Court Opinion

ID: 2971168
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:30:12.21169+00
Date Added: 2024-06-11T11:43:34.233032
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                        2    United States v. Wood, et al.               No. 01-2548
        ELECTRONIC CITATION: 2004 FED App. 0111P (6th Cir.)
                    File Name: 04a0111p.06                                                    _________________
                                                                                                   COUNSEL
UNITED STATES COURT OF APPEALS
                                                                          ARGUED: Kip T. Bollin, THOMPSON HINE, Cleveland,
                  FOR THE SIXTH CIRCUIT                                   Ohio, for Appellant. Richard S. Murray, ASSISTANT
                    _________________                                     UNITED STATES ATTORNEY, Grand Rapids, Michigan,
                                                                          for Appellee. ON BRIEF: Kip T. Bollin, William B. Leahy,
 UNITED STATES OF AMERICA , X                                             THOMPSON HINE, Cleveland, Ohio, for Appellant.
           Plaintiff-Appellee, -                                          Richard S. Murray, ASSISTANT UNITED STATES
                                -                                         ATTORNEY, Grand Rapids, Michigan, for Appellee.
                                -             No. 01-2548
          v.                    -                                           GILMAN, J., delivered the opinion of the court, in which
                                 >                                        DAUGHTREY, J., joined. GWIN, D. J. (pp. 23-41),
                                ,                                         delivered a separate opinion concurring in part and dissenting
 EDWIN DAVID WOOD , II,         -
        Defendant-Appellant. -                                            in part.
                               N                                                              _________________

        Appeal from the United States District Court                                              OPINION
   for the Western District of Michigan at Grand Rapids.                                      _________________
      No. 99-00132—Gordon J. Quist, District Judge.                          RONALD LEE GILMAN, Circuit Judge. In August 1999,
                                                                          Edwin David Wood, II was indicted on 22 counts of wire
                   Argued: October 22, 2003                               fraud, mail fraud, and money laundering. These charges arose
                                                                          out of two loan transactions that Wood arranged in 1994.
              Decided and Filed: April 19, 2004                           Wood pleaded not guilty. After a jury found Wood guilty on
                                                                          21 of the 22 counts, the district court sentenced him to 168
 Before: DAUGHTREY and GILMAN, Circuit Judges;                            months of imprisonment and ordered him to pay
              GWIN, District Judge.*                                      approximately $570,000 in restitution. Wood appeals,
                                                                          arguing that (1) certain jury instructions were erroneous,
                                                                          (2) venue in the Western District of Michigan was improper
                                                                          with regard to five of the seven mail fraud charges, (3) the
                                                                          district court’s restitution order was excessive, and (4) the
                                                                          government failed to produce sufficient evidence concerning
                                                                          one of the loan transactions to support his conviction. For the
                                                                          reasons set forth below, we AFFIRM Wood’s conviction and
                                                                          sentence on all counts other than the mail fraud charges in
    *
     The Ho norable James S. Gwin, United States District Judge for the   Counts 17-21, REVERSE Wood’s conviction on these latter
Northern District of Ohio, sitting by designation.

                                  1
No. 01-2548               United States v. Wood, et al.        3   4      United States v. Wood, et al.             No. 01-2548

counts for lack of proper venue, and, accordingly, REMAND              purchase all or any part of the pledged shares at such
for resentencing.                                                      sale.
                   I. BACKGROUND                                      First Financial utilized a technique called “selling short
                                                                   against the box” to fund the loans. (For a detailed description
   The charges against Wood arise out of two loan agreements       of short-against-the-box transactions, see Edward D.
executed by him in 1994. Wood orchestrated these                   Kleinbard, Risky and Riskless Positions in Securities, TAXES,
transactions from the Metropolitan Correctional Center             December 1993, at 788). Neither in the Agreement nor in any
(MCC) in Chicago, a federal prison, between June 15 and            other communication with prospective borrowers did First
October 6 of 1994. While at the MCC, Wood worked                   Financial disclose the use of short-against-the-box
through First Financial Acceptance Company, Inc., which had        transactions to fund the requested loans.
offices in Battle Creek, Michigan. First Financial personnel
did not disclose to the potential borrowers that Wood was in         The first loan transaction at issue was with Robert Graham.
prison as a convicted felon.                                       Graham wanted to retire a debt with the $230,000 that he
                                                                   intended to borrow from First Financial. He pledged 70,000
   To attract customers, First Financial advertised in             shares of Sonic Environmental Systems stock as collateral.
publications such as the New York Times, the Wall Street           Graham received a loan commitment from First Financial for
Journal, and Investors Business Daily, offering to lend up to      the $230,000 in June of 1994, but he did not receive any of
90% of the value of any eligible stock that the prospective        the loan proceeds until November of that year. At that time,
borrower owned. These ads generated a large number of              Graham received approximately $31,000. First Financial
telephone inquiries. Wood kept track of these inquiries by         made no other disbursements on its $230,000 commitment.
calling First Financial from prison and then having First
Financial personnel connect him to the prospective borrower           Meanwhile, on September 13 and 14 of 1994, a broker
through call forwarding. Interested callers were sent a            acting on Wood’s instructions sold short 35,000 shares of
package of documents compiled by Wood. These documents             Graham’s Sonic Environmental Systems stock for $173,191.
included a Security and Pledge Agreement, which provided           The sale of Graham’s stock was supposed to be a short-
in pertinent part as follows:                                      against-the-box sale, but because the broker was unable to
                                                                   borrow 35,000 shares of Sonic Environmental Systems stock
  Lender [First Financial] shall hold the pledged shares as        in the open market, a short-against-the-box transaction could
  security for the repayment of the loan and shall not             not be executed. Instead, the short position was closed by
  encumber the shares except in accordance with the                selling the 35,000 shares on the open market in October of
  provisions of this Agreement. . . . In the event that            1994.
  Pledgor defaults in the performance of any of the terms
  of this Agreement, . . . Lender may, upon five (5) days            Graham was not told that half of his collateral had been
  advance written notice to Pledgor, sent by certified mail,       sold when he attempted to get his stock back in late 1994.
  and without liability for any diminution in price which          First Financial returned the remaining 35,000 shares of
  may have occurred, sell all of the pledged shares in such        Graham’s collateral to him in January of 1995. Graham later
  manner and for such price as Lender may determine, at            sold the stock and paid the approximately $31,000 balance
  any bona fide public sale, and Lender shall be free to
No. 01-2548                United States v. Wood, et al.     5    6      United States v. Wood, et al.              No. 01-2548

due on his loan. He never received the rest of his collateral     was later sentenced to 168 months of imprisonment and
back.                                                             ordered to pay $570,025.83 in restitution. The district court
                                                                  entered judgment on October 26, 2001. This timely appeal
  The second transaction at issue in this case arises from a      followed.
loan First Financial made to Gordon Miller and his mother,
Ruth Miller. Ruth Miller pledged 8,167 shares of her                                      II. ANALYSIS
Comerica Bank stock as collateral for the loan, and Gordon
Miller received approximately $200,000 in loan proceeds in        A. Jury instructions
September of 1994. First Financial sold Ruth Miller’s 8,167
shares of stock short against the box two days after closing on     Wood claims that the district court erred in instructing the
the Millers’ loan. It received approximately $227,000 from        jury that short sales against the box encumber the stock
the sale. The government presented evidence at trial that, at     pledged as collateral. He maintains that, as a matter of law,
Wood’s direction, First Financial closed its short position in    such sales do not encumber the stock, thus making the court’s
Comerica by delivering Ruth Miller’s stock in December of         instructions to the jury erroneous. Wood concludes that the
1994 to the broker who provided the shares sold short.            jury “was charged in a manner that allowed them to convict
Although the stock was thus disposed of by First Financial        him on insufficient grounds – for legal conduct.”
within three months of closing the loan transaction, Gordon
Miller continued to make loan payments through June of               Because Wood did not object to the jury instructions at
1996. Ruth Miller never recovered her collateral from First       trial, we review the instructions under the “plain error”
Financial.                                                        standard, considering whether “the instructions, when taken
                                                                  as a whole, were so clearly wrong as to produce a grave
   In August of 1999, a federal grand jury returned a 22-count    miscarriage of justice.” United States v. Sanderson, 966 F.2d
indictment that charged Wood with 7 counts of wire fraud in       184, 187 (6th Cir. 1992). Plain error is a stringent standard.
violation of 18 U.S.C. § 1343, 7 counts of mail fraud in          See United States v. Cox, 957 F.2d 264, 267 (6th Cir. 1992).
violation of 18 U.S.C. § 1341, 3 counts of money laundering       This court in Cox noted that the Supreme Court and numerous
in violation of 18 U.S.C. § 1956(a)(1)(A)(i), 2 counts of         federal courts caution that the plain error doctrine should be
money laundering in violation of 18 U.S.C.                        applied only “in exceptional circumstances, and solely to
§ 1956(a)(1)(B)(i), and 3 counts of engaging in monetary          avoid a miscarriage of justice. Recourse may be had to the
transactions with proceeds of a specified unlawful activity in    doctrine only on appeal from a trial infected with error so
violation of 18 U.S.C. § 1957. Arguing that the district court    ‘plain’ the trial judge and prosecutor were derelict in
lacked venue to try certain mail fraud charges, Wood sought       countenancing it.” Id. (quotation marks omitted).
dismissal of most of the mail fraud counts before trial, at the
close of the government’s case, and at the close of all of the        Wood claims that the following instruction was erroneous:
evidence. The district court denied all of these motions.
Wood also moved for acquittal under Rule 29 of the Federal            The government has alleged, in part, that Defendant
Rules of Criminal Procedure at the end of the government’s            Wood engaged in a scheme or plan to obtain money or
case and at the close of all the evidence. The district court         property by means of false or fraudulent pretenses,
denied these motions as well. After an eight-day trial in April       representations, or promises and, more particularly, that
of 2001, a jury convicted Wood on 21 of the 22 counts. He
No. 01-2548                 United States v. Wood, et al.        7   8    United States v. Wood, et al.                No. 01-2548

  a short sale against the box encumbers the securities in           Moreover, the jury instructions as a whole detailed the
  the box.                                                           elements of the alleged crimes and did not imply that a short
                                                                     sale against the box was inherently a fraudulent transaction.
The government concedes that this portion of the district            We therefore conclude that the jury instructions were not “so
court’s instruction suggests that a short sale against the box is    clearly wrong as to produce a grave miscarriage of justice.”
a fraudulent transaction in and of itself. What followed this        United States v. Sanderson, 966 F.2d 184, 187 (6th Cir.
portion of the instruction, however, is significant in               1992).
determining whether the instruction as a whole was
erroneous. The court continued:                                      B. Venue
  A short sale is made by selling a security that the seller           Wood claims that because the government did not prove by
  does not own. This is different from a short sale against          a preponderance of the evidence that the checks forming the
  the box. A short sale is “against the box” to the extent           basis of the mail fraud charges in Counts 17 through 21 were
  that the separate account contemporaneously owns or has            sent from, received in, or moved through the Western District
  the right to obtain at no added cost securities identical to       of Michigan, venue in that district was improper.
  those sold. The owner of the account is considered the             Accordingly, Wood urges this court to reverse his convictions
  owner of the shares deposited “in the box.”                        on these counts.
  The shares can be returned in one of two ways:
  1. By delivering the shares held “in the box” – or in the             Counts 17 through 21 allege that Wood, on five separate
  account; or                                                        occasions, “did cause to be deposited, sent and delivered by
  2. By purchasing in the market identical shares. If the            mail . . . from Battle Creek, Michigan, to Ruth Miller in
  market value is higher than the amount received in the             Birmingham, Michigan, [checks] purporting to be Mrs.
  short sale, then the account owner must come up with               Miller’s dividend check from her Comerica stock being used
  more money than he received from the short sale. . . . If          as collateral for the First Financial loan to her son.” Before
  the market value of the short sale goes down, then the             trial, Wood moved unsuccessfully for the dismissal of Counts
  account owner must come up with less money than he                 17 through 21. At the end of the government’s case and again
  received from the short sale. . . . [I]f the account owner         at the close of all evidence, Wood moved, pursuant to Rule 29
  is required to deliver the shares “in the box” to a third          of the Federal Rules of Criminal Procedure, to dismiss Counts
  person, like Mrs. Miller, for example, after she has repaid        17 through 21 because of improper venue. The district court
  her loan, he has to do two things:                                 denied these motions. Count 16 was also part of the Rule 29
  a. Deliver the equivalent shares to the third person -             motions, but Wood does not include that count in his
  that’s Mrs. Miller – and                                           argument on appeal.
  b. Cover with cash or shares the shares that were in the
  box so that the broker is not at risk on the money paid to           Both the United States Constitution and Rule 18 of the
  the account holder at the time of the original short sale.         Federal Rules of Criminal Procedure provide that a person
                                                                     can be tried for a crime only where that crime was committed.
  This instruction, when read in its entirety, explained how         United States v. Cabrales, 524 U.S. 1, 6-7 (1998). The
the short sale against the box had to be covered so that the         Constitution requires that all criminal trials “shall be held in
collateral could be returned once the loan was repaid.               the State where the said Crimes shall have been committed.”
No. 01-2548                United States v. Wood, et al.      9    10   United States v. Wood, et al.               No. 01-2548

U.S. CONST . art. III, § 2, cl. 3. A similar guarantee is found      prosecuted in any district in which such offense was
in the Sixth Amendment: “In all criminal prosecutions, the           begun, continued, or completed.
accused shall enjoy the right to a speedy and public trial, by
an impartial jury of the State and district wherein the crime        Any offense involving the use of the mails, transportation
shall have been committed.” U.S. CONST . amend. VI. Rule             in interstate or foreign commerce, or the importation of
18 of the Federal Rules of Criminal Procedure likewise               an object or person into the United States is a continuing
provides that “[u]nless a statute or these rules permit              offense and, except as otherwise expressly provided by
otherwise, the government must prosecute an offense in a             enactment of Congress, may be inquired of and
district where the offense was committed.”                           prosecuted in any district from, through, or into which
                                                                     such commerce, mail matter, or imported object or
  “[T]he locus delecti [of the crime charged] must be                person moves.
determined from the nature of the crime alleged and the
location of the act or acts constituting it.” Cabrales, 524 U.S.   The substantive offense of mail fraud, on the other hand, is
at 6-7. In determining the “locus delecti” of a crime, the         defined by the following portion of the federal mail fraud
Supreme Court directs us to “initially identify the conduct        statute:
constituting the offense (the nature of the crime) and then
discern the location of the commission of the criminal acts.”        Whoever having devised or intending to devise any
United States v. Rodriguez-Moreno, 526 U.S. 275, 279                 scheme or artifice to defraud . . . for the purpose of
(1999). Venue is therefore appropriate only in the district          executing such scheme or artifice or attempting so to do,
where the conduct comprising the essential elements of the           places in any post office or authorized depository for
offense occurred. The government must prove that venue was           mail matter, any matter or thing whatever to be sent or
proper as to each count charged. United States v. Crozier,           delivered by the Postal Service, or deposits or causes to
259 F.3d 503, 519 (6th Cir. 2001). Because venue is an               be deposited any matter or thing whatever to be sent or
essential aspect of the government’s case, “[i]f the                 delivered by any private or commercial interstate carrier,
government does not establish venue and the defendant                or takes or receives therefrom, any such matter or thing,
objects at trial, then an appellate court must reverse the           or knowingly causes to be delivered by mail or such
conviction.” United States v. Scaife, 749 F.2d 338, 346 (6th         carrier according to the direction thereon, or at the place
Cir. 1984).                                                          at which it is directed to be delivered by the person to
                                                                     whom it is addressed, any such matter or thing, shall be
  For venue purposes, this court has held that mail fraud is         fined under this title or imprisoned not more than 20
a continuing offense governed by 18 U.S.C. § 3237(a).                years, or both.
United States v. Holt, Nos. 89-6070, 89-6092, 1990 WL
37613, at *1-2 (6th Cir. April 3, 1990) (unpublished opinion).     18 U.S.C. § 1341.
Section 3237 reads in pertinent part as follows:
                                                                      Appropriate venue under the mail fraud statute is far from
  (a) Except as otherwise expressly provided by enactment          clear in the present case because the government did not
  of Congress, any offense against the United States begun         allege that the checks at issue in mail fraud Counts 19-21
  in one district and completed in another, or committed in        were either mailed from or received in the Western District of
  more than one district, may be inquired of and                   Michigan. Rather, the government argues that venue in the
No. 01-2548                 United States v. Wood, et al.      11    12   United States v. Wood, et al.                No. 01-2548

Western District of Michigan was appropriate because the             scheme. The place where the scheme is conceived or put in
offices of First Financial, located in the Western District of       motion is immaterial, it is the place of mailing or delivery by
Michigan, were used at every step of the scheme to defraud.          mail.”); United States v. Mikell, 163 F. Supp. 2d at 728
                                                                     (holding that venue was inappropriate “for a prosecution
   As a starting point, we note that in discussing the mail          under § 1314 in a district where the mail matter did not move
fraud statute, court decisions have focused on the use of the        from, through, or into, but where an aspect of the scheme to
mails. The Ninth Circuit, for example, has stated that the           defraud was devised and executed”).
mail fraud statute protects the instrumentality of
communication “making the use of the mails . . . as part of a          The third case is United States v. Olen, 183 F. Supp. 212
fraudulent scheme an independent offense quite separate from         (S.D.N.Y. 1960), which, although not a mail fraud case,
any other potentially illegal conduct.” United States v.             discusses the general venue statute for continuing crimes, 18
Garlick, 240 F.3d 789 (9th Cir. 2001) (emphasis in original).        U.S.C. § 3237(a). In Olen, the district court granted the
See also United States v. Monostra, 125 F.3d 183, 187 (3d            defendant’s request to transfer venue in a securities fraud case
Cir. 2001) (comparing the mail and wire fraud statute to the         to the Southern District of Alabama where the scheme to
bank fraud statute and commenting that “the mail and wire            defraud was located, even though the mailings in furtherance
fraud statutes do not penalize the victimization of specific         of that scheme occurred in the Southern District of New York.
persons; rather, they are directed at the instrumentalities of       Id. at 218. The district court focused on the second paragraph
fraud.”) (emphasis added) (citations and quotations marks            of § 3237(a) that prescribes venue for mail fraud
omitted).                                                            prosecutions, even though mail fraud was not charged, yet
                                                                     ignored the first paragraph of § 3237(a) that appears to justify
   This concentration upon the use of the mails makes sense,         the court’s decision. We frankly find Olen’s reasoning
given that the use of the mails is what establishes federal          unpersuasive as it relates to the present case.
jurisdiction in these cases. Although “the use of the mails
need not be an essential element of the [fraudulent] scheme,”           Also relevant to our inquiry are two Supreme Court
Schmuck v. United States, 489 U.S. 705, 710 (1989), such use         decisions, neither of which involved the mail fraud statute,
is essential to federal jurisdiction, United States v. Mikell, 163   but both of which resolved venue challenges in a criminal
F. Supp. 2d 720, 729 (E.D. Mich. 2001). Without the use of           case. One is United States v. Cabrales, 524 U.S. 1 (1998),
the mails, after all, the fraudulent scheme would be only a          where the government prosecuted Cabrales in Missouri for
state-law offense.                                                   illegal financial transactions in Florida. The Supreme Court
                                                                     held that venue in Missouri was inappropriate, despite the fact
   We have found only three cases that have directly                 that the source of the funds was from drug trafficking in that
addressed a situation comparable to the present case where           state, reasoning in part that the money laundering statutes
the “base” location for the fraudulent scheme was in a               proscribed “only the financial transactions (acts located
different district than the place of the mailings. Two of these      entirely in Florida), not the anterior criminal conduct that
cases rejected the government’s expansive view of mail fraud         yielded the funds allegedly laundered.” Id. at 7.
venue. See Kreuter v. United States, 218 F.2d 532, 534 (5th
Cir. 1955) (“[T]he gravamen of the offense is the use of the           The other relevant decision is United States v. Rodriguez-
mails. Therefore, [defendant] could be tried where he caused         Moreno, 526 U.S. 275 (1999), where a drug distributor and
a letter to be either mailed or delivered in furtherance of the      his henchmen kidnaped another drug dealer in Texas and held
No. 01-2548                United States v. Wood, et al.     13    14    United States v. Wood, et al.                No. 01-2548

him captive as they traveled through several states, including     *1-2 (6th Cir. April 3, 1990) (unpublished opinion) (holding
New Jersey. Rodriguez was tried in New Jersey “for using or        that 18 U.S.C. § 3237 governs venue in mail fraud cases);
carrying a firearm during and in relation to any crime of          United States v. Reitmeyer, 356 F.3d 1313 (10th Cir. 2004)
violence.” Id. at 276 (citation and quotation marks omitted).      (discussing venue in mail fraud cases and noting that
The Supreme Court rejected Rodriguez’s claim that venue            “Congress specifically stated ‘any offense involving the use
was appropriate only in Maryland, where the gun was actually       of the mails . . . is a continuing offense’ for venue
possessed. It reasoned that kidnaping is a continuing offense,     purposes.”); United States v. Loe, 248 F.3d 449, 465 (5th Cir.
causing venue to lie in any district where the offense “was        2001) (“As a ‘continuing offense,’ mail fraud may be
begun, continued, or completed” as provided in the first           prosecuted in ‘any district in which such offense was begun,
paragraph of 18 U.S.C. § 3237(a). Id. at 282. Aside from the       continued, or completed.”).
fact that neither Cabrales nor Rodriguez involved the mail
fraud statute, they point in different directions as to the          The dissent questions whether the offense of mail fraud is
appropriate resolution of the case before us.                      an “offense involving use of the mails . . . .” 18 U.S.C.
                                                                   § 3237(a). (Dissenting Op. 30) To the contrary, we believe
   In the present case, the fraudulent scheme was not              that the question virtually answers itself. If the plain meaning
separable from the mailings, which is the very reason why          of language is to be given any efficacy at all, how can the
Cabrales is not directly on point. If it were, then the venue      offense of mail fraud not be an “offense involving the use of
issue would not be an open question for us to resolve. But         the mails . . . .”? We find this court’s application of § 3237(a)
Rodriguez is not directly on point either, because the decision    to the offense of mail fraud in Holt, as well as the Fifth and
relied solely upon the first paragraph of 18 U.S.C. § 3237(a),     Tenth Circuits’ discussion of the issue, more persuasive and
which provides, in pertinent part, that “any offense against the   in line with common sense that the contrary Second Circuit
United States begun in one district and completed in another,      decision in United States v. Brennan, 183 F.3d 139 (2d Cir.
or committed in more than one district, may be inquired of         1999), that is relied upon so heavily by the dissent.
and prosecuted in any district in which such offense was           Consistent with this court’s previous decision in Holt, as well
begun, continued, or completed.” We are concerned here,            as Reitmeyer and Loe, we believe that § 3237(a) is the
however, with the second paragraph of § 3237(a), which             controlling statute on venue for mail fraud cases.
specifically deals with any offense involving the use of the
mails: “Any offense involving the use of the mails . . . may be       A plain reading of the text thus leads us to the conclusion
inquired of and prosecuted in any district from, through, or       that venue in a mail fraud case is limited to districts where the
into which such . . . mail matter . . . moves.”                    mail is deposited, received, or moves through, even if the
                                                                   fraud’s core was elsewhere. Whether or not Congress could
  The dissent focuses in part on a “plain reading of the text”     constitutionally provide otherwise is not before us, because
to support its conclusion that venue for mail fraud may be         the present language of § 3237(a) is determinative.
based on the situs of the scheme to defraud. (Dissenting Op.
41) But the “text” that the dissent focuses on is § 1341,            The dissent also focuses in part on fairness to the
which creates the substantive offense of mail fraud, not           defendant. (Dissenting Op. 40) We find this argument
§ 3237(a), which deals specifically with the proper venue for      puzzling in light of the fact that the government is the party
“any offense involving the use of the mails.” See United           pressing for venue where the core of the fraudulent scheme
States v. Holt, Nos. 89-6070, 89-6092, 1990 WL 37613, at           took place, not Wood.            If public policy supports
No. 01-2548                United States v. Wood, et al.     15    16   United States v. Wood, et al.               No. 01-2548

accommodating the accused by promoting “fairness,” then it         Columbus, Ohio, who occasionally worked for Wood. The
should support Wood’s desire to limit venue to where the           checks are dated May 31, 1995, and August 28, 1995.
mailings took place. The dissent’s expansive interpretation        Johnson testified that she traveled to Michigan “quite a bit”
that would impose a different venue on Wood thus appears           during “March, April, May, through probably late 1995 . . . .”
contrary to public policy as expressed in § 3237(a).               She noted that the bank account from which the two checks
                                                                   were drawn was a Battle Creek account and that any checks
   Finally, we note the dissent’s concern that “[b]y applying      written when she was frequently traveling to Michigan “were
§ 3237(a) to mail fraud, the majority could permit the             probably all written while we were visiting the offices in
government to hale a defendant into court in distant               Battle Creek.” Based upon this testimony, the government
jurisdictions having virtually no relation to the underlying       argues that it proved that venue is proper as to Counts 17 and
crime.” (Dissenting Op. 34) We would first observe that this       18 by a preponderance of the evidence.
is not what happened in the case before us, nor is the dissent’s
concern consistent with Department of Justice Policy. United         Wood counters that the undisputed evidence at trial showed
States Department of Justice, United States Attorneys’             that the checks were sent to Ruth Miller in Birmingham,
Manual 9-43.300 (1997) (“Department of Justice policy              Michigan, which is located in the Eastern District of
opposes mail fraud venue based solely on the mail matter           Michigan. He also points out that the evidence at trial
passing through a jurisdiction.”). Second, the dissent’s           showed that the checkbook for the Battle Creek account on
“parade of horribles” is really a challenge to § 3237(a) itself,   which the checks were drawn was kept in Ohio and that the
because the statute allows all “continuing offense[s]” to be       dividend checks were generally sent from Columbus.
prosecuted “in any district from, through, or into which such      Moreover, Wood was in federal custody in Chicago during
commerce, mail matter, or imported object or person moves.”        the relevant time period and was therefore not personally
(Emphasis added.) We would note in this regard that the            sending or receiving mail in the Western District of Michigan.
dissent’s concern was evidently not shared by the Supreme
Court in Rodriguez, because the Court expressly held that the         Johnson’s testimony that any checks written while she was
defendant could be prosecuted under § 3237(a) for the illegal      traveling in Michigan were “probably all written while we
possession of a firearm in New Jersey, through which he            were visiting the offices in Battle Creek” does not answer the
traveled on his kidnaping odyssey, even though the gun was         question at hand. In the first place, she had no specific
actually possessed only in Maryland. United States v.              recollection that the particular two checks in question were in
Rodriguez-Moreno, 526 U.S. 275, (1999).                            fact written while she was in Michigan. Nor was she asked if,
                                                                   after writing any checks in Battle Creek, she then mailed them
   We now turn our attention to the mail fraud charged in          from Battle Creek. Under these ambiguous circumstances,
Counts 17 and 18. Unlike Counts 19-21 discussed above,             we conclude that the government failed to prove by a
where the government based venue solely on the existence of        preponderance of the evidence that Johnson actually mailed
a fraudulent scheme with a significant nexus to the Western        the two checks at issue from the Western District of
District of Michigan, the government argues that it proved by      Michigan. This precludes a finding that venue was proper
a preponderance of the evidence that the checks involved in        with respect to Counts 17 and 18. We therefore reverse
Counts 17 and 18 were actually mailed from Battle Creek,           Wood’s conviction on these counts, as well as on Counts 19-
which is located within the district. Counts 17 and 18 refer to    21, and remand for resentencing.
checks signed by Jacqueline Johnson, an attorney based in
No. 01-2548                United States v. Wood, et al.    17    18   United States v. Wood, et al.                No. 01-2548

C. Restitution                                                      needs of the defendant’s dependents, shall be on the
                                                                    defendant.
   Wood also claims that the district court erred in imposing
restitution as a penalty for the Graham and Miller loan           Although he failed to complete his personal financial
transactions. The district court ordered Wood to pay              statement, Wood’s presentencce report reflects that “[f]rom
$125,000 in restitution to Graham and approximately               April 1996 to the present [the date of the presentence report],
$445,000 in restitution to the Millers. We review de novo         . . . he received $20,000 a year.” Wood’s failure to cooperate
whether a restitution order is permitted under the law. United    and to complete his personal financial statement undercuts his
States v. Dunigan, 163 F.3d 979, 981 (6th Cir. 1999). If it is,   argument that the district court should have taken his
then the amount of restitution ordered is reviewed under the      financial situation into account at sentencing.
“abuse of discretion” standard. Id. Because Wood did not
object to the restitution awards at sentencing, however, we          The district court appears, however, to have had some
will not set aside the district court’s determination unless it   awareness of Wood’s financial situation, even without
constitutes plain error. United States v. Bondurant, 39 F.3d      Wood’s personal financial statement. After ordering Wood
665, 668 (6th Cir. 1994).                                         to pay approximately $570,000 in restitution and a $5,000
                                                                  fine, the court waived the fine because it found that Wood
  The district court had authority under 18 U.S.C. § 3663 to      “[did] not have the ability to pay a fine, because he can’t even
order Wood to pay restitution. This statute provides in           pay restitution probably. But he doesn’t have the financial
pertinent part as follows:                                        wherewithal to pay both certainly. So I’ll reverse myself and
                                                                  waive the fine in this case.” Thus the district court apparently
  (B)(i) The court, in determining whether to order               had some understanding of Wood’s financial situation.
  restitution under this section, shall consider — (I) the
  amount of the loss sustained by each victim as a result of         This court has taken a clear position against restitution
  the offense; and (II) the financial resources of the            orders in amounts “that a defendant cannot possibly pay,”
  defendant, the financial needs and earnings ability of the      reasoning that such restitution orders threaten “respect for
  defendant and the defendant’s dependents, and such other        judicial orders generally and provide[] the defendant with less
  factors as the court deems appropriate.                         incentive to seek remunerative, rehabilitative, and non-
                                                                  criminal employment.” United States v. Dunigan, 163 F.3d
   Wood argues that the district court failed to consider his     979, 982 (6th Cir. 1999) (quotation marks omitted). In the
financial situation as the statute mandates. The government       present case, however, the record provides no basis to
counters that because Wood refused to complete his personal       conclude that the district court definitively knew that Wood
financial statement, he did not meet his burden under             could not pay the award. Wood bore the responsibility of
18 U.S.C. § 3664(e), which provides in pertinent part as          providing the court with details of his financial situation. See
follows:                                                          United States v. Hall, 71 F.3d 569, 573-74 (6th Cir. 1995)
                                                                  (“The Sixth Circuit has held repeatedly that the district court
  Any dispute as to the proper amount or type of restitution      is not required to make findings on the defendant’s financial
  shall be resolved by the court by the preponderance of          condition.”). We conclude that the district court’s restitution
  the evidence. . . . The burden of demonstrating the             order does not rise to the level of plain error because Wood’s
  financial resources of the defendant and the financial          lack of cooperation belies his argument that the order
No. 01-2548                United States v. Wood, et al.     19    20   United States v. Wood, et al.                No. 01-2548

“affected the fairness or integrity of the judicial proceeding.”   States v. Kincaide, 145 F.3d 771, 781 (6th Cir. 1998)
United States v. Koeberlein, 161 F.3d 946, 952 (6th Cir.           (employing the Jackson standard of review).
1998).
                                                                     Wood first contends that, because the evidence at trial
  Wood makes two additional arguments as to why the                demonstrated that the Millers defaulted on their loan, First
restitution awards were erroneous. He contends that the            Financial had the right to sell the Millers’ Comerica stock
district court miscalculated the loss sustained by the Millers     under the terms of the Agreement. The government counters
because it failed to consider the Millers’ receipt and use of      that the parties treated the loan as an outstanding debt through
loan proceeds that were never repaid. Wood also argues that        1996, yet First Financial had in fact sold Miller’s collateral
the court failed to consider that the Millers and Wood had         long before it ever claimed that the Millers were in default.
settled their claims against each other in a prior civil action.
These arguments fail, however, because evidence in the                First Financial closed on the Millers’ loan for $200,000 on
record shows that the court did take these considerations into     September 19, 1994. The government presented evidence at
account when ordering the restitution awards. And even if          trial that First Financial sold Ruth Miller’s 8,167 shares of
the court had not taken these factors into account, we cannot      Comerica stock short against the box two days later.
say that this would rise to the level of plain error in light of   According to the government, Wood directed First Financial
Wood’s failure to object to the awards at sentencing.              to cover its short position in Comerica stock by delivering
Accordingly, we affirm the district court’s restitution awards.    Ruth Miller’s stock to a broker, on December 8, 1994. This
                                                                   means that less than three months after the Millers entered
D. Sufficiency of the evidence                                     into the loan agreement, First Financial had disposed of their
                                                                   collateral.
   Wood’s final argument is that, with respect to the Miller
transaction, the government failed to present sufficient             The earliest default notice First Financial sent to Gordon
evidence for a rational trier of fact to convict him on Counts     Miller was in the spring of 1995 and the latest was in early
7-11 and 16-22 of the indictment. He contends that (1) the         1996. Gordon Miller made12 payments to First Financial
Millers breached their loan agreement, thus giving First           between October of 1994 and June of 1996, 10 of which were
Financial the right under the Agreement to sell the Millers’       made after Ruth Miller’s stock had been sold in December of
stock; (2) there was no sale as alleged in the indictment, only    1994. Viewed in the light most favorable to the government,
a “short sale against the box”; and (3) the government failed      this proof was sufficient for a jury to find that the Millers
to show that Wood was being deceitful when he claimed in a         were not in default at the time that First Financial sold their
telephone conversation in August of 1996 to have 2,950             collateral.
shares of Ruth Miller’s Comerica stock. When reviewing the
sufficiency of the evidence to support a criminal conviction,        Wood next argues that the district court erred in denying his
the “relevant question is whether, after viewing the evidence      Rule 29 motion to dismiss Count 8 of the indictment.
in the light most favorable to the prosecution, any rational       Count 8 alleged wire fraud due to the sale of the Ruth Miller’s
trier of fact could have found the essential elements of the       8,167 shares of Comerica stock on September 21, 1994.
crime beyond a reasonable doubt.” Jackson v. Virginia, 443         Wood claims that there was no evidence of a “sale” of the
U.S. 307, 319 (1979) (emphasis in original); see also United       Comerica stock. According to Wood, the sale alleged in the
                                                                   indictment never occurred because Ruth Miller’s Comerica
No. 01-2548                United States v. Wood, et al.    21    22   United States v. Wood, et al.                No. 01-2548

stock was used as collateral for a short sale of someone else’s   attempting to find Miller’s stock, his “beliefs were . . .
Comerica stock. “Therefore, the Comerica stock posted by          confirmed . . . that the stock was not in existence any more.”
the Millers as collateral for the loan from First Financial was   In addition to Ruth Miller’s and Michael Herzoff’s testimony,
held by First Financial in a brokerage account in a short         Gordon Miller testified that his mother’s stock was never
against the box transaction.” Wood’s argument may be              returned to her.
semantically correct, but it is ultimately unpersuasive.
                                                                     This evidence, when viewed in the light most favorable to
   In response to Wood’s Rule 29 motion, the government           the government, supports the allegation that Wood’s
argued at trial that “the term ‘sale’ is sufficiently broad to    telephone conversation, which is the subject of Count 22,
cover a sale short against the box at that time where             furthered a scheme to defraud because “[i]t lulled [Miller]
Ms. Miller’s stock was the collateral standing behind the loan    into believing her collateral was safe . . . when in fact it was
and became, in a sense, encumbered to fulfill the obligation      completely gone.” Accordingly, we find no error in the
to restore the stock where it had been borrowed.” (Emphasis       district court’s denial of Wood’s Rule 29 motion with regard
added.) The government presented evidence at trial that Ruth      to Count 22.
Miller’s Comerica stock was in fact disposed of on
December 8, 1994, to cover the short position created by the                          III. CONCLUSION
September 21, 1994, transaction. This evidence was
sufficient to support Count 8 of the indictment. We therefore        For all of the reasons set forth above, we AFFIRM Wood’s
find no error in the district court’s denial of Wood’s Rule 29    conviction and sentence on all counts other than the mail
motion on Count 8.                                                fraud charges in Counts 17-21, REVERSE Wood’s
                                                                  conviction on these latter counts, and, accordingly,
   Wood’s final argument concerns the sufficiency of the          REMAND for resentencing.
evidence supporting the wire fraud charged in Count 22 of the
indictment. Count 22 alleged that Wood committed wire
fraud during a telephone call when he represented that 2,950
shares of Comerica stock in the account of Keystone
Financial, a successor to First Financial, was a portion of
Ruth Miller’s stock, when in fact Wood knew that the stock
was not hers. Wood argues that the government presented no
evidence at trial that the stock did not belong to Ruth Miller.
  Ruth Miller testified at trial, however, that she became
suspicious about her stock’s whereabouts when her dividend
checks “were coming very late and they were not directly
from Comerica, which had been the practice up until then.”
She explained that no one had told her where her stock was
being kept and that she attempted to track it down on her
own. Miller finally engaged the help of an attorney, Michael
Herzoff, to assist her. Herzoff testified at trial that after
No. 01-2548                 United States v. Wood, et al.     23    24        United States v. Wood, et al.                No. 01-2548

 ______________________________________________                     with this finding, although I believe we should reject Wood’s
                                                                    argument for a more fundamental reason–he offered
  CONCURRING IN PART, DISSENTING IN PART                            insufficient evidence to support a finding that the Graham and
 ______________________________________________                     Miller transactions were short sales against the box
                                                                    transactions.
   JAMES S. GWIN, District Judge, CONCURRING, in part
and DISSENTING, in part. While agreeing with the well-                 Long sales of securities occur when the owner of certain
stated opinion of my colleagues on other issues, I respectfully     stocks sells them, delivers them, and consequently pays taxes
dissent regarding their determination that venue did not lie in     on the profits. In short sales, an investor borrows stock,
the Western District of Michigan under the mail fraud statute,      typically from his broker, and sells that stock in the hopes that
18 U.S.C. § 1341. In that district, the defendant, through          he can later return the stock the investor had borrowed from
collaborators, engaged in a large portion of the fraudulent         the broker with stock purchased at a lower price. If the price
activities involved with this case. Further, while I concur         of the security declines, the investor profits by the difference
with the majority opinion’s denial of a motion for acquittal,       between the price at which he sold the stock and the price at
I offer a somewhat different explanation why Defendant              which he later purchases the stock (minus any sales
Wood’s transactions were sales or encumbrances and not              commissions and margin fees that his broker assesses). Short
“short sales against the box.” I begin by offering                  sales can also help customers avoid taxes. Short sale
supplemental reasoning regarding Wood’s claim that he               transactions close when the short seller returns an equal
engaged in short sales against the box and that such                number of shares to the lender.
transactions were neither a sale nor an encumbrance of any
equities. I then turn to the majority’s finding that, in mail          Short sales are risky. The short seller loses when the price
fraud prosecutions, venue lies in the district where the            of the security rises and the cost of covering the borrowed
participants have mailed or delivered or through which              securities increases. Because no metaphysical cap exists on
materials passed but not within the district that was the focus     how high a security price can rise, losses continue to increase
of the fraudulent scheme.                                           as the stock borrowed for the short sale gains value. The loss
                                                                    is theoretically unlimited. As a result, “[a] material
              I. Short Sales Against the Box                        misrepresentation concerning the risks of a short sale
                                                                    transaction . . . can form the basis of a private suit under SEC
  On appeal, Defendant Wood argues that, as a matter of law,        Rule 10b-5.”1
a short sale against the box is neither a sale nor an
encumbrance. First, the defendant argues that the jury                 Short sales “against the box” differ from short sales by
instructions that describe a short sale against a box as a “sale”   attempting to reduce the risk associated with borrowing
or an “encumbrance” were invalid. Second, the Defendant             stocks and agreeing to replace the borrowed stocks. In these
argues that the evidence was insufficient to convict him            transactions, an investor already owns equities, but borrows
because his activities could not be a sale or an encumbrance.       (generally through a broker) an equal number of shares of the
                                                                    same class of stock to sell short in the open market. The
  The majority finds the trial court’s instructions were
balanced, neither suggesting nor rejecting that a short sale
against the box could be an encumbrance or a sale. I agree               1
                                                                             3 L A W S EC . R EG . § 14 .22 (4 th Ed .).
No. 01-2548                United States v. Wood, et al.    25    26    United States v. Wood, et al.                No. 01-2548

investor posts the “long” (owned) shares as collateral. The          This argument fails. Most important, the presence of
broker then generally holds the shares in a safety deposit        collateral to satisfy the short seller’s obligation to return the
box–thus the name, “against the box.” The broker uses the         borrowed shares distinguishes an “in the box” transaction.
shares from the box to complete the short sale only if the        Wood showed no evidence that he placed equivalent
investor is unable or unwilling to return the borrowed stock.     otherwise-unencumbered securities “into the box.” For
                                                                  example, the shorted security, Sonic Environmental Systems,
  Theoretically, those who invest “against the box” perfectly     was very thinly traded and not readily obtainable. In essence,
hedge against market risk. If the market price of the stock       Wood makes the argument that a transaction is a short sale
increases, this increases the value of their long (owned)         against the box if funds are available to cover the borrowed
shares. Yet, if the market price decreases, this increases the    security. If we accepted this argument, any trustee who
value of the short (borrowed) shares. While an investor will      absconded with securities could characterize any short sale as
not profit from a short against the box transaction–since         no sale. Even if Wood’s unsupportable argument were
losses in the short or long transaction offset any gains in the   allowed, he loses for another simple reason. Wood showed
other–such transactions can allow investors to liquidate stock    no evidence that he dedicated funds to obtain replacement
without incurring taxes on the original sale.                     shares for the Sonic Environmental Systems shares he had
                                                                  shorted. The evidence showed that Wood used the Graham
  Defendant Wood claims he did not defraud First Financial        proceeds to cover the loan to the Millers. In addition, Wood
customers because securities taken from customers’ accounts       offered no evidence that he maintained unencumbered assets
were covered by an “in the box” transaction. With his             of any kind that would allow the purchase of cover for the
argument, the Defendant turns the idea of a short sales against   shorted stock.
the box on its head. Most importantly, Wood’s argument fails
because he never had any long shares “in the box” to cover           Moreover, I am not convinced that it would make a
the shares he borrowed in the short sale. Without permission,     difference even if Defendant Wood could show the
Defendant Wood sold securities that customers had pledged         transactions were short sales against the box. Even if his
to secure loans the customers had received. At the time he        assertions are true, the Government could still convict him for
sold the pledged securities, no evidence showed that he           fraudulent behavior.
placed equivalent securities “in the box,” as required for a
short sale against the box.                                         The defendant argues that a short sale “against the
                                                                  box”does not encumber the stock posted or make up a sale as
  Although he never covered the securities used, Wood tries       a matter of law. The defendant cites no authority for his
to overcome this problem by arguing that he could have            assertion that a short sale against the box can never be a
purchased shares to place “in the box” if his customers’ loans    “sale” violating the Security and Pledge Agreement. Cf.
were repaid: “Once borrowers from First Financial had             United States v. Rubin, 449 U.S. 424, 429, 431 (1981)
repaid their loans, First Financial had a pool of capital with    (expansively interpreting the words “sale” to hold that a
which to purchase securities in the open market to close the      pledge of stock as collateral for a loan is a “sale”under the
short position, which would in turn free the borrower’s           Securities Act, even without a default on the loans).
pledged securities from ‘the box’ and allow their return to the
borrower.” (Def. br. at 12).                                        The defendant goes on to assert that a short sale against the
                                                                  box never amounts to an encumbrance, citing Schreiber v.
No. 01-2548                United States v. Wood, et al.     27    28   United States v. Wood, et al.                No. 01-2548

First Fin. Acceptance, 965 F. Supp. 397 (E.D.N.Y. 1997).           under the Securities Act, even without a default on the loans.
The Schreiber case also involved Defendant Wood. The               Extending this holding to conclude that a short sale against
Schreiber court found that “the question of encumbrance            the box is an encumbrance of the stock would be logical.
amounts to whether the defendants could have returned the
securities to [plaintiff], at any given time, had [plaintiff]         Even if this court were to apply the questionable reasoning
repaid the loan in full.” Id. at 400. The Schreiber court          of Schreiber, the facts of the Graham loan would still amount
opined that short sales against the box do not encumber the        to an encumbrance. The Schreiber court says that a defendant
stock if the defendant maintained “sufficient equity in the        must be prepared to return the securities upon payment of the
account” to satisfy margin requirements. Id. This holding          loan in full. Yet, Graham did repay his loan and Defendant
confuses short sales with short sales against the box. While       Wood did not produce his 35,000 shares of Sonic stock that
the former transactions depend upon margin requirements, the       Graham had posted to secure the loan.
later transactions revolve around posted shares, not the
availability of other assets that could be used to satisfy the       An analysis of the Miller case, under the common
obligation to cover the borrowed shares. Furthermore, the          definition of margin requirements, also reveals an
Eastern District of New York engaged in a unique definition        encumbrance. Wood sold the Millers’ Comerica stock on
of equity when it considered outstanding payments on               December 8, 1994, less than three months after the Millers
Defendant Wood’s loan as collateral for the obligation to post     pledged the stock to secure the loan to them. Defendant
securities. Id. This definition, which Defendant Wood urges        Wood did not maintain long shares of Comerica stock “in the
the Court to adopt in the present case, is not persuasive.         box” nor did he post margin requirements. By the end of
                                                                   December 1994, all that remained in that brokerage account
   Typically, to engage in a short sale, one must maintain a       was $1,117. Because the price of stock can increase
margin account related to the market value of the borrowed         dramatically, the only way to insure an economically feasible
stock. Until Schreiber, speculative future earnings have never     purchase of stock to close a short sale is by posting margin
been considered part of posted equity for purposes of              requirements before-the-fact. This court would need to
fulfilling margin requirements. Essentially, the Schreiber         engage in pure fantasy to pretend that Wood did not
court redefines securities law with its anomalous view of an       encumber the Miller stock–that Defendant Wood could
“encumbrance.” As a result, commentators have criticized           magically come up with identical shares when the Millers
Schreiber as Aflagrantly wrong.@ See, e.g., Kenneth C.             repaid the loan. That the Comerica stock tripled in value by
Kettering, Repledge and Pre-Default Sale of Securities             May 1996 and Wood failed to produce replacement Comerica
Collateral under Revised Article 9, 74 CHICAGO -KENT L.            stock drives this point home.
REV . 1109, n. 13 (1999) (“Schreiber seems flagrantly wrong
and is explicable only on the supposition that the court had          Ultimately, Defendant Wood argues that by considering a
little patience with the suit because the secured party was in     short sale against the box as an unlawful sale or encumbrance,
fact solvent.”).                                                   the lower court allowed the jury to find that these types of
                                                                   transactions are illegal. Nevertheless, the jury instructions
  Moreover, Schreiber breaks from the momentum of                  never say that a short sale against the box is per se an illegal
Supreme Court precedent. Recall that, in United States v.          transaction. The jury instructions explain that the jury cannot
Rubin, 449 U.S. 424, 429, 431 (1981), the Supreme Court            convict the Defendant apart from fraudulent behavior.
held that a pledge of stock as collateral for a loan is a “sale”   Nothing in the jury instructions says that engaging in a short
No. 01-2548                     United States v. Wood, et al.         29     30    United States v. Wood, et al.                 No. 01-2548

sale against the box, by itself, is fraudulent behavior. Rather,             these rules, the prosecution shall be had in a district in which
the Grand Jury charged Defendant Wood with knowingly                         the offense was committed.”); 18 U.S.C. § 3237, infra. Read
deceiving investors about the status of their stock. The jury                as a whole, these provisions manifest a strong constitutional
convicted the Defendant of fraud, not for engaging in short                  policy disfavoring trials removed from the situs of the alleged
sales against the box, assuming we could so characterize his                 criminal activity.
transactions. Summarizing, Wood fails to show that he ever
posted covering shares for the stock that he sold short.                     A. Applicability of 18 U.S.C. § 3237(a)
Additionally, he fails to offer evidence that he had the
resources to provide covering shares for the stock that he sold                 The general venue provisions for continuing offenses are
short. Having failed to give any evidence that his short sale                found at 18 U.S.C. § 3237. Section 3237(a) reads, in relevant
of the pledged securities was covered, he cannot argue that                  part, “Any offense involving use of the mails . . . is a
there was no sale or encumbrance of the securities that Miller               continuing offense and . . . may be . . . prosecuted in any
and Graham had pledged to secure their loans.                                district from, through, or into which such . . . mail matter . . .
                                                                             moves.” The majority states that mail fraud is such a
                              II. Venue                                      continuing offense. After referencing that provision, the
                                                                             majority finds that venue exists where mail related to the
   In a criminal case, the question of venue has not only                    fraud “is deposited, received, or moves through, even if the
pragmatic, but also constitutional implications. Article III                 fraud’s core was elsewhere.” Majority opinion at ¶ 28. I
requires that “[t]he Trial of all Crimes . . . shall be held in the          cannot agree.
State where the said Crimes shall have been committed.”
U.S. CONST . art. III § 2 cl. 3. The Sixth Amendment takes                     Section 3237 has a limited application. The Supreme Court
this requirement a step further by requiring that the trial take             has long noted that § 3237 is inapplicable to statutes which
place in the same district as that in which the crime was                    contain their own specific venue provisions. See Travis v.
allegedly committed. U.S. CONST . amend. VI. (“In all                        United States, 364 U.S. 631, 636-37 (1961) (“[V]enue should
criminal prosecutions, the accused shall enjoy the right to . . .            not be made to depend upon the chance use of the mails,
trial, by an impartial jury of the State and district wherein the            when Congress has so carefully indicated the locus of the
crime shall have been committed[.]”).2 Various federal                       crimes.”); see also United States v. Brennan, 183 F.3d 139,
statutes further define these provisions. See, e.g., Fed. R.                 147 (2d Cir. 1999). Furthermore, the second paragraph of
Crim. P. 18 (“Except as otherwise permitted by statute or by                 § 3237(a) broadly refers to offenses involving the “use of the
                                                                             mails.” Thus, any statutes which do not so broadly
                                                                             criminalize acts involving the “use of the mails” are not likely
    2
                                                                             covered under § 3237. See infra.
      Technica lly, the Sixth Amendment addresses only “vicinage” (the
place from which jurors are to be selected) rather than ven ue. See United      In United States v. Brennan, 183 F.3d 139, the Second
States v. Brennan, 183 F.3d 139, 144 n.5 (2d Cir. 1999) (citing Charles      Circuit spoke to the applicability of § 3237 to the mail fraud
Alan W right, Federal Practice and Procedure: Criminal 2d § 301, at 190
(1982)).    This distinction is meaningless, however, “because the           statute. In Brennan, the government argued that venue was
requirement that the jury be chosen from the state and district where the    appropriate under § 3237(a) because mail had moved through
crime was committed presupposes that the jury will sit where it is           the Eastern District of New York. The Second Circuit
chosen.” Id. (quoting United States v. Passodelis, 615 F.2d 975 , 977 n.3
(3d Cir. 1980)).
No. 01-2548                United States v. Wood, et al.    31    32       United States v. Wood, et al.                     No. 01-2548

rejected this argument and found that § 3237(a) does not            act of “us[ing] the mails.” Rather than make a defendant
establish venue in mail fraud cases:                                like Brennan subject to prosecution in any district
                                                                    through which a mail truck carrying his mail happened to
  Defendants maintain . . . that § 3237(a) does not apply to        drive (or perhaps even in any district over which an
  mail fraud prosecutions. Their argument rests on the              airplane carrying the mail happened to fly, or in which it
  contention that the mail fraud statute does not proscribe         happened to make an interim stop), we think Congress's
  conduct involving “the use of the mails” within the               more particularized and careful phrasing in the mail fraud
  meaning of § 3237(a). We agree. Though perhaps                    statute takes it outside the scope of § 3237(a) and is best
  surprising, this conclusion is strongly supported by              read less expansively.
  consideration of the history and purpose of § 3237(a) and
  the constitutional protection of defendants' venue rights.      Id. at 147 (brackets in original). This well-reasoned decision
                                                                  also is consistent with dicta from the Third Circuit. See
Id. at 146.                                                       United States v. Turley, 891 F.2d 57, 60 (3d Cir. 1989)
                                                                  (acknowledging and approving government concession that
  Examining the legislative history of § 3237(a), the Second      “18 U.S.C. § 3237 . . . is not applicable to mail fraud.”).
Circuit found that this venue provision was enacted in
response to the Supreme Court’s opinion in United States v.          A close comparison of the text of § 3237(a) with that of the
Johnson, 323 U.S. 273 (1944), where the Court articulated a       mail fraud statute, 18 U.S.C. § 1341, compels this conclusion.
rule favoring restrictive construction of venue provisions. In    Recall that § 3237(a) applies to crimes involving “use of the
Johnson, the defendant had been charged with an offense           mails.” As the Brennan court noted, “[t]here are today many
involving “use [of] the mails or any instrumentality of           . . . statutes that expressly prohibit ‘use of the mails’ in
interstate commerce.” Finding there was insufficient venue        connection with various activities for various purposes.” 183
under the continuing violation provision of the first paragraph   F.3d at 147.3 Mail fraud, however, “specif[ies] that a crime
of § 3237(a), the Court overturned the conviction. In             is committed by the particular acts of depositing or receiving
response to the Court’s ruling in Johnson, Congress expanded      mail, or causing it to be delivered, rather than by the more
§ 3237(a) by adding a second paragraph expanding                  general and ongoing act of ‘us[ing] the mails.’” Id. (second
continuing violations to include “the use of the mails.”          brackets in original). Had Congress intended to include mail
Brennan, 183 F.3d at 146.                                         fraud as a “continuing offense” under § 3237(a), it would
   Against this backdrop, the Second Circuit in Brennan held
that mail fraud is not a continuing violation and,                     3
                                                                        The Brennan court cited the following code sec tions:
consequently, that § 3237 is inapplicable to the mail fraud           18 U.S.C. §§ 43(a)(1) (animal enterprise terrorism); 514(a)(3)
statute:                                                              (false or fictitious instruments or obligations; 844(e) (threats or
                                                                      false statements concerning explosive materials); 1461 (ob scene
  [W]e agree with defendants that § 3237(a) is best read as           or crime-inciting matter); 17 17(b) (miscellane ous no nmailable
                                                                      matter); 1735(a)(1)(sexually oriented advertisements; 1738(a)
  not applying to statutes, like the mail fraud statute, that         (private identification documents without disclaimer); 1952(a)
  specify that a crime is committed by the particular acts of         (various unlawful activities); 21 01 (inciting, and other activity
  depositing or receiving mail, or causing it to be                   connected to, riots); 2332b (b)(1)(A ) (acts of terrorism
  delivered, rather than by the more general and ongoing              transce nding national bounda ries).
183 F.3d at 147.
No. 01-2548                United States v. Wood, et al.    33    34       United States v. Wood, et al.                     No. 01-2548

have defined mail fraud as involving “use of the mails.” Its      constitutional policy.4 By applying § 3237(a) to mail fraud,
refusal to do so, especially considered in light of the           the majority could permit the government to hale a defendant
numerous statutes invoking “use of the mails,” is a               into court in distant jurisdictions having virtually no relation
compelling reason not to apply § 3237(a) to mail fraud.           to the underlying crime. To illustrate, consider a defendant
                                                                  who initiated a Ponzi scheme by mailing letters from
  Furthermore, § 3237 is inapplicable to statutes which           Cleveland soliciting “investments” to residents of California.
contain their own venue provisions. See Travis, 364 U.S. at       Suppose further that the U.S. Postal Service routs mail from
636-37 (1961). Section 1341 specifically defines the locus of     Cleveland to California through a postal center in Kansas
mail fraud prosecutions as the situs of “scheme or artifice to    City. The defendant could potentially be forced to stand trial
defraud,” or the location where the defendant “places”,           in Kansas City despite the fact that his mail fraud concerned
“causes to be deposited”, or “takes or receives” an item for      nary a Missourian.5 This example shows how Government
delivery through the Postal Service. 18 U.S.C. § 1341. These      could use this expansive interpretation of venue to increase
provisions expressly contemplate the acts which trigger venue     the burden of defending a case in federal court.
and preempt the more general venue provisions contained in
§ 3237(a). See id. at 147.                                          The majority argues that using § 3237 does not expand
                                                                  Wood’s vulnerability to suit in far-away jurisdictions.
   Based on these considerations, the United States               Although true in this case, the majority’s holding greatly
Department of Justice policy opines that § 3237 is                expands the number of locations other defendants may be
inapplicable to the mail fraud statute: “The locus for mail       summoned to. Indeed, future defendants will likely be
fraud prosecutions is specifically set forth in section 1341;     summoned to trial in a distant jurisdiction merely because the
since Congress has ‘otherwise expressly provided [the situs       postal system happened to route a piece of mail though that
for venue],’ section 3237 is inapplicable to mail fraud.”         location. As I see it, this outcome plainly violates the
United States Department of Justice, Criminal Resource            constitutional policy, expressed in Article III and the Sixth
Manual 966 (1997).
  Moreover, the majority’s holding that a prosecutor can               4
establish venue in any district that the mail moves through is           The Supreme Court’s opinion in United States v. Johnson reflects
                                                                  the imp ortance of this p olicy:
extremely expansive, and invites conflict with the                     Questions of venue in crim inal case s, therefore, are not merely
Constitution’s guarantee that trials be held at the location of        matters of formal legal procedure. They raise deep issues of
the crime. The Sixth Amendment’s requirement that                      public policy in the light of which legislation must be construed.
defendants be tried in the district where their alleged crimes         If an enactme nt of Congress equally permits the underlying spirit
took place reveals a policy against enhancing the already-             of the constitutional concern for trial in the vicinage to be
                                                                       respected rather than to b e disrespected, co nstruction shou ld go
onerous burdens of trial by establishing venue in a far-off            in the direction of constitutional policy even though not
locale. The majority’s reasoning impairs this important                com manded by it.
                                                                  323 U.S. 273 , 276 , (194 4).

                                                                       5
                                                                        As the Second Circuit recognized in Brennan, this might be the case
                                                                  even if the mail did not travel through the Kansas City distribution center,
                                                                  but merely traveled in an airplane that crossed over Missouri airspace en
                                                                  route to California. See Brennan, 183 F.3d at 147.
No. 01-2548                     United States v. Wood, et al.           35     36       United States v. Wood, et al.                     No. 01-2548

Amendment, against exacerbating the burdens of trial by                        appropriateness of venue in the present matter.7 The Eastern
establishing venue in far-away locations.6                                     District of Michigan, in Mikell, notes that the Sixth Circuit
                                                                               never before has decided the matter: “This issue is a novel
B. Appropriateness of Venue Where the Scheme Was                               one, especially in light of the Supreme Court decision in
Hatched                                                                        Rodriguez-Moreno.” 163 F. Supp. 2d 720, 728 (reversed on
                                                                               other grounds). Further, in Brennan the Second Circuit –the
  At the outset of this discussion, I wish to highlight that this              only other Circuit to decide (albeit in passing) whether venue
case presents an unusual factual setting for discussing venue                  under § 1341 can be based on the scheme to
under the mail fraud statute. Typically, the district where a                  defraud–described the lack of clarity in this area of the law:
defendant set up and carried the scheme to defraud also is the                 “We cannot tell whether the reasoning of [the Supreme Court
place from which mail was sent or received. Thus, most                         in] Rodriguez-Moreno would make venue appropriate for a
federal courts have never addressed whether venue under                        prosecution under § 1341 not only in districts where mail
§ 1341 is also appropriate where the defendant carried out the                 matter was sent or received in furtherance of a fraud [sic]
scheme to defraud, in the rare circumstances that a mailing is                 scheme, but also in any district where any aspect of the
not easily traceable to that area. Only a handful of district                  ‘scheme or artifice to defraud,’ 18 U.S.C. § 1341, was
courts have dealt directly with the matter and they have not                   practiced.” 183 F.3d 139, 145 (2d Cir. 1999) (emphasis
come to any consensus. Compare United States v. Mikell,                        added).
163 F. Supp. 2d 720, 728 (E.D. Mich. 2001) (holding that
venue was proper in any district through which the mail                          Given that this ruling sets precedent regarding the scope of
moved), with United States v. Olen, 183 F. Supp. 212, 218                      venue under § 1341, we should look to the text of the statute,
(S.D.N.Y. 1960) (holding that venue was proper in the district                 the legislative history, the Supreme Court’s mandates for how
where the defendants initially devised their fraudulent
scheme). As district courts take opposing sides on the issue,
the only thing that is clear is that the law is unclear.                            7
                                                                                      The Sixth Circuit has not previously addressed the applicability of
                                                                               § 3237(a) to the mail fraud statute in a p ublished op inion. T he ma jority
 Thus, no binding precedent exists from the Sixth Circuit                      cites to the unpublished opinion of United States v. Ho lt, Nos. 89-6070,
Court of Appeals (or any other circuit) addressing the                         89-6092, 899 F.2d 15, 1 990 W L 37 613 (6th C ir. Apr. 3, 19 90). In the
                                                                               Sixth Circuit, unpublished decisions “carry no precedential weight [and]
                                                                               have no binding effect on anyone other than the parties to the ac tion.”
    6
                                                                               Sheets v. Moo re, 97 F .3d 1 64, 1 67 (6th Cir. 199 6).
       The majority aptly notes that the current policy of the United Stated        The majo rity also cites Kreuter v. United States, 218 F.2d 532 (5th
Department of Justice (“DOJ”) “opposes mail fraud ve nue based solely          Cir. 195 5) for the pro position that ve nue would not be appropriate at the
on the mail matter p assing through a jurisdiction.” United States             locus of the scheme to defraud apart from a mailing. The dicta o f Kreuter
Attorney’s Manual 9-43.300 (1997). However, such a policy does not             states: “The place where the schem e is conceived or put in motion is
resolve the dissent’s concerns that defendants may be tried in a distant       imma terial”to venue . Id. at 534. However, this case more narrowly holds
district based on the tenuous connection that a piece of mail passed           that venue is appropriate at the place of a ma iling or delivery by mail,
though this location. § 3 237 (a). First, the DO J po licy is based on the     even if the scheme to defraud did not occur in that jurisdiction. I do not
presumption that § 3237 is inapp licable to mail fraud – a presumption         dispute this finding, indicating the deposit of mail establishes venue under
which this court contradicts. See Criminal Resource Manual at 966.             § 134 1. W hat is at dispute here is whether a trial for mail fraud cannot
Second, the DOJ policy is not binding law. Indeed, the policy does not         take place at the locus of the scheme to defraud without a mailing. The
even presume to bind the United States Attorneys as it “opposes” such an       Fifth Circuit does not address this point in Kreuter and the dicta in
app lication o f the law but does not “proh ibit” it.                          Kreuter canno t amount to a F ifth Circuit holding on the matter.
No. 01-2548                  United States v. Wood, et al.       37    38       United States v. Wood, et al.                     No. 01-2548

to interpret the statutory text in such situations, and public           First of all, the text of the statute establishes that venue is
policy concerns. I fear that the majority adopts a frame of            appropriate in the district encompassing the situs of the
analysis that ignores great inconsistencies and practical              scheme to defraud. Applying the standard established in
difficulties created by its approach.                                  Rodriguez-Moreno, the scheme to defraud is the more
                                                                       essential conduct element in mail fraud. As the statute reads,
   In United States v. Rodriguez-Moreno, 526 U.S. 275                  the mailings themselves are illegal only to the extent that they
(1999), the Supreme Court addressed how to decide where                further an ongoing fraudulent scheme. See, e.g., United
venue lies. To decide whether venue is appropriate “a court            States v. Griffith, 17 F.3d 865, 874 (6th Cir.1994). In this
must initially identify the conduct making up the offense (the         sense, the mailing is merely a jurisdictional “hook,”
nature of the crime) and then discern the location of the              secondary in importance to the substantive scheme.
commission of the criminal acts.” Id. at 279. The Supreme
Court has said that the “locus delicti [of the charged offense]           Additionally, the mail fraud statute’s legislative history
must be determined from the nature of the crime alleged and            supports the conclusion that the fraud, and not the mailing, is
the location of the act or acts constituting it.” United States        the central conduct of the mail fraud offense. The legislative
v. Cabrales, 524 U.S. 1, 6-7 (1998) (quoting United States v.          history that exists establishes that, when enacting the mail
Anderson, 328 U.S. 699, 703 (1946)). The Rodriguez-                    fraud statute, Congress primarily concerned itself with the
Moreno Court recognized that essential conduct elements may            alleviation of fraud, not the protection of the mails. In 1948,
be “embedded in a prepositional phrase and not expressed in            Congress passed the current mail fraud statute, codified in
verbs,” and asserted that verbs are not “the sole consideration        part at 18 U.S.C. § 1341. The modern statute stems from a
in identifying conduct that constitutes an offense.” Id. at 280.       predecessor statute, originally enacted in 1872 as part of the
A study of the mail fraud statute will clarify the essential           recodification of the postal laws. The legislative history for
conduct elements of the statue.                                        the mail fraud statute is sparse. However, in 1870 the sponsor
                                                                       of the original statute noted that the mail fraud component
   The mail fraud statute describes the central acts forbidden:        was intended “to prevent the frauds which are mostly gotten
“Whoever, having devised or intending to devise any scheme             up in the large cities . . . by thieves, forgers, and rapscallions
or artifice to defraud . . . places, . . . deposits, or causes to be   generally, for the purpose of deceiving and fleecing the
deposited . . . or knowingly causes to be delivered [mail              innocent people in the country.” McNally v. United States,
matter]. . . shall be fined under this title or imprisoned not         483 U.S. 350, 356 (1987) (quoting Remarks of Rep. John
more than 20 years. . . .” 18 U.S.C. § 1341. The mail fraud            Franklin Farnsworth, Cong. Globe, 41st Cong., 3d Sess. 35
statute therefore involves (1) a scheme to defraud and (2) a           (1870) (emphasis added)).8 Commentators who have studied
deposit or a delivery of mail. The majority asserts that venue         the legislative history of the mail fraud statute also have
is proper where mail is placed, deposited, travels through or          described the purpose of the statute as seeking to eliminate
is delivered through the postal system. The majority does not
pay heed to the critical phrase of § 1341–“[w]hoever, having
devised or intending to devise any scheme or artifice to
                                                                            8
defraud.”       The ultimate dispute is one of textual                       These remarks were made during the debate on H.R. 229 5, the
interpretation.                                                        recodification legislation introduced during the 41st Congress. The
                                                                       recodification bill was not passed by the 41st Congress, but was
                                                                       reintroduced and passed by the 42d Congress with the antifraud section
                                                                       intact. Act of June 8, 1872, ch. 335, §§ 149 and 301, 17 Stat. 302 and 323.
No. 01-2548                  United States v. Wood, et al.       39   40    United States v. Wood, et al.                No. 01-2548

fraud: “There existed a perceived need for federal intervention          After considering the conduct making up the offense of
to dispel widespread fraud.” Jed S. Rakoff, The Federal Mail          mail fraud, it is difficult to find justification for holding
Fraud Statute (Part I), 18 DUQ . L. REV . 771 (1980) (emphasis        Wood’s trial in the Southern District of Ohio or the Eastern
added).                                                               District of Michigan. At best, the only connections with those
                                                                      places are the incidental mailing of less important documents.
  Third, contemporary case law supports the view that the             The fraud’s core centered in the Western District of Michigan
scheme to defraud comprises the integral part of mail fraud.          and most of the evidence and connections lay there. It is
For example, the Supreme Court has minimized the                      notable that the “independent value in trial at the place of
importance of mailings in establishing a mail fraud offense:          offense” is that “this may be where the witnesses will be
                                                                      located.” Charles Alan Wright, Federal Practice and
  “To be part of the execution of the fraud, however, the             Procedure: Criminal § 301(3d ed. 2000). Most of the
  use of the mails need not be an essential element of the            witnesses and evidence are found near the situs of the
  scheme. It is sufficient for the mailing to be ‘incident to         fraudulent scheme–the obvious location for a fair trial.
  an essential part of the scheme,’ or ‘a step in [the] plot.’”       Further, the majority’s holding implicates judicial economy
  Schmuck v. United States, 489 U.S. 705, 710-11 (1989)               and fairness to the defendant. It is unnecessarily duplicitous
  (internal citations omitted). The Sixth Circuit also has            if federal prosecutors pursue–and judges must try–separate
  downplayed the importance of mailings in establishing               cases for each location where defendants sent or received
  mail fraud, noting that a legal mailing will violate the            mail. Four decades ago, the Second Circuit noted that
  federal mail fraud statute if it furthers a fraudulent              modern policy concerns may merit an expansion of venue
  scheme. United States v. Hopkins, 357 F.2d 14, 17 (6th              under the mail fraud statute. Such concerns are even more
  Cir. 1966).                                                         pressing today:
  Indeed, the Southern District of New York also has                    [W]e cannot ignore the fact that the venue rule for mail
explained that the mailing is merely the hook to federal                fraud cases was developed many decades ago, when
jurisdiction, while the fraud is the essence of the offense:            more restricted notions of the limits of federal power
                                                                        prevailed than exist today. Were the issue of the
  It is [ ] true . . . that the “gist” of a mail fraud case is the      appropriate place of trial in such cases to arise [de] novo
  mailing. This statement, however, is true only in the                 in 1960, it is by no means clear that trial would not be
  sense that until a use of the mail occurs, no federal                 permitted at the place where the fraudulent scheme was
  jurisdiction exists. The evil to be combated, of course, is           developed as well as at the place where the mailing has
  the fraud and I have no doubt that Congress could                     its impact.
  constitutionally provide for trial of a mail fraud case in
  the district where the scheme was hatched even though               United States v. Cashin, 281 F.2d 669, 674 (2d Cir. 1960);
  all mailings took place in another district.                        see also Wright, supra, § 303, at 323 (“A similar principle
                                                                      should apply as to use of the mails to defraud. . . . [I]t can be
Olen, 183 F. Supp. at 218. For these reasons, the scheme to           fairly argued that the place where the scheme to use the mails
defraud, not the protection of the mails, is the central              to defraud was devised is also a proper venue.”).
prohibited activity of fraudulent mailing under § 1341.
No. 01-2548                 United States v. Wood, et al.     41

   I would therefore find that venue exists where the
fraudulent conduct is centered, where items of mail are
deposited, where they are received, and where they are caused
to be delivered. In this case, the Western District of Michigan
is where the scheme was centered, where Wood sent out
advertising to national publications soliciting customers, sent
out packets of information in response to inquiries from
potential customers, took telephone messages and offer
excuses why Defendant could not answer a customer’s call,
prepared loan documents; disbursed loan proceeds, accepted
the stock offered as collateral, directed the distribution of the
proceeds from the sale of the stock, and sent letters to traders
concerned about the fate of their collateral.
   In summation, when considering the mail fraud statute in
light of legislative history, a plain reading of the text, the
Supreme Court’s mandates for textual interpretation, and
public policy, venue for mail fraud may be based on the situs
of the scheme to defraud.
                       III. Conclusion
  To summarize, I respectfully dissent from the majority’s
conclusion that venue was improper as to the mail fraud
counts. While I agree with all of the other legal conclusions
of this Court, I have provided supplemental reasoning
regarding why Defendant Wood’s transactions are not
protected under the rubric of “short sales against the box.”