U.S. v. Radley

• Decision Date: 11 June 2008
• Docket Number: No. 07 CR 689.,07 CR 689.
• Parties: UNITED STATES of America, Plaintiff, v. Mark David RADLEY, James Warren Summers, Cody Dean Claborn, and Carrie Kienenberger, Defendants.
• Court: U.S. District Court — Northern District of Illinois

558 F.Supp.2d 865

UNITED STATES of America, Plaintiff, v. Mark David RADLEY, James Warren Summers, Cody Dean Claborn, and Carrie Kienenberger, Defendants.

No. 07 CR 689.

United States District Court, N.D. Illinois, Eastern Division.

June 11, 2008.

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Barry M. Hartman, Benjamin J. Oxley, Brian W. Stolarz, Charles R. Mills, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Matthew G. Kaiser, Roger E. Zuckerman, Zuckerman Spaeder LLP, Washington, DC, Daniel T. Hartnett, Leigh D. Roadman, Martin, Brown & Sullivan, Ltd. Kevin Michael Flynn, Kevin M. Flynn & Associates, Erika L. Csicsila, Ronald S. Safer, Schiff Hardin LLP, Chicago, IL, Jeffrey L. Bornstein, Kirkpatrick & Lockhart Preston Gates Ellis, LLP, San Francisco, CA, Gregg Bernstein, Zuckerman Spaeder LLP, Baltimore, MD, Jacks C. Nickens, Nickens Keeton Lawless Farrell & Flack LLP, Jill L. Lansden, Lansden and Associates, Mitchell B. Lansden, Mitchell B. Lansden and Associates, Ryan K. Higgins, Rusty Hardin and Associates, Houston, TX, for Defendants.

Jerrob Duffy, Joseph A. Konizeski, United States Department of Justice, Criminal Division, Washington, DC, Tyler C. Murray, AUSA, United States Attorney's Office, Chicago, IL, for Plaintiff.

MEMORANDUM OPINION AND ORDER

RUBEN CASTILLO, District Judge.

In this novel criminal case, the government charges Mark David Radley ("Radley"), James Warren Summers ("Summers"), Cody Dean Claborn ("Claborn") and Carrie Kienenberger ("Kienenberger") (collectively "Defendants"), with conspiring to corner the market and manipulate the price of propane in violation of the Commodity Exchange Act ("CEA"), 7 U.S.C. § 1, et seq., and other federal laws. (R. 1, Indictment.) Defendants move to dismiss the indictment for lack of venue, or, alternatively, for a transfer of venue to the Southern District of Texas. (R. 62, Defs.' Am. Mot. to Dismiss; R. 59, Defs.' Mot. to Transfer.) For the following reasons, the motion to dismiss is denied, and the motion to transfer is granted.

RELEVANT FACTS¹

BP America, Inc. and BP Products North America Inc. (collectively "BP") are based in Warrenville, Illinois. (R. 1, Indictment ¶ 4.) Defendants are all former employees of a BP subsidiary and were assigned to the Integrated Supply & Trading ("1ST") group, BP's world-wide trading business. (R. 1, Indictment ¶ 4.) Within 1ST, the trading of natural gas liquids in the United States was conducted by the Natural Gas Liquids ("NGL") trading bench (the "NGL Trading Bench"), located in Houston, Texas. (Id. ¶¶ 4-5.)

One of the NGLs handled by the NGL Trading Bench was propane transported in the Texas Eastern Products Pipeline Company, LLC ("TEPPCO") interstate pipeline system, known as "TET propane." (Id. ¶¶ 1, 4-5.) TET propane is a "commodity" as defined by the CEA, 7 U.S.C. § la(4). (Id. ¶ 13.) Propane is used by petrochemical industries to produce plastics, and is also used as a source of energy for residential and commercial purposes. (Id. ¶ 13.) Residential and commercial consumption of propane is greatest in the Northeast and Midwest sections of the United States, including Chicago.² (Id.) The NGL Trading Bench traded TET propane with other companies, referred to as "counter-parties," throughout the United States. (Id. ¶ 5.) Radley was the "bench leader" of the NGL Trading Bench, and his duties included the development and oversight of trading strategies. (Id. ¶ 7.) Summers was a Vice President of NGLs and Radley's supervisor. (Id. ¶ 8.) Claborn was the primary trader on the NGL Trading Bench responsible for trading TET propane during 2003 and 2004. (Id. ¶ 9.) Kienenberger was a trader on the NGL Trading Bench who traded TET propane during February 2004. (Id. ¶ 10.) Defendants were commonly granted year-end bonuses, based in part on the trading profits of the NGL Trading Bench. (Id. ¶ 6.)

TET propane was predominantly traded over-the-counter in one of three ways: (a) directly between two parties; (2) through "voice brokers," whereby brokers negotiated and executed deals on behalf of a buyer and seller; and (3) through an electronic trading platform known as "Chalkboard," in which buyers and sellers posted anonymous bids and offers on an electronic web-site, and would learn the counter-party's identity only upon completing a transaction. (Id. ¶ 14.) After a trade was executed, a confirmation notice was sent to the counter-party via the mail and interstate wire systems between BP's offices in Texas or Illinois and the various counter-parties' offices in Texas, Illinois, or elsewhere. (Id. ¶ 5.) Funds from the Defendants' sales of TET propane were transmitted by counter-parties via the mail and interstate wire systems to a BP bank account in Chicago. (Id. ¶ 5.)

As part of their alleged scheme, Defendants used the financial resources of BP to buy contracts for delivery of large amounts of TET propane at the end of February 2004, despite the fact that BP had no commercial need for the propane, in order to make BP the dominant owner of February 2004 TET propane.³ (Id. ¶¶ 2, 36.) Defendants allegedly exploited their dominant market power by continuing to purchase large quantities of February 2004 TET propane throughout the month, withholding February 2004 TET propane from the market, and using bidding tactics that were intended to artificially inflate the price of February 2004 TET propane. (Id. ¶¶ 2, 23-47.) The government alleges that through their actions, Defendants, along with others, cornered the market for February 2004 TET propane and sold the propane at prices that were artificially inflated. (Id. ¶¶ 2, 44.)

Defendants are further alleged to have inflated the industry benchmark price of February 2004 TET propane through their conduct. (Id. ¶ 3.) During the relevant period, the Oil Price Information Sheet ("OPIS") published prices for various types of propane, including TET propane. (Id. ¶ 15.) OPIS published daily and monthly average prices based on information collected daily from market participants. (Id.) The OPIS daily average consisted of the unweighted mean between the lowest and highest reported transaction prices on a given day. (Id.) OPIS prices published for TET propane affected the price paid by commodity traders and end-users of propane in the Midwest and Northeast. (Id. ¶ 16.) Defendants allegedly sold February 2004 TET propane to counter-parties throughout the United States at the artificially inflated index price, thus defrauding them. (Id. ¶¶ 3, 17, 27.) Companies A through P, among others, purchased February 2004 TET propane from BP. (Id. ¶ 17.) On or about February 27, 2004, Company D, which is located within the Northern District of Illinois, purchased 5,000 barrels of February 2004 TET propane from BP at an artificially inflated price. (Id. ¶ 44(d).)

PROCEDURAL HISTORY

On October 25, 2007, Defendants were charged in a twenty-count Indictment.⁴ (R. 1.) Count 1 charges the Defendants with conspiracy to violate the CEA, 7 U.S.C. § 13(a)(2), and to commit mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343. (Id. ¶¶ 18-49.) Counts 2-13 charge Defendants with manipulating and attempting to manipulate the price of February 2004 TET propane, and cornering and attempting to corner the market of February 2004 TET propane in violation of the CEA, 7 U.S.C. § 13(a)(2). These violations allegedly culminated in the receipt of funds in BP's Chicago bank account from twelve separate trades, including the trade with Company D, located within the Northern District of Illinois. (Id. ¶¶ 50-51.) Counts 14-20 charge Defendants with seven separate acts of wire fraud, in violation of 18 U.S.C. § 1343. (Id. ¶¶ 52-54.)

ANALYSIS

Defendants move to dismiss the Indictment, arguing that "venue is improper here because the acts underlying the allegations in the Indictment occurred in the Southern District of Texas and not in the Northern District of Illinois." (R. 62, Defs.' Am. Mot. to Dismiss at 2.)⁵ Defendants argue that maintaining the case in this District would violate Article III of the U.S. Constitution and their Sixth Amendment right to be tried in the District where their crimes were allegedly committed. (Id. at 1.) In a separate motion, Defendants alternatively argue that the Court should exercise its discretion to transfer the case to the Southern District of Texas pursuant to Federal Rule of Criminal Procedure 21(b) for the convenience of the parties and witnesses. (R. 59, Defs.' Mot. to Transfer at 1-2.)

The government objects to both motions. (R. 78, Gov't Resp. to Mot. to Dismiss; R. 79, Gov't Resp. to Mot. to Transfer.) As to the motion to dismiss, the government argues that constitutional venue requirements are satisfied in this District because, in essence, "Defendants' criminal conduct began and ended with the financial transactions that occurred in this District." (R. 78, Gov't Resp. to Mot. to Dismiss at 1.) The government additionally argues that a discretionary transfer to the Southern District of Texas is not warranted, and that such a transfer would cause undue hardship to the government. (R. 79, Gov't Resp. to Mot. to Transfer.)

I. Defendants' Motion to Dismiss

Article III of the U.S. Constitution provides that criminal trials "shall be held in the state where said Crimes shall have been committed." U.S. CONST. Art. Ill, § 2. Similarly, the Sixth Amendment provides, "In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed. . . ." U.S. CONST. amend VI. These constitutional venue guarantees are more than procedural technicalities; they "touch closely the fair administration of criminal justice and public confidence in it" and "raise deep issues of public policy." United States v. Muhammad, 502 F.3d 646, 652 (7th Cir.2007), cert. denied, ___ U.S. ___, 128 S.Ct. 1104, 169 L.Ed.2d 813 (2008). One such...