U.S. Justice vs. Foreign Fraud Ross H. Mandell was accused of running what amounted to a boiler room in Florida, peddling stocks that were overvalued at best, and fraudulent at worst, to customers who were told lies. When some of them tried to sell the securities, he would not let them do so. They lost, and he made, more than $50 million from the scam, the government said. This spring he was convicted of securities fraud, wire fraud and mail fraud and sentenced to 12 years in prison. Judge Paul A. Crotty of the United States District Court in Lower Manhattan ordered him sent to prison immediately and directed him to forfeit $50 million. But now he seems likely to have his convictions overturned. The prestigious Association of the Bar of the City of New York has filed a brief with the appeals court in his support, and the United States Court of Appeals for the Second Circuit has ordered him freed on bail pending appeal. He showed what turned out to be good judgment in both whom he defrauded, and where. Most of the victims were British, and the securities were traded in London, not New York. In 2010, the Supreme Court ruled that a civil suit contending securities fraud could not proceed because the law did not apply to foreign transactions. In that case, Morrison v. National Australia Bank, foreign shareholders were suing a foreign bank whose share price had plummeted when it was disclosed the bank was taking a big loss caused by its American mortgage business. That bank's securities did not trade in the United States. The case has become known as the "3-F" ruling, at least in securities law circles. Foreign issuer, foreign investors and foreign trading added up to no American jurisdiction. The fact that some of the supposedly deceptive statements were made in United States was not enough for the court, which said Congress had not authorized the application of that statute to crimes committed outside the United States. "It is a rare case of prohibited extraterritorial application that lacks all conduct with United States territory," wrote Justice Antonin Scalia. But the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case. The Supreme Court opinion was quiet as to whether it also applied to criminal cases; that is the issue in a number of pending appeals. The government argues that it does not. But the Second Circuit Court seems to be poised to rule that it does. In another case, the appeals court this week ordered the release on bail of Alberto W. Vilar, the former head of Amerindo investments, who was convicted of securities fraud in 2008. His lawyers argued that the Morrison precedent made it highly likely that he would win his appeal. In his appeal, Mr. Mandell argues all of the claimed American victims who testified at his trial conducted their trades so long ago that the statute of limitations bars charging him with crimes for those trades, and that the rest were British. His lawyers say the Morrison case requires that the conviction be overturned. It is at least conceivable that the mail fraud and wire fraud convictions could stand even if the securities fraud conviction did not. In a concurring opinion in Morrison, Justice Stephen Breyer said as much. But it was not clear that the majority would agree. The government argues that Section 10 (b) of the securities act may apply in criminal cases "even if the transactions at issue were executed overseas." It is that argument that drew the opposition from the city bar association's white-collar crime committee. The government's position "that Section 10 (b) can simultaneously have two authoritative constructions - an extraterritorial reading that applies in criminal cases, and a purely domestic one that applies in civil cases - is mistaken," argues the brief filed by the committee's chairman, John F. Savarese, a partner in Wachtell, Lipton, Rosen & Katz. If Mr. Mandell's conviction is overturned and he goes free, one of the more colorful securities law violators will be back on the scene. As far back as 1995, he was suspended from the New York Stock Exchange for unauthorized trading. He later attributed those problems to drug usage. Aware of his background, American regulators required Sky Capital, Mr. Mandell's brokerage firm, to promise that he would have no supervisory authority. The government says he ignored that promise. Sky Capital went public in Britain in 2002 and was traded on London's Alternative Investment Market, where there are fewer rules than on other markets. The charges say that stock was one of the securities used to defraud investors, with Mr. Mandell promising some investors that the price would double. The shares have not traded since 2006. In 2009, he says, he was days away from starting a "mixed martial arts franchise," only to have it delayed after he was indicted. He then tried to sell his life story - including the trial - as a reality television show. In the show's trailer, he proclaimed his innocence and determination to fight the charges. Always a fighter, ready to face any challenge, Ross Mandell continues to live his life as a husband to his wife, a father to his children, and as an entrepreneur, who is free on $5 million bail. He is a defendant facing criminal charges, the subject of a new reality television show and a recovering alcoholic with 19 years sobriety. Ross Mandell has got a lot on the line, a lot to lose and a lot to live for as the drama continues to unfold in this real life saga," says the pitch accompanying the video, which is posted on YouTube. Mr. Mandell did not respond to an interview request. His lawyer said he would have no comment. His Web site asks those visiting there to vote on his innocence or guilt, and 1,000 have, with a small majority saying he is innocent. The jury in federal court, however, was unanimous in finding him guilty. He evidently continues to live large. His video shows him driving an expensive sports car in Boca Raton, Fla., proclaiming "I have a perfect life." The government says the money he gained from defrauding investors paid for "first-class flights, five-star hotel suites, expensive meals, adult entertainment and personal spending," even though his firm was losing money. It says some of the money was used for "work done on Mandell's penthouse apartment at Trump U.N. Plaza" in Manhattan. The Supreme Court opinion in Morrison was based on its reading of the Securities Act, and the court made clear that Congress could change the law if it wished. If the courts free Mr. Mandell, and Congress does not act, the government will be sending an unfortunate message to foreign investors: If American brokers defraud Americans, the government can prosecute them. But if they defraud foreigners, and arrange to have the fraudulent securities traded overseas, there is nothing the American government will do about it. Floyd Norris comments on finance and the economy at nytimes.com/economix.