United States v. Cashin

• Decision Date: 18 August 1960
• Docket Number: No. 26306.,26306.
• Parties: UNITED STATES of America, Petitioner, v. Hon. John M. CASHIN, United States District Judge for the Southern District of New York, Respondent.
• Court: U.S. Court of Appeals — Second Circuit

281 F.2d 669 (1960)

UNITED STATES of America, Petitioner, v. Hon. John M. CASHIN, United States District Judge for the Southern District of New York, Respondent.

No. 26306.

United States Court of Appeals Second Circuit.

Submitted August 1, 1960.

Decided August 18, 1960.

COPYRIGHT MATERIAL OMITTED

S. Hazard Gillespie, Jr., U. S. Atty., Southern Dist. of New York, New York City (Morton S. Robson, Chief Asst. U. S. Atty., and Arnold N. Enker, Asst. U. S. Atty., New York City, on the brief), for petitioner.

Davies, Hardy & Schenck, New York City (John W. Burke and Burton H. Brody, New York City, on the brief), for respondent Maurice Olen.

Margaret Mandeville, Mobile, Ala., respondent pro se.

Tompkins, Lauren & Edelhertz, New York City (Herbert Edelhertz, New York City, and Willis C. Darby, Jr., Mobile, Ala., on the brief), for respondents Lewie F. Childree, Homer Kerlin and Luther E. Clements.

Before LUMBARD, Chief Judge, and CLARK and HINCKS, Circuit Judges.

LUMBARD, Chief Judge.

The United States has filed a petition for a writ of mandamus or prohibition to prevent the transfer of a criminal indictment charging offenses under §§ 17(a) and 24 of the Securities Act, 15 U.S.C.A. §§ 77q(a), 77x, and §§ 14 and 32(a) of the Securities Exchange Act, 15 U.S.C.A. §§ 78n, 78ff(a),¹ from the Southern District of New York to the Southern District of Alabama. Upon the motion of all five defendants requesting the transfer pursuant to Rule 21(b) of the Federal Rules of Criminal Procedure, Judge Cashin filed an opinion holding that the crimes alleged in the indictment were committed in the Southern District of Alabama as well as in New York and that under the continuing offenses venue provision, 18 U.S.C. § 3237(a), trial is proper in Alabama and, further, that it would be "in the interest of justice" if the case were heard there. We think that Judge Cashin's decision was a proper exercise of his power and deny mandamus.

The government's petition does not challenge the district judge's determination that the transfer would be in the interest of justice; indeed, as the United States Attorney recognizes, we will not review the propriety of such an exercise of discretion by mandamus, except in "extraordinary" circumstances. Ex parte Fahey, 1947, 332 U.S. 258, 67 S.Ct. 1558, 91 L.Ed. 2041; Torres v. Walsh, 2 Cir., 221 F.2d 319, certiorari denied 1955, 350 U.S. 836, 76 S.Ct. 72, 100 L.Ed. 746. The government argues, however, that the crimes set forth in the indictment were committed solely in New York and that the district judge therefore had no power to order a transfer to a district where trial could not lawfully be had. Concededly, if the government is correct in its contention, mandamus would be a proper remedy to redress the erroneous exercise of power by the district court. Foster-Milburn Co. v. Knight, 2 Cir., 1950, 181 F.2d 949; see Hoffman v. Blaski, 1960, 363 U.S. 335, 80 S.Ct. 1084; United States v. United States District Court, 6 Cir., 1954, 209 F.2d 575.²

Count I of the indictment charges a violation of § 17(a) of the Securities Act, which, generally speaking, makes it unlawful "in the sale of any securities" by the use of the mails or other facilities of interstate commerce to employ any scheme to defraud the purchaser of such securities.³ The first paragraph is drawn in the terms of the statute and alleges that all five of the defendants, by means of untrue and misleading statements made in the prospectus and registration statement filed by The Olen Company, Inc., in connection with the sale of an issue of its common stock to the public, defrauded various named purchasers. The following paragraphs go on to detail the means by which the scheme was carried out and the final paragraph of Count I alleges that for the purpose of executing the fraud a letter confirming the purchase of common stock of The Olen Company was mailed from the Southern District of New York to a named purchaser residing in New York.

Counts II through V of the indictment are identical to Count I except that the mailing of a letter of confirmation to a different named purchaser residing in New York is alleged and defendant Margaret Mandeville is not named in these counts.

Count VI of the indictment charges a violation of § 14 of the Securities Exchange Act, which prohibits the solicitation of proxies with respect to any security listed on a national securities exchange by means of a proxy statement which is materially false or misleading.⁴ The count describes the respects in which the proxy statements issued by the defendants were false and alleges generally use of the mails and other facilities of commerce.⁵

The government concedes, as it must in the light of its bill of particulars, that the fraudulent scheme alleged in the indictment was formed and in large measure executed in Mobile, Alabama, where The Olen Company has its headquarters and where all of the defendants — a former president and a former bookkeeper of The Olen Company and two partners and an employee of its former accountants — reside. But it contends that since a use of the mails or other facilities of interstate commerce is a prerequisite to the invocation of the federal statutes, the crimes were not "committed" until the mailings alleged took place and therefore may only be prosecuted at those places where the mailings had their impact, in this case only New York. We think the government's interpretation of the securities laws and the pertinent venue statutes is erroneous and that venue is properly laid in the Southern District of Alabama.

Rule 21(b) of the Federal Rules of Criminal Procedure provides:

"The court upon motion of the defendant shall transfer the proceeding as to him to another district or division, if it appears from the indictment or information or from a bill of particulars that the offense was committed in more than one district or division and if the court is satisfied that in the interest of justice the proceeding should be transferred to another district or division in which the commission of the offense is charged."

Under this rule the court is authorized to transfer an action only when the crime charged was "committed" both in the district where the indictment was returned and in the transferee district. United States v. Warring, D.C.D.Md. 1954, 121 F.Supp. 546, affirmed 4 Cir., 222 F.2d 906, certiorari denied, 1955, 350 U.S. 861, 76 S.Ct. 102, 100 L.Ed. 764. In such circumstances venue is proper in both districts, for 18 U.S.C. § 3237(a), paragraph one, provides that "any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed." Section 3237 is applicable to the Securities Act counts of the indictment before us because the Act itself contains no venue provision for criminal cases except § 20(b), 15 U.S.C. A. § 77t(b), by its terms irrelevant to this case and, in any event, only supplementary to the general venue statutes. See United States v. Monjar, D.C.D.Del. 1942, 47 F.Supp. 421, 427-428, affirmed 3 Cir., 1944, 147 F.2d 916, certiorari denied 1945, 325 U.S. 859, 65 S.Ct. 1191, 1192, 89 L.Ed. 1979.

By ordinary use of the English language the crimes alleged in the indictment were "begun" and "continued" in Alabama, where almost all of the acts performed in furtherance of the scheme took place. See United States v. Gross, 2 Cir., 1960, 276 F.2d 816; United States v. Floyd, 7 Cir., 228 F.2d 913, certiorari denied 1956, 351 U.S. 938, 76 S.Ct. 835, 100 L.Ed. 1466. The indictment charges that the false financial statements were drawn up there, the fraudulent inventory records prepared there, and numerous other steps taken there. Indeed, except for the mailings, no acts in furtherance of the crime are alleged to have taken place in New York. In the absence of exceedingly compelling arguments, we would not be inclined to reach a conclusion contrary to this common sense view of the venue statute — that the crimes alleged in Counts I through V were "committed" in Alabama.

The fact that there could be no violation of the Securities Act until some use was made of the mails or other facilities of interstate commerce, and that this use was in New York, is scarcely reason to decide that no crime was begun or continued — or even "committed" — elsewhere than in New York. The gist of the crimes charged in the indictment, as in most Securities Act cases, is the fraudulent scheme employed in the sale of securities. See United States v. Robertson, D.C.S.D.N.Y.1959, 181 F.Supp. 158; United States v. Monjar, supra. The purpose of the requirement that there be a use of the mails or other facilities of commerce is solely to create a basis for federal jurisdiction. Creswell-Keith, Inc. v. Willingham, 8 Cir., 1959, 264 F.2d 76; Schillner v. H. Vaughan Clarke & Co., 2 Cir., 1943, 134 F.2d 875; United States v. Robertson, supra. The use of the mails need not be central to the fraudulent scheme and may be entirely incidental to it. See, e. g., Kopald-Quinn & Co. v. United States, 5 Cir., 101 F.2d 628, certiorari denied sub nom. Ricebaum v. United States, 1939, 307 U.S. 628, 59 S.Ct. 835, 83 L.Ed. 1511. Indeed, in the very case before us the only alleged use of the mails was to confirm purchases already induced by the defendants' deceit. No claim is made that fraudulent matter was mailed or even that the mailings alleged were necessary to the execution of the unlawful scheme. In such circumstances it cannot be said that the only places at which the crimes charged took place were those where the mailed matter had its impact. The crimes were "begun," "continued," and "committed" as well at the place where most of the acts necessary to their execution occurred.

The government strenuously urges in support of its position that the present indictment under the Securities Act is analogous to an...