Sky Capital Case Study

1550 Words7 Pages
On July 8, 2009 Sky Capital LLC a/k/a Granta Holding Ltd. and Sky Capital Enterprises Inc. was charged with a civil injunctive action in the United States District Court by the Securities and Exchange Commission for using fraudulent boiler room tactics between September 2002 and November 2006 to raise more the $61 million from investors. The Commission also charged Sky Capital’s founder former President and CEO, Ross Mandell, the firm’s former COO, Stephen Shea, and four registered representatives, Adam Harrington Ruckeschel, Arn Wilson, Michael Passaro, and Robert Grabowski, for orchestration and participating in the fraudulent scheme to defraud investors by material misrepresentation and omissions. Mandell directed Sky Capital brokers to…show more content…
Although, Sky Capital solicited investors in the United States, most of the solicitation efforts were directed towards investors in the United Kingdom. During the years prior, Sky Capital acted as the sales agent of Sky Enterprises’ placement and raised approximately $20.7 million from over 80 investors between September 2002 and August 2003. Also during 2003 Sky Capital acted as the sales agent for an offering of Sky Holdings’ Series A convertible preferred stock and raised approx. $9.2 million from more the 50 investors and from September 2003 through January 2004, using the same scheme with Series B convertible preferred stock, Sky Capital raised over $32 million from more than 240 investors. Although the company fraudulently induced investors and drew millions of dollars from them, the financial health and stability of the company between 2002 and 2006 became more and more unstable. By the 2004 fiscal year end Sky Holdings publicly reported that it had over $33 million in financial losses. The former CEO Ross Mandell used the investor funds instead to subsidize his own lifestyle and to richly compensate the other individual defendants by paying them hefty undisclosed commissions and perks for their participation in the stock manipulation scheme. Sky Capital did not have an operating history or…show more content…
The Securities Acts and laws are in place to protect society from corrupt business practices, such as these acts committed by Sky Capital and the defendants. The defendants may have been in denial of the fraud and deceptive business practices they were using, but their impact was felt by many who had trusted them. Bad things happen when trust is met with ethical blind spots in managers high and low in company management. Each defendant found the monetary gain of their deceit and fraud more important than their professional responsibility to their customers and therefore created an ethical blind spot in management. In addition, as a group effort, the defendants not only participated with the fraud, but encouraged the continuation of the malpractice going on. Sky Capital may not have been created for the sole purpose of using deceptive business practices, but because of the group effort made by the defendants the company as a whole could not be trusted to make any ethical decisions in favor of society. The impact Sky Capital and its defendants imposed on what business ethics and professional responsibility stands for shows in a very negative light, however if the group effort made was without the ethical blind spot and favored the trust of their customers with positive and lawful business practices the
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