The opinion of the court was delivered by: CASHIN
Considered herein are three motions to transfer the venue of this case to the District Court for the Southern District of Alabama under Rule 21(b) of the Federal Rules of Criminal Procedure, 18 U.S.C. Defendants Olen and Mandeville move separately, and defendants Childree, Kerlin and Clements move jointly.
The indictment contain 8 counts. Counts I through V charge a violation of Section 17 of the Securities Act of 1933 (15 U.S.C.A. § 77q(a)). The counts are all pleaded in the words of the statute and differ only in that separate mailings in each count are charged. Defendant Margaret Mandeville is named as defendant only in Count I.
Section 17 of the Securities Act of 1933, the terms of which are set out in the margin,
basically makes it unlawful, in the 'offer or sale' of any securities by the use of any interstate instrumentality, to practice any fraud or deceit.
Count VI of the indictment charges a violation of Section 14 of the Securities Exchange Act of 1934 (15 U.S.C.A. § 78n). The terms of Section 14 are set out in the margin.
Basically the crime charged is soliciting proxies in respect to a registered security in contravention of Rule 14a-9 of the General Rules and Regulations promulgated by the United States Securities and Exchange Commission in that a fraudulent proxy statement was utilized. All of the defendants except Mandeville, are named in this Count.
Count VII charges a violation of the same statute by the filing of a false proxy statement with the Securities Exchange Commission. All of the defendants, except Mandeville, are named in this Count.
Count VIII charges all the defendants with a conspiracy, along with other co-conspirators not named as defendants, to violate both the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Government opposes the motions to transfer on two grounds:
First, that the venue would be improper in the proposed transferee court as to Counts I through VII; and
Second, that in any event the interests of justice would not be served by such a transfer.
Under the provisions of Rule 21(b), of the Federal Rules of Criminal Procedure
I can look only to the indictment and any bill of particulars filed thereunder in determining whether the proposed transferee court has jurisdiction. A perusal of these documents indicates clearly that the basically wrongful action giving rise to all of the counts in the indictment is the allegedly fraudulent maintaining of the books and records of The Olen Company, Inc. Defendant, Maurice Olen, was president of the Company; defendant, Margaret Mandeville, was an employee of the Company whose duties consisted of maintaining these records, and defendants, Lewis F. Childree, Homer Kerlin and Luther E. Clements, were members and an employee of an accounting firm who allegedly fraudulently audited the said books.
Thus, in the first five counts a prospectus misrepresenting the financial status of the Company was purportedly used in obtaining the five specific sales which are the bases of the five counts. The specific use of the mails, charged in each of the counts, consisted of a confirmation of the purchase of stock, all of which confirmations were mailed from the Southern District of New York.
The same fraudulent maintaining of the books was the basis of the balance sheet and earnings and surplus statements which are the basis for Counts VI and VII.
It would appear clear to me that since the basically improper action which is charged took place at the home office of The Olen Company, Inc. in Mobile, Alabama, that the trial should be held in that District. The Government, however, strongly argues that since specific mailings are mentioned in the first five counts of the indictment the case is basically a mail fraud case and thus should be tried only in the District from which or into which the mailings took place. Similarly, it is argued that, with regard to Count VI of the indictment, the use of the mails occurred in the Southern District of New York since that is the place from which the proxy solicitations were mailed, and the use of the mails in Count VII occurred in the Southern District of New York where the statement was prepared and mailed to the Securities and Exchange Commission in Washington, and, thus, Mobile, Alabama could not conceivably be the proper place of venue.
I find myself clearly constrained to disagree with the contention of the Government. This constraint is impelled by a consideration of the rationale of United States v. Johnson, 1944, 323 U.S. 273, 65 S. Ct. 249, 89 L. Ed. 236. In the Johnson case the defendants were being prosecuted for using the mails for sending dentures in violation of the Federal Denture Act of 1942 (18 U.S.C. § 1821). The Government indicted the defendants in the District Court for the district into which the dentures had been mailed. This indictment was quashed and the Government appealed. The Federal Denture Act did not have any specific venue provision. Defendants' contention was that they should be tried in the district from which they had mailed the ...