Opinion ID: 218836
Heading Depth: 2
Heading Rank: 1

Heading: Securities Fraud (Count Two)

Text: Count Two charged Butler with securities fraud under 15 U.S.C. §§ 78j(b) and 78ff, which has its own specific venue provision: Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. 15 U.S.C. § 78aa. The government's sole basis for venue in the Eastern District on this substantive count was that Butler and Tzolov traveled through JFK airport on their way to meet with the investors. According to the government, these flights are sufficient to establish venue because, under United States v. Svoboda, 347 F.3d 471 (2d Cir.2003), the flights were an important part of furthering the [fraudulent] scheme. We disagree. We have little difficulty concluding that the government failed to offer competent proof that any act or transaction constituting the [securities fraud] violation occurred in the Eastern District. See 15 U.S.C. § 78aa (emphasis added). Butler did not transmit any false or misleading information into or out of the Eastern District. All the fraudulent statements that were part of the government's proof, whether made by Butler or Tzolov, were made in telephone calls or emails from Credit Suisse's Madison Avenue offices located in the Southern District or in meetings with investors. None of this activity occurred in the Eastern District. Nor did Butler commit securities fraud by boarding a plane in the Eastern District. At most, catching flights from the Eastern District to meetings where Butler made fraudulent statements were preparatory acts. They were not acts constituting the violation. We have cautioned that venue is not proper in a district in which the only acts performed by the defendant were preparatory to the offense and not part of the offense. Beech-Nut, 871 F.2d at 1190. That is all we have here. In other words, going to Kennedy airport and boarding flights to meetings with investors were not a constitutive part of the substantive securities fraud offense with which Butler was charged. See United States v. Ramirez, 420 F.3d 134, 141-142 (2d Cir. 2005) (vacating Appellant's conviction for visa fraud because venue is proper only where a crime is `committed,' and Beech-Nut precludes considering preparatory acts in determining the locus delicti ); id. (finding that venue did not lay in the Southern District for mail fraud when the scheme to defraud originated in the Southern District but the mailing occurred in another district because that would mean that a defendant who devised a scheme to defraud while driving across the country could be prosecuted in virtually any venue through which he passed); United States v. Geibel, 369 F.3d 682, 697 (2d Cir.2004) (finding venue improper where actions in the Southern District of New York were anterior and remote to the criminal conduct); United States v. Bozza, 365 F.2d 206, 220-21 (2d Cir.1966) (finding venue improper in a district in which a telephone call was made to arrange for the receipt of stolen goods, but the receipt of property itself occurred in another district). The government's reliance on Svoboda is misplaced. In Svoboda, we stated that venue is proper in a district where (1) the defendant intentionally or knowingly causes an act in furtherance of the charged offense to occur in the district of venue or (2) it is foreseeable that such an act would occur in the district of venue [and it does]. 347 F.3d at 483. However, Svoboda does not control here. [3] In Svoboda we were not faced with the question of whether preparatory acts alone could establish venue. Indeed, Svoboda did not involve preparatory acts at all. The act that established venue and that occurred in furtherance of the crime chargedthe execution of a tradeconstituted an essential element of the crime. See id. at 485. The only question before us in Svoboda was whether venue could lie in a district when the defendant did not necessarily intend that the criminal conduct take place in that district. Id. at 482-84. Here, by contrast, no conduct that constituted the offense took place in the Eastern District. Accordingly, nothing in Svoboda calls into question the principle that preparatory acts alone are insufficient to establish venue. For these reasons, we hold that venue in the Eastern District was not proper as to Count Two.