK is now in liquidation. 

20. Sky Enterprises (fi'kla Sky Capital Ventures, Inc.) is a Delaware company Mandell 

formed in August 2002 purportedly to invest in emerging growth companies. Sky Holdings 

6
 



had access to Sky Enterprises funds through a revolving credit line of£3 million. Sky 

Enterprises began trading on the AIM on March 29,2004. On November 7,2006 the London 

Stock Exchange suspended trading in Sky Enterprises' stock. To date, Sky Enterprises' stock 

has not resumed trading on the AIM. During the period that it was trading on the AIM, Sky 

Enterprises' average daily trading volume was 16,573 shares. 

21. Sky Holdings is a Delaware company Mandell fonned in June 2001. Sky Holdings 

ownS at least 75% of Sky Capital stock. Mandell was the President of Sky Holdings and 

owned a portion of Sky Holdings. Sky Holdings also owned Sky Capital UK prior to its 

liquidation. Sky Holdings began trading on the AIM on July 15,2002. On November 7,2006 

the London Stock Exchange suspended trading in Sky Holdings' stock. To date, Sky 

Holdings' stock has not resumed trading on the AIM:. DUring the period that it was trading on 

the AIM, Sky Holdings' average daily trading volume was 12,341 shares. 

FACTS 

A. Sky Capital's Role as Sales Agent for Related Entities 

22. From 2002 to 2006, Sky Capital sold stock in private placements of several related 

entities, including the Sky Entities, to investors. 

23. Although Sky Capital solicited investors in the United States, most of Sky Capital's 

brokers' solicitation efforts were directed towards investors in the United Kingdom. 

24. From September 2002 to August 2003, Sky Capital acted as the sales agent for Sky 

Enterprises' private placement. Sky Enterprises raised approximately $20.7 million from over 

80 investors. 

7
 



25. From February 2003 through July 2003, Sky Capital acted as a sales agent for an 

offering of Sky Holdings' Series A convertible preferred stock. Sky Holdings raised 

approximately $9.2 million from more than 50 investors. 

26, From September 2003 through January 2004, Sky Capital acted as a sales agent for 

an offering of Sky Holdings' Series B convertible preferred stock to more than 240 investors.. 

Sky Holdings raised over $32 million in this offering. 

27. After public trading in Sky Enterprises and Sky Holdings commenced, Sky Capital 

continued to act as the sales agent for subsequent private placements, and also facilitated Sky 

Capital customers' public trading of these stocks. 

B.	 Sky Capital, Mandell and the RRs Made Material Misrepresentations and Omissions 
in Connection With the Sky Entities' Private Placements 

28. Mandell directed Sky Capital brokers to make material misrepresentations, omit 

material infonnation, and use high pressure sales tactics to induce their Sky Capital customers 

to purchase stock in the Sky Entities' private placements. 

29. Throughout the time that Sky Capital served as the sales agent for the Sky Entities' 

private placements, Mandell instructed Sky Capital brokers to pressure their customers to sell 

their positions in liquid stocks and invest the proceeds in Sky Enterprises or Sky Holdings. 

30. Based on this directive from Mandell, Sky Capital brokers, including Broker A and 

Broker B, told their customers that investing in the Sky Entities, as opposed to holding the 

stock that the customers then owned, was a better investment even though there was no basis 

for the brokers to make such assertions. 

3L For example, although neither Sky Enterprises nor Sky Holdings had any operating 

history or revenues, Sky Capital brokers, including Broker A and Broker B, made baseless 

8
 



price predictions regarding the Sky Entities' stocks and misrepresented the value of the 

investments to their customers. 

32. Mandell personally examined Sky Capital brokers' customers' portfolios, and when 

Mandell found customers who hel9 liquid stocks, Mandell instructed the brokers to convince 

those customers to sell the liquid stocks and invest the proceeds in the Sky Entities. 

33. Sky Capital brokers also used scripts to solicit investors for the Sky Entities' private 

placements, and they based their sales pitches on what Mandell told them. 

34. Mandell personally made material misrepresentations to Sky Capital customers to 

convince themto invest in the Sky Entities. For example, beginning in 2002, Mandell 

personally solicited Investor 1 and Investor 2, both ofManchester, England, to invest in the 

Sky Enterprises private placements. Mandell convinced Investor 1 and Investor 2 to invest 

approximately $1 million in Sky Enterprises by promising them the stock price would at least 

double in value, and that they would be able to sell their shares to capture this profit in six 

months. 

35. Prior to July 2003, Mandell solicited Investor 1 and Investor 2 to invest in the Sky 

Holdings private placement as well. Mandell met with Investor 1, and assured Investor 1 that 

Investor 1 would be getting the Sky Holdings stock "cheap," that there was no doubt that 

Investor 1 would make a significant profit from his Sky Holdings investment, and that there 

was no risk of losing money on the investment. Mandell persuaded Investor 1 and Investor 2 

to buy 900,000 shares of Sky Holdings' Series A convertible preferred stock for approximately 

£600,000. 

36. After Sky Holdings' preferred stock was converted into common stock, Investor 1 

and Investor 2 met with Mandell in approximately September 2004 to discuss selling all their 

9
 



Sky Holdings shares. At the meeting, in or around September 2004, Mandell told them that it 

would be "ridiculous" for them to sell their Sky Holdings stock because in a few weeks 

Mandell was going to sell Sky Holdings to a German Bank for £4 per share, a price that 

constituted a premium of nearly 100% over £2.01, the highest price at which Sky Holdings' 

stock traded in September 2004. 

37. In fact, there was no such sale transaction in the works. Investor 1 and Investor 2, 

however, continued to hold their Sky Holdings stock. Soon thereafter, the price of Sky 

Holdings stock began to decline. 

38. Mandell later told Investor 1 and Investor 2 that the Sky Holdings acquisition was 

cancelled because the German bank: had wanted Mandell to work for the bank for three years 

as part of the deal, but because he was Jewish, Mandell could not work for a German bank. In 

fact, the bank: never proposed any employment arrangement of any type to Mandell. 

39. Contrary to Mandell's indications to Investor 1 and Investor 2 that they would be 

able to sell their Sky Entities' stocks profitably because a liquid market would exist, as 

Mandell knew, or was reckless in not knowing, the Sky Entities' stocks were illiquid stocks, 

and there was no reasonable basis to make these predictions. 

40. Investor 1 and Investor 2 continued to hold a substantial amount of their Sky
 

Entities' stock until November 7, 2006 when trading in these stocks was suspended.
 

C.	 Sky Capital and Mandell Paid Additional Commissions in Connection With the Sky 
Entities' Private Placements That Were Not Disclosed to Investors 

41. In order to motivate Sky Capital brokers to sell the Sky Entities' private placement 

stocks to their customers, Mandell paid the brokers additional commissions that were not 

disclosed. While the disclosed commission rates in the private placement memoranda 

10
 



("PPMs") for the Sky Entities' offerings were 8% to 10%, Mandell authorized Sky Capital to 

pay brokers, including Broker A and Broker B, additional commissions beyond such rates. 

42. Despite the language in the PPMs, Mandell instructed Sky Capital brokers to tell 

investors, if asked about commissions, that the investors would not be charged for 

commissions. However, the funds raised from investors in the private placements were, in 

fact, used to pay commissions to Sky Capital brokers. 

43. For example, Sky Capital and Mandell paid Broker A and Broker B additional 

commissions following each private placement for Sky Holdings or Sky Enterprises for which 

they sold stock to investors. Broker A and Broker B did not disclose these additional 

commissions to investors. 

D.	 Sky Capital, Mandell, Shea and the RRs Made Material Misrepresentations and 
Omissions After the Sky Entities' Stocks Became Publicly Traded 

Failure to Disclose the "No Net Sales" Policy 

44. Throughout the time that the Sky Entities' stocks were publicly trading on the AIM, 

in an effort to support the price of the stocks, Sky Capital had a "no net sales" policy. The 

policy prohibited Sky Capital brokers from submitting sell order tickets for the Sky Entities' 

stocks unless they had lined up Sky Capital customers to buy an equivalent amount of shares at 

the same price so that the sell order did not drive the stock price down. Therefore, in order for 

a broker to sell a customer's stock in one of the Sky Entities, the broker had to find another 

Sky Capital customer to buy the stock being sold. 

45. Mandell enforced the "no net sales" policy. Mandell held meetings with Sky 

Capital brokers to inform them that they needed to find buyers for the Sky Entities' stocks 

being sold by other Sky Capital customers to alleviate the "selling pressUre" on the stocks. In 

11
 



addition, Mandell told brokers, including Broker A and Broker B, that they had to find a buy~r 

before the broker could submit a sell ticket. 

46. Mandell bullied brokers who submitted customer sell orders without first lining up 

a buyer, and accused them ofnot being a ''team player." Mandell also denied perks to brokers 

who did not follow the "no net sales" policy. Sky Capital often paid for parking, cell phones, 

and other personal expenses incurred by the brokers, but if a broker did not "support the 

stock," Mandell would take away the broker's perks. 

47. Shea also enforced the "no net sales" policy. When Sky Capital brokers were 

unable to find a buyer to match a customer sell order for the Sky Entities' stocks, the broker 

would give the customer sell order to Shea who would then attempt to find a buyer for that 

stock from another Sky Capital broker. This practice was also called "crossing stock." 

48. Sky Capital's trading records reveal numerous instances of cross-trades or 

"crossing-stock" in the Sky Entities' stocks by each of the RRs, either acting alone or in 

concert with other Sky Capital brokers. For example: 

•	 On April 27, 2004, Harrington earned a commission resulting from the sale by a Sky 
Capital customer, Investor 3, of 2,000 shares of Sky Holdings stock at £4.61 per share. 
On that same day, Harrington also earned a commission by causing an account held by a 
Sky Capital customer, Investor 4, to purchase 2,000 shares of Sky Holdings stock at 
£4.64 per share. 

•	 On May 7, 2004, Harrington earned a commission resulting from the sale by a
 
Sky Capital customer, Investor 5, of 15,000 shares of Sky Enterprises stock at
 
$3.01 per share. On that same day, Harrington and two other Sky Capital.
 
brokers also shared commissions by causing two Sky Capital customer
 
accounts - Investor 6 (4,000 shares) and Investor 7 (11,000 shares) - to
 
purchase, in the aggregate, 15,000 shares of Sky Enterprises stock at $3.04 per
 
share.
 

•	 On July 27, 2004, Wilson and Grabowski shared a commission resulting from
 
the sale by a Sky Capital customer, Investor 8, of 15,000 shares of Sky
 
Enterprises stock at $3.02 per share. On that same day, Wilson and
 
Grabowski shared a commission by causing an account held by a Sky Capital
 

12 



customer, Investor 9, to purchase 15,000 shares of Sky Enterprises stock at 
$3.07 per share. 

• On August 20, 2004, Wilson and Grabowski shared a commission resulting 
from the sale by a Sky Capital customer, Investor 10, of 3,000 shares of Sky 
Holdings stock at £3.81 per share. On that same day, Wilson and Grabowski 
shared another commission by causing an account held by a Sky Capital 
customer, Investor 11, to purchase 3,000 shares of Sky Holdings stock at 
£3.85 per share. 

• On November 18, 2004, Passaro earned a commission resulting from the sale 
by a Sky Capital customer, Investor 12, of 10,000 shares of Sky Enterprises 
stock at $1.57 per share. On that same day, Passaro earned another 
commission by causing four Sky Capital customer accounts - Investor 13 
(8,600 shares), Investor 14 (340 shares), Investor 15 (640 shares), and 
Investor 16 (420 shares) - to purchase, in the aggregate, 10,000 shares of Sky 
Enterprises stock at $1.60 per share. 

• On February 22,2005, Harrington earned a commission resulting from the 
sale by a Sky Capital customer, Investor 17, of 6,000 shares of Sky Holdings 
stock at £3.15 per share. On that same day, Wilson and Grabowski shared a 
commission by causing an account held by a Sky Capital customer, Investor 
18, to purchase 5,000 shares ofSky Holdings stock at £3.21 per share. 

• On March 3 and 4,2005, Wilson and Grabowski shared commissions 
resulting from the sales by Investor 8 of20,000 shares (sold in equal parts 
over the two days) of Sky Enterprises stock, at $2.27 per share. On March 3, 
Wilson and Grabowski caused an account held by a Sky Capital customer, 
Investor 19, to purchase 10,000 shares of Sky Enterprises stock at $2.30 per 
share, and on March 4, Wilson and Grabowski caused an account held by 
another Sky Capital customer, Investor 20, to also purchase 10,000 shares of 
Sky Enterprises stock at $2.30 per share. Wilson and Grabowski shared the 
commissions resulting from the two buy transactions. 

• On March 7, 2005, Wilson and Grabowski shared commissions resulting from 
the sale by two Sky Capital customers - Investor 8 (60,000 shares) and 
Investor 21 (20,000 shares) - of 80,000 shares of Sky Enterprises stock, at 
$2.34 per share. On that same day, Wilson and Grabowski shared an 
additional commission by causing an account held by a Sky Capital customer, 
Investor 22, to purchase 80,000 shares of Sky Enterprises stock at $2.37 per 
share. 

• On August 31, 2005, Broker B earned commission resulting from the sale by a 
Sky Capital customer, Investor 23, of 3,000 shares of Sky Enterprises stock at 
$2.73 per share.· On that same day, Passaro earned commission by causing an 

13
 



account held by a Sky Capital customer, Investor 24, to purchase 3,000 shares 
of Sky Enterprises stock at $2.77 per share. 

•	 On May 23,2006, Wilson and Grabowski shared a commission resulting from the sale by 
Investor 21 of 16,000 shares of Sky Holdings stock at £0.94 per share. On that same day, 
Wilson and Grabowski earned additional commissions by causing three Sky Capital 
customer accounts -Investor 23 (9,000 shares), Investor 25 (4,000 shares), and Investor 
19 (3,000 shares) - to purchase, in the aggregate, 16,000 shares of Sky Holdings stock at 
£0.95 per share. 

49. In some cases, if Sky Capital brokers could not dissuade a customer from selling, 

and were unsuccessful in finding a buyer to cross the sell order, Shea and the sales managers 

told other brokers that the stock was "at the desk." Shea and the sales managers used the 

phrase "at the desk" to mean either that sell tickets for Sky Holdings or Sky Enterprises stock 

were literally at the trading desk waiting to be executed against buy orders from other Sky 

Capital customers, or that Sky Capital's "desk" - i.e., its proprietary account - had purchased 

the stock so that it would not be up for sale on the open market without a buyer, which might 

cause the price to fall. Shea directed the Sky Capital brokers to find Sky Capital customers 

who would buy the stock that had been purchased by the proprietary account. 

50. At times, Mandell directed Sky Capital brokers whose customers wanted to sell 

their Sky Entities stocks to inform such customers that because the Sky Enterprises and Sky 

Holdings stocks were thinly traded, the customers had no option but to sell their shares to Sky 

Capital at a discount from the publicly listed price. 

51. The Sky Capital desk made several purchases of Sky Holdings and Sky Enterprises 

stocks from its customers at a "discount," a price below the stock's listed price on the AIM. 

52. Sky Capital brokers, including Broker A and Broker B, then resold the discounted 

shares to other Sky Capital customers at the publicly listed price, thereby making a profit for 

14
 



Sky Capital on the difference between the two prices, or the "spread." Mandell was aware of, 

and condoned, this practice. 

53. Sky Capital also offered its brokers, including Broker A and Broker B, additional 

commissions to find buyers of Sky Enterprises' publicly traded stock to "keep the stock price 

up" while Sky Capital was soliciting investors to invest in a Sky Enterprises private placement. 

54. Because of the "no net sales" policy being in effect, investors had extreme difficulty 

selling their stock in the Sky Entities, and, as a result, many of them continued to remain 

shareholders in the Sky Entities until November 7, 2006 when the stocks were delisted from 

the AIM and trading in the shares was haIted. 

55. Mandell, Shea, the RRs, Broker A and Broker B did not tell their customers that
 

Sky Capital had a "no net sales" policy.
 

E.	 Sky Capital, Mandell, and Shea Paid Additional Commissions in Connection With the 
Sky Entities' Publicly Traded Stock and the RRs Did Not Disclose these Commissions 

56. Mandell and Shea offered Sky Capital brokers additional commissions in the form 

of bonuses for getting Sky Capital customers to buy the Sky Entities' publicly traded stocks that 

other Sky Capital customers sold. 

57. Shea, acting under Mandell's direction, led meetings with Sky Capital's brokers to 

let them know when there was stock "at the desk" and let them know that that there was a 

"credit" or "special bonus" available for them to resell it. This "credit" or "special bonus" was 

often a portion of the profit, or spread, that Sky Capital earned when it resold to its customers 

the publicly traded Sky Entities stocks it had purchased at a discount from other Sky Capital 

customers. 

58. At Mandell's direction, Harrington led a meeting with Sky Capital's brokers in
 

which he said that Sky Capital would be giving out what he called "performance bonuses"
 

15
 



because, he explained, Sky Capital was not permitted to pay extra commission for selling the 

stock of Sky Enterprises or Sky Holdings. Harrington described the performance bonuses as 

being bonuses for dressing nicely, coming to work on time, and being a team player. It was 

clear to the brokers that Harrington was telling them in this meeting that they could earn 

additional commissions. 

59. The brokers called their customers to find buyers for the Sky Entities' stocks "at the 

desk," and when they sold it, they received additional commissions in an amount equal to 50% 

of the spread, with the other 50% remaining at Sky Capital. These commissions were not 

disclosed to the Sky Capital customers. 

60. Mandell and, in some cases, Shea approved these additional commission payments, 

which were made by check. 

61. For example, in January 2005 Broker A received a check from Sky Capital dated 

January 6,2005 in the amount of $8,682.00. The January 6,2005 check was additional, 

undisclosed commissions for Broker A's sales of a total of 80,000 shares of Sky Enterprises' 

stock to two ofhis customers during October and December of2004. Broker A did not inform 

his customers of the additional commissions. 

62. Mandell ignored complaints from customers about the behavior of Sky Capital's 

brokers in connection with the sales ofthe Sky Entities' publicly traded stocks. For example, a 

Sky Capital broker gave Mandell several customer complaints concerning Broker B, including 

allegations of unauthorized trading in the Sky Entities' stocks. Mandell did not, however, file 

notice of the complaints with the NASD, and did nothing to address the customers' concerns. 

16
 



F. Mandell Profited from the Scheme 

63.· Under Mandell's leadership, Sky Capital raised over $61 million for Sky
 

Enterprises and Sky Holdings.
 

64. Mandell squandered the funds on a lavish lifestyle for himself and the Sky Capital 

brokers. For example, Mandell made frequent trips to London to pitch the Sky Enterprises and 

Sky Holdings private placements to prospective investors. These trips were extravagant, and 

included first-class flights, five-star hotel suites, expensive meals, adult entertainment, and 

personal spending. Mandell authorized the Sky Entities to pay the expenses for these trips. 

65. Mandell was also handsomely compensated, not only by Sky Capital, but also by 

Sky Enterprises and Sky Holdings, throughout the period ofthe fraudulent scheme. For 

example, in 2006, Mandell's overall cash compensation from Sky Capital, the Sky Entities, and 

related companies exceeded $1.5 million. 

66. During the period of the fraudulent scheme, the Sky Entities suffered significant 

financial losses. For example, for the fiscal year ended March 2004, Sky Holdings publicly 

reported that it lost over $33 million, and in a period ofless than three years, from August 2002 

to June 2005, Sky Enterprises publicly reported that it lost over $15 million. 

67. Mandell also used Sky Capital's funds to pay for personal expenses. For example, 

Mandell paid a decorator from checks drawn on Sky Capital's bank account for work done on 

Mandell's penthouse apartment at the Trump UN Plaza in Manhattan, New York. Sky Capital 

also paid for Mandell's child-care expenses. 

17
 



FIRST CLAIM FOR RELIEF
 
Violations of Section 17(a) of the Securities Act
 

(Sky Capital, Mandell, Shea, Harrington,
 
Wilson, Passaro, and Grabowski)
 

68. The Commission repeats and realleges paragraphs 1 through 67, as though fully set 

forth herein. 

69. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro,and Grabowski, directly 

or indirectly, singly or in concert, by use of the means or instruments of transportation or 

communication in, or the means or instrumentalities of, interstate commerce, or by the use of 

the mails, in connection with the offer or sale of securities, knowingly or recklessly: (a) 

employed devices, schemes, or artifices to defraud; (b) obtained money or property by means 

of untrue statements ofmaterial fact or have omitted to state material facts necessary in order 

to make the statements made, in light of the circumstances under which they were made, not 

misleading; and/or (c) engaged in acts, transactions, practices, and courses ofbusiness which 

operated or would have operated as a fraud or deceit upon the purchasers ofthe securities 

offered and sold by the Defendants and other persons. 

70. As part of and in furtherance of a fraudulent scheme, Sky Capital, Mandell, Shea, 

Harrington, Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, 

employed the deceptive devices, schemes, artifices, contrivances, acts, transactions, practices, 

and courses ofbusiness and/or made misrepresentations and/or omitted to state the facts 

alleged above. 

71. The false and misleading statements and omissions made by Sky Capital, Mandell, 

Shea, Harrington, Wilson, Passaro, and Grabowski were material. 

72. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski knew, or 

were reckless in not knowing, that these material misrepresentations and omissions were false 

18
 



or misleading. 

73. The material misrepresentations and omissions were made in connection with the 

offer or sale of securities. 

74. By reason of the foregoing, Sky Capital, Mandell, Shea, Harrington, Wilson, 

Passaro and Grabowski, directly or indirectly, singly or in concert, violated Section 17(a) ofthe 

Securities Act [15 U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 
Violations of Section 1O(b) of the Exchange Act
 

and Rule 10b-5 Thereunder (Sky Capital, Mandell,
 
Shea, Harrington, Wilson, Passaro, and Grabowski)
 

75. The Commission repeats and realleges paragraphs 1 through 74 as though fully set 

forth herein. 

76. From at least 2001 through November 2006, or at various times during such period, 

Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski, directly or 

indirectly, singly or in concert, by use of the means or instruments of transportation or 

communication in, or the means or instrumentalities of, interstate commerce, or by the use of 

the mails, in connection with the purchase or sale of securities, knowingly or recklessly: (a) 

employed devices, schemes, or artifices to defraud; (b) made untrue statements of material fact 

or omitted to state material facts necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; and/or (c) engaged in acts, 

transactions, practices, and courses of business which operated or would have operated as a 

fraud or deceit upon the purchasers ofthe securities offered and sold by the Defendants and 

other persons. 

77. As part of and in furtherance of this violative conduct, Sky Capital, Mandell, Shea, 

Harrington, Wilson, Passaro, and Grabowski, directly or indirectly, singly or in concert, 

19
 



employed the deceptive devices, schemes, artifices, contrivances, acts, transactions, practices, 

and courses of business and/or made misrepresentations and/or omitted to state the facts 

alleged above. 

78. The false and misleading statements and omissions made by Sky Capital, Mandell, 

Shea, Harrington, Wilson, Passaro, and Grabowski were material. 

79. Sky Capital, Mandell, Shea, Harrington, Wilson, Passaro, and Grabowski knew, or 

were reckless in not knowing, that these material misrepresentations and omissions were false 

or misleading. 

80. The material misrepresentations and omissions were in connection with the 

purchase or sale of securities. 

81. By reason of the foregoing, Sky Capital, Mandell, Shea, Harrington, Wilson, 

Passaro and Grabowski, singly or in concert, directly or indirectly, violated Section 1O(b) of 

the Exchange Act [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.lOb-5]. 

THIRD CLAIM FOR RELIEF
 
Aiding and Abetting Violations of Section 1O(b)
 

of the Exchange Act and Rule lOb-S Thereunder (Shea)
 

82. The Commission repeats and realleges paragraphs 1 through 81 as though fully set 

forth herein. 

83. By reason ofthe foregoing, Sky Capital, Mandell, Harrington, Wilson, Passaro, and 

Grabowski, directly or indirectly, singly or in concert, violated Section 10(b) of the Exchange 

Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.lOb-5]. 

84. As part of and in furtherance of this violative conduct, Shea provided knowing and 

substantial assistance to Sky Capital, Mandell, Harrington, Wilson, Passaro, and Grabowski. 

85. By reason ofthe foregoing and pursuant to Section 20(e) of the Exchange Act [15 

20u.S.c. § 78t(e)], Shea, directly or indirectly, singly or in concert, aided and abetted Sky 

Capital's, Mandell's, Harrington's, Wilson's, Passaro's and Grabowski's primary violations of 

Section 10(b) ofthe Exchange Act [15 U.S.c. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. 

§ 240.10b-5]. 

FOURTH CLAIM FOR RELIEF 
Violations of Section 15(c) of the Exchange Act 

(Sky Capital) 

86. The Commission realleges and incorporates by reference paragraphs 1 through 85, 

as though fully set forth herein. 

87. Sky Capital, directly or indirectly, singly or in concert, made use of the mails or 

means or instrumentalities of interstate commerce to effect transactions in, or to induce or 

attempt to induce the purchase or sale of securities, by means of a manipulative, deceptive, or 

other fraudulent device or contrivance as prohibited by SeCtion 15(c) of the Exchange Act [15 

U.S.c. § 780(c)]. 

88. As part and in furtherance of this violative conduct Sky Capital engaged in a 

fraudulent scheme to sell its customers shares of the Sky Entities' stock. 

89. By reason of the foregoing, Sky Capital, directly or indirectly, singly or in concert, 

violated Section 15(c) of the Exchange Act [15 U.S.c. § 780(a)]. 

FIFTH CLAIM FOR RELIEF
 
Aiding and Abetting Violations of Section 15(c)
 

of the Exchange Act (Mandell)
 

90. The Commission realleges and incorporates by reference paragraphs 1 through 89, 

as though fully set forth herein. 

91. Sky Capital, directly or indirectly, singly or in concert, made use ofthe mails or 

means or instrumentalities of interstate commerce to effect transactions in, or to induce or 

21
 



attempt to induce the purchase or sale of securities, by means of a manipulative, deceptive, or 

other fraudulent device or contrivance as prohibited by Section 15(c) of the Exchange Act [15 

U.S.C. § 780(c)]. 

92. As part of and in furtherance of this violative conduct, Mandell provided lrn.owing and 

substantial assistance to Sky Capital by means of a manipulative, deceptive, or other fraudulent device 

or contrivance. 

93. By reason ofthe foregoing and pursuant to Section 20(e) of the Exchange Act [15 

U.S.C. § 78t(e)], Mandell, directly or indirectly, aided and abetted Sky Capital's primary
 

violations of Section 15(c) ofthe Exchange Act [15 U.S.c. § 780(a)].
 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a Final 

Judgment: 

I. 

Permanently restraining and enjoining Sky Capital, Mandell, Shea, Harrington, Wilson, 

Passaro, and Grabowski, and their officers; agents, servants, employees, and attorneys, and all 

persons in active concert or participation with them who receive actual notice of the injunction 

by personal service or otherwise, and each of them, from violating Section 17(a) of the Securities 

Act [15 U.S.C. § 77q(a)], and Section lOeb) of the Exchange Act [15 U.S.c. § 78j(b)] and Rule 

lOb-5 thereunder [17 C.F.R. § 240.lOb-5]. 

II. 

Permanently restraining and enjoining Sky Capital and its officers, agents, servants, 

employees, and attorneys, and all persons in active concert or participation with it who receive 

actual notice of the injunction by personal service or otherwise, and each of them, from violating 

22
 



Section 15(c) of the Exchange Act [15 U.S.C. § 780(c)], and permanently restraining and 

enjoining Mandell and any ofhis agents, servants, employees, and attorneys and all persons in 

active concert or participation with him who receive actual notice of this injunction by personal 

service or otherwise, and each of them, from aiding and abetting or causing violations of Section 

15(c) of the Exchange Act [15 U.S.c. § 780(c)] .. 

III. 

Ordering each of the Defendants to disgorge the ill-gotten gains they received as a result 

of their violations alleged herein, and to pay prejudgment interest thereon; 

IV. 

Ordering each of the Defendants to pay civil money penalties pursuant to Section 20(d) 

ofthe Securities Act [15 U.S.C. § 77t(d)] and/or Section 21(d)(3) of the Exchange Act [15 

U.S.c. § 78u(d)(3)]. 

V. 

Permanently prohibiting Mandell from acting as an officer or director of any issuer that 

has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.c. § 781] 

or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 

780(d)] pursuant to Section 21 (d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]: 

23
 



VI. 

Granting such other and further relief as this Court may deem just and proper. 

Dated: New York, NY 
July 8,2009 

.5'~ W~~ 
SANJAy1;ADHWA 

o 

, 

Assistant Regional Director 
Attorney for the Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
3 World Financial Center, Suite 400 
New York, New York 10281-1022 
(212) 336-0181 
Email: [email protected] 

Of Counsel:
 
Amelia Cottrell· ([email protected])
 
Kay L. Lackey* ([email protected])
 
Shannon A. Keyes* ([email protected])
 

* not admitted in New York 

24