(Bloomberg News) Sky Capital Holdings Ltd. founder Ross Mandell was convicted of operating what the U.S. said was an eight-year long scheme that defrauded investors out of $140 million.

Mandell, 54, of Boca Raton, Florida, was found guilty yesterday by a federal jury in New York of all four counts he was charged with, conspiracy, securities fraud, wire fraud and mail fraud, after a trial before U.S. District Judge Paul Crotty in Manhattan.

Adam Harrington, 41, of Miami, a former broker at Sky Capital who was tried with Mandell, was convicted of the same four counts. The jury began its deliberations July 22.

Prosecutors said the evidence showed the defendants used the funds for tens of thousands of dollars of personal expenditures like private jets, luxury hotels and expensive Swiss watches.

Jurors were shown bills for more than $162,400 in charges between May 2001 and January 2006 made on Mandell's corporate American Express card that prosecutors said were for "adult entertainment" that included visits to strip clubs like Stringfellows in London as well as "hostesses."

Excessive Commissions

Mandell, Harrington and others at Sky Capital also used the money to pay themselves excessive commissions and pay off other victims who'd lost money through prior purported investment opportunities, Assistant U.S. Attorneys Pablo Quinones and Katherine Goldstein argued during the trial.

Crotty declined to set a sentencing date or revoke bail for Mandell and Harrington. The judge said he wouldn't rule on prosecutors' request to jail both men before sentencing because they pose a flight risk. He gave defense lawyers until Aug. 5 to file legal papers before issuing a ruling.

"It's unjust," Harrington said about the verdict as he sat outside the courtroom. "We will appeal."

Most of the jurors declined to comment on their deliberations. One who identified herself as Carmen said, "there was enough evidence. It was a tough decision. We based it on the judge's charge."

Mandell and Harrington were accused of manipulating shares in two Sky Capital companies traded on the Alternative Investment Market of the London Stock Exchange. The U.S. said the two solicited millions of dollars from victims for what they claimed were restricted stock offerings or private placements that promised large returns.

Issues For Appeal

Mandell's lawyer, Jeffrey Hoffman, said after the verdict that "there are very significant issues for appeal," citing a U.S. Supreme Court ruling last year in Morrison v. National Australia Bank that U.S. securities laws don't protect foreign investors who buy stocks on overseas exchanges in a civil case.

"The judge has ruled that Morrison did not apply," Hoffman said. "We think ultimately that the Second Circuit Court of Appeals and the Supreme Court will say that Morrison applies equally to civil as well as criminal cases."

Four other men were arrested and charged in the case and have pleaded guilty. Two of them, Robert Grabowski and Michael Passaro, both former Sky Capital brokers, agreed to cooperate with the U.S. and testified against Mandell and Harrington.

"There is a mountain of evidence that these men defrauded investors of Sky Capital stock," Goldstein told jurors in closing arguments on July 20.