Opposition Brief — Hawkins v. United States

No. 03-1326 | OFFICE OF THE CLER!

In the Supreme Court of the Gnited States

ARTHUR M. HAWKINS, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

THEODORE B. OLSON

Solicitor General

Counsel of Record

CHRISTOPHER A. WRAY

Assistant Attorney General

DANIEL S. GOODMAN

Attorney

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

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QUESTION PRESENTED

Whether venue in petitioner’s prosecution for wire

fraud was proper, when the government alleged and

subsequently proved that acts taken in furtherance of

the fraudulent scheme, including the airing of false

television advertisements, occurred in the district of

prosecution.

(I)

TABLE OF CONTENTS

Page

Opinions below 1

Jurisdiction 1

Statement 2

Argument 8

Conclusion 15

Appendix la

TABLE OF AUTHORITIES

Cases:

United States v. Cabrales, 524 U.S. 1 (1998) ..........000 10, 11

United States v. Frederick, 835 F.2d 1211 (7th Cir.

1987), cert. denied, 486 U.S. 1013 (1988) 7

United States v. Mitchell, 70 Fed. Appx. 707

(4th Cir. 2003), cert. denied, 124 S. Ct. 1114 (2004) ......... 11

United States v. Molt, 772 F.2d 366 (7th Cir. 1985),

cert. denied, 475 U.S. 1081 (1986) 8

United States v. Pace, 314 F.3d 344 (9th Cir.

2002) ios 11, 12, 13

United States v. Rodriguez-Moreno, 526 U.S 275

(1999) 9, 10, 11, 14

United States v. Svoboda, 347 F.3d 471 (2d Cir.

2003), cert. denied, No. 03-1438 (May 17, 2004) ............... 11

United States v. Wood, No. 01-2548, 2004 WL 828097

(6th Cir. Apr. 19, 2004) 12

Statutes and regulation:

18 U.S.C. 371 2,3

18 U.S.C. 924(¢)(1) 9, 10

18 U.S.C. 1341 a 12

18 U.S.C. 1343 2,3, 4, 10, 11, 12, 14

IID os cirnntsocnshissnnemnateansoscnapsineinntouwbinnesension 10

18 U.S.C. 1957 10

18 U.S.C. 3237(a) ........cecceeseeees 6, 12

United States Sentencing Guidelines § 5G1.2(d) ................ 6

(IID)

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In the Supreme Court of the Gnited States

No. 03-1326

/

ARTHUR M. HAWKINS, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OFINIONS BELOW

The opinion of the court of appeals (Pet. App. B at 1-

19) is reported at 340 F.3d 459. The opinion of the

district court denying petitioner’s motion for a change

of venue (App., infra, 1a-12a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 2003. A petition for rehearing was denied

on October 10, 2003, and an amended order denying the

petition for rehearing was issued on October 14, 2003

(Pet. App. A at 1-2). On January 8, 2004, Justice

Stevens extended the time within which to file a peti-

tion for a writ of certiorari to and including March 12,

2004, and the petition was filed on that date. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

Following a jury trial in the United States District

Court for the Southern District of Illinois, petitioner

was found guilty on one count of conspiracy to commit

wire fraud, in violation of 18 U.S.C. 371, and one count

of wire fraud, in violation of 18 U.S.C. 1343. Pet. App.

B at 1; Gov’t C.A. Br. 3-4. He was sentenced to con-

secutive terms of imprisonment of 60 months on each

count, for a total of 120 months of imprisonment. Pear-

son Separate C.A. App. SA1045. The court of appeals

affirmed. Pet. App. B at 1-19.

1. Petitioner was the Chief Executive Officer and

Chairman of the Board of Exide Corporation, a battery

manufacturer. Pet. App. B at 2. In April 1994, Exide

was awarded a contract to manufacture DieHard

batteries for Sears. The batteries that Exide manu-

factured pursuant to that contract contained a design

flaw and did not conform to the representations made in

Exide’s bid. By October 1994, Sears warned Exide

officials of significant quality problems with the batter-

ies. By the end of that month, Exide removed defective

batteries from approximately 700 Sears stores nation-

wide. [bid.

In order to retain une lucrative Sears contract, Exide

bribed Gary Marks, Sears’s battery buyer. From

March 1995 through February 1996, Exide made

several payments of approximately $10,000 each to

Marks. After Marks left Sears in July 1997, petitioner

informed Marks that an investigation by the Florida

Attorney General’s Office had implicated Marks in the

Exide bribery scheme. Petitioner and Marks at-

tempted to conceal their arrangement by fabricating a

consulting agreement and creating backdated docu-

ments to substantiate the bribe payments. Petitioner

3

paid Marks $15,000 in the spring of 1999 and an addi-

tional $10,000 in the fall of 1999 in return for Marks’s

participation in the cover-up. Pet. App. B at 2-3.

2. The federal wire statute establishes criminal

penalties for any person who,

having devised or intending to devise any scheme or

artifice to defraud, or for obtaining money or

property by means of false or fraudulent pretenses,

representations, or promises, transmits or causes to

be transmitted by means of wire, radio, or television

communication in interstate or foreign commerce,

any writings, signs, signals, pictures, or sounds for

the purpose of executing such scheme or artifice.

18 U.S.C. 1343. In July 2001, a federal grand jury in the

Southern District of Illinois returned a two-count

second superseding indictment against petitioner;

Douglas N. Pearson, Executive Vice President of Sales

and Marketing and then-President of North American

Operations for Exide; and Alan E. Gauthier, Chief

Financial Officer of Exide. Pearson Separate C.A. App.

SA46-SA62.' Count One of the indictment charged the

defendants with conspiracy to commit wire fraud. Jd.

at SA46-SA61; see 18 U.S.C. 371 (establishing criminal

penalties for conspiracy “to commit any offense against

the United States”). The indictment alleged that, as

part of the conspiracy, “a nationwide advertising cam-

paign was run both before and after the initial delivery

of the defective batteries. Exide, acting together with

the defendants and others, would and did misrepresent

and cause to be represented material facts to the

! Marks and Joseph Calio, Senior Vice President of Sales and

Marketing for Exide, entered into plea agreements and pleaded

guilty to wire fraud in March 2001. Pet. App. B at 4 n.1.

4

consumers.” Pearson Separate C.A. App. SA55.

Among the overt acts alleged to have been committed

in furtherance of the conspiracy, the indictment

charged that “(dJuring 1994, television advertising re-

garding the DieHard batteries was aired to consumers

located in the Southern District of Illinois.” Jd. at

SA60.

Count Two of the indictment charged the defendants

with wire fraud, in violation of 18 U.S.C. 1343. Pearson

Separate C.A. App. SA61-SA62. The substantive wire

fraud count “reallege[d] and reincorporate[d] by refer-

ence” the allegations in the conspiracy count. Id. at

SA61. The wire fraud count further alleged that from

on or about January 1994 through February 1996, the

defendants, in the Southern District of Illinois and

elsewhere,

for the purpose of executing the scheme and artifice

to defraud consumers of money and property by

means of false and fraudulent pretenses, representa-

tions, and promises in connection with the distribu-

tion, sale and marketing of Sears’ automotive bat-

teries manufactured by Exide, caused to be trans-

mitted by wire from an Exide bank account at

CoreStates Bank in Philadelphia, Pennsylvania,

wire transfer B00035879, writings, signs, and sym-

bols representing $10,000 cash to an account main-

tained at the Bank of Palatine, Palatine, Illinois in

the name of DG Consulting, Inc., account no. 051-

594-01.

Id. at SA62.”

2 Palatine is a northwestern suburb of Chicago and is located in

the Northern District of Illinois.

5

Pearson argued that venue for the wire fraud count

was not proper in the Southern District of Illinois, and

he asked that the case be transferred either to the

Northe istrict of Illinois or to the Eastern District

of Pennsylvania. See Pearson’s Pretrial Motions (May

11, 2001). Petitioner adopted Pearson’s pre-trial venue

motion. See Government’s Omnibus Response to De-

fendant Pearson’s Pre-Trial Motions 2 (June 8, 2001).

In opposing that motion, the government stated that,

“[wlith regard to count 2, the case law does not require

that a wire pass through the subject district for proper

venue on a wire fraud charge. Additionally, the offense

is continuing in nature, over a large geographic area,

with substantial points of contact and causative acts

performed in Southern Illinois.” Jd. at 6. The govern-

ment further explained: “The indictment alleges,

among other causative acts, that the wires were used in

interstate commerce, including in Southern Illinois, to

promote the sale of known defective batteries through

the use of false advertising. While those particular wire

transmissions were not charged in count 2 as the sub-

ject wires, they were alleged as part of the overall

scheme charged in count 2.” Jd. at 8.

The district court determined that venue was

“proper in this Court as to both Counts One and Two of

the Second Superseding Indictment.” App., infra, 4a.

The court explained that, “[bJased on the pleadings, the

situs of the Defendants’ acts include causing the de-

livery and sale of defective batteries by Sears’ distri-

bution centers in the Southern District of Illinois and

causing specific acts of concealment to facilitate the

scheme, including but not limited to false advertising in

the Southern District of Illinois.” Jbid. The court

further observed that the propriety of venue in the

Southern District of Illinois did not depend on the

6

existence of a “personal ‘tie’ to any of the three

Defendants.” Jd. at 5a.

The ensuing jury trial lasted approximately three

months. Pet. App. B at 4. With respect to the wire

fraud count, the jury was instructed as to venue:

Count 2 charges a continuing offense occurring in

more than one state or district. The Government

must prove by a preponderance of the evidence that

some part of the crime charged in count 2 of the

Indictment occurred in the Southern District of

Illinois. Venue is proper in any district in which

part of the crime was committed.

Gov’t C.A. Br. 21 n.6. (citation omitted). The jury found

petitioner and Pearson guilty on both counts of the

indictment. Pet. App. B4. Petitioner was sentenced to

120 months of imprisonment, to be followed by three

years of supervised release, and was fined $1 million.

Ibid. The prison sentence consisted of a 60-month term

of imprisonment on each count of conviction, to run

consecutively pursuant to Sentencing Guidelines

§ 5G1.2(d). Pearson Separate C.A. App. SA1045.

3. The court of appeals affirmed. Pet. App. B at 1-

19. Petitioner and Pearson contended, inter alia, that

venue on the substantive wire fraud charge was not

proper in the Southern District of Illinois. See id. at 8-

10. In addressing that claim, the court of appeals ex-

plained that, under the general federal venue statute

governing offenses committed in more than one State

or district, “any offense against the United States be-

gun in one district and completed in another, or com-

mitted in more than one district, may be inquired of and

prosecuted in any district in which such offensc was

begun, continued, or completed.” Jd. at 8 (quoting 18

U.S.C. 3237(a)). The court also stated that “[pJroper

7

venue is not limited to districts where the defendants

were physically present when they committed unlawful

acts. So long as an overt act is intended to have an

effect in the district where the case is finally brought,

venue is proper.” Jd. at 9 (quoting United States v.

Frederick, 835 F.2d 1211, 1215 (7th Cir. 1987), cert.

denied, 486 U.S. 1013 (1988)).

Petitioner and Pearson contended “that the sub-

stantive wire fraud count should not have been tried in

the Southern District of Illinois because the basis for

that count, a wire transfer from a bank in the Eastern

District of Pennsylvania to a bank in the Northern

District of Illinois, did not originate in, pass through, or

terminate in the Southern District of Illinois.” Pet.

App. B at 8. The court of appeais rejected that argu-

ment, explaining that petitioner and his co-defendant

intended to defraud customers in the Southern

District of Illinois. They were charged with wire

fraud, including use of the wires to promote the sale

of defective batteries through false advertising in

the Southern District of Illinois. Moreover, the de-

fective batteries themselves were distributed and

sold in that district, and an audit of the battery

quality conducted in the Southern District of Illinois

initially uncovered the defects in the product. The

Exide Corporation, a defendant in a companion case,

was charged with similar crimes and pled guilty in

the Southern District of Illinois.

These fraudulent activities conducted in the

Southern District of Illinois provided critical evi-

dence of the “intent to defraud,” an element of the

crime of wire fraud. The Supreme Court has em-

phasized that when analyzing venue, courts must

inquire into the nature of the offense, see United

8

States v. Rodriguez-Moreno, 526 U.S. 275, 280

(1999) * * * , and Pearson and [petitioner]’s crime

of wire fraud focused on defrauding and concealing

their deceit of consumers, including those in the

Southern District of Iliinois.

Id. at 9-10 (citations omitted). In a footnote, the court

of appeals stated that, “[aJthough neither party dis-

cusses the case, in United States v. Pace, 314 F.3d 344,

350 (9th Cir. 2002), the Ninth Circuit held that venue

for a wire fraud offense may only ‘lie where there is a

direct or causal connection to the . . . wires.’ This

approach differs with the rubric we have established for

analyzing venue * * * , and we decline to adopt the

analysis outlined by the Ninth Circuit in Pace.” Id. at

10.’

ARGUMENT

Petitioner contends (Pet. 4-12) that the courts belew

erred in ruling that venue was proper in the Southern

District of Illinois for the wire fraud count of his indict-

ment. Petitioner further argues (Pet. 5-10) that the

court of appeals’ resolution of the venue issue is incon-

3 Petitioner also contended in the court of appeals that venue in

the Southern District of Illinois was improper on the conspiracy

count. Pet. App. B at 10. The court rejected that argument, ex-

plaining that “[bjoth the sale of defective batteries and the

broadcasting of advertisements in the Southern District of Illinois

were overt acts that supported the charge of conspiracy to commit

mail fraud.” Ibid. Relying on the principle that “[aJs long as one

overt act in furtherance of the conspiracy was committed in a

district, venue is proper there,” the court held that venue was

proper in the Southern District of Illinois on the conspiracy count

as well as on the substantive wire fraud charge. IJbid. (quoting

United States v. Molt, 772 F.2d 366, 369 (7th Cir. 1985), cert.

denied, 475 U.S. 1081 (1986)). In this Court, petitioner does not

contest the propriety of venue on the conspiracy charge.

9

sistent with decisions of other circuits. As the court of

appeals explained, however, petitioner’s fraudulent

scheme was effectuated in part through false television

advertising aired in the district of prosecution. Peti-

tioner identifies no decision suggesting that such con-

tacts are insufficient to establish venue in a federal wire

fraud case. Because any differences between the legal

standards employed by various courts of appeals in

resolving venue questions would not affect the disposi-

tion of the instant case, the petition for a writ of

certiorari should be denied.

1. In United States v. Rodriguez-Moreno, 526 U.S.

275 (1999), this Court considered a venue challenge to a

conviction for using or carrying a firearm during and in

relation to a crime of violence, in violation of 18 U.S.C.

924(c)(1). The underlying crime of violence in that case

was a kidnapping that continued through several States

(and thus through several federal judicial districts).

See 526 U.S. at 276-277. The defendant was prosecuted

in the District of New Jersey, one of the locations in

which the victim had been held captive. Id. at 277. The

Section 924(c)(1) charge was based on evidence that the

defendant had used a firearm in Maryland in

furtherance of the crime. bid.

This Court rejected the defendant’s argument “that

venue was proper only in Maryland, the only place

where the Government had proved he had actually used

a gun.” 526 U.S. at 277. Rather, the Court interpreted

Section 924(c)(1) as containing “two distinct conduct

elements”: “the ‘using and carrying’ of a gun and the

commission of a kidnaping [or other crime of violence].”

Id. at 280. The Court further explained that Ҥ 924(c)(1)

does not define a ‘point-in-time’ offense when a firearm

is used during and in relation to a continuing crime of

violence.” Id. at 281. It observed that “(t]he kidnaping,

10

to which the § 924(c)(1) offense is attached, was com-

mitted in all of the places that any part of it took place,

and venue for the kidnaping charge * * * was

appropriate in any of them.” Jd. at 282. “Where venue

is appropriate for the underlying crime of violence,” the

Court concluded, “so too it is for the § 924(c)(1) offense.”

Ibid.

The same analysis applies here. Like Section

924(c)(1), 18 U.S.C. 1343 requires proof of two distinct

elements: that the defendant has devised a “scheme or

artifice to defraud,” and that he has used a “wire, radio,

or television communication in interstate or foreign

commerce” to execute that scheme. Like the kidnap-

ping in Rodriguez-Moreno, the scheme or artifice to

defraud in Section 1343 is a continuing crime for which

venue is proper in any district in which a portion of that

scheme or artifice was devised and carried out. And, as

in Rodriguez-Moreno, a wire fraud prosecution under

Section 1343 may properly be brought in any district

where the fraudulent scheme was devised and imple-

mented, whether or not the wires were used in that

district. Thus, the facts that petitioner “intended to

defraud consumers in the Southern District of Illinois,”

and that “the defective batteries themselves were

distributed and sold in that district,” provide a suffi-

cient basis for rejecting petitioner’s venue challenge in

this case. Pet. App. B at 9.*

4 United States v. Cabrales, 524 U.S. 1 (1998), is not to the

contrary. The defendant in Cabrales was charged with money

laundering, in violation of 18 U.S.C. 1956(a)(1)(B)(ii) and 1957,

based on financial transactions that were alleged to have occurred

in Florida and to have involved funds derived from unlawful

cocaine distribution in Missouri. 524 U.S. at 3-4. This Court held

that the Western District of Missouri was not a proper venue for

the money-laundering prosecution. Jd. at 6-10. In explaining that

11

2. As the court of appeals recognized (Pet. App. B at

10 n.3), the Ninth Circuit appears to have taken a more

restrictive view of permissible venue in prosecutions

under Section 1348. See United States v. Pace, 314

F.3d 344 (9th Cir. 2002).° The court in Pace stated that

“{a]lthough a fraudulent scheme may be an element of

the crime of wire fraud, it is using wires and causing

wires to be used in furtherance of the fraudulent

scheme that constitutes the prohibited conduct.” Jd. at

conclusion, however, the Court emphasized that the money laund-

ering statutes did not prohibit “the anterior criminal conduct that

yielded the funds allegedly laundered,” and that the defendant was

“charged in the money-laundering counts with criminal [money-

laundering] activity ‘after the fact’ of [a different] offense begun

and completed by others.” Jd. at 7. In the instant case, by con-

trast, the basis for laying venue in the Southern District of Illinois

was not that petitioner was alleged to have acted “after the fact” to

prevent detection of crimes committed by other persons in that

district. Rather, petitioner was from the outset an integral

member of a criminal scheme, prohibited by the wire fraud statute,

to defraud consumers in, inter alia, the district of prosecution.

Nor, contrary to petitioner’s contention (Pet. 5-6), did the lower

courts’ venue rulings turn on “the intended effects of unlawiul

conduct in a given district.” Cf. Rodriguez-Moreno, 526 U.S. at 279

n.2 (reserving that issue). The devising of a scheme to defraud is

an element of a wire fraud offense.

5 In addition to alleging a conflict with Pace (see Pet. 5-7), peti-

tioner also contends (Pet. 9-10) that the court of appeals’ resolution

of the venue issue in the instant case conflicts with the Second

Circuit’s decision in United States v. Svoboda, 347 F.3d 471 (2003),

cert. denied, No. 03-1438 (May 17, 2004), and the Fourth Circuit’s

unpublished decision in United States v. Mitchell, 70 Fed. Appx.

707 (2003), cert. denied, 124 S. Ct. 1114 (2004). Petitioner’s reliance

on Svoboda and Mitchell is misplaced. Neither of those cases

involved a prosecution under 18 U.S.C. 13438, and the courts of

appeals in both cases rejected the defendants’ venue challenges to

their convictions. See Svoboda, 347 F.3d at 475, 482-485; Mitchell,

70 Fed. Appx. at 709, 710-713.

LEE Sener nee ee a

12

349. The court indicated that venue in Section 1343

prosecutions was limited to districts “where the wire

transmission at issue originated, passed through, or

was received, or from which it was orchestrated.” Id.

at 349-350 (interna! quotation marks omitted).°

In the instant case, however, venue would be proper

in the Southern District of Illinois even under the

approach taken by the court of appeals in Pace. The

wire fraud statute applies whenever the defendant,

“having devised or intending to devise any scheme or

artifice to defraud, * * * transmits or causes to be

transmitted by means of wire, radio, or television com-

munication in interstate or foreign commerce, any writ-

ings, signs, signals, pictures, or sounds for the purpose

of executing such scheme or artifice.” 18 U.S.C. 1348

(emphasis added). The government alleged in peti-

tioner’s indictment, and subsequently proved at trial,

that false television advertising in the Southern

6 After the certiorari petition in the instant case was filed, the

Sixth Circuit adopted a similar venue rule for mail fraud

prosecutions under 18 U.S.C. 1341. See United States v. Wood, No.

01-2548, 2004 WL 828097, at *4-*9 (6th Cir. Apr. 19, 2004). Court

in Wood, however, based its decision on the second paragraph of 18

U.S.C. 3237(a), which states that “[aJny offense involving the use of

the mails * * * may be inquired of and prosecuted in any district

from, through, or into which such * * * mail matter * * *

moves.” See Wood, 2004 WL 828097, at *7-*8. The court

concluded that “[a] plain reading of the text” of Section 3237(a)

“leads us to the conclusion that venue in a mail fraud case is limited

to districts where the mail is deposited, received, or moves

through, even if the fraud’s core was elsewhere.” Id. at *8.

Because 18 U.S.C. 3237(a) contains no comparable language

governing offenses that involve the use of wire communications, it

is by no means clear that the Sixth Circuit would adopt a similar

limit on venue in wire fraud prosecutions brought under 18 U.S.C.

1343.

13

District of Illinois was used to mislead consumers about

the characteristics of Exide’s batteries. See Pearson

Separate C.A. App. SA55, SA56, SA60 (indictment);

Gov’t C.A. Br. 11 (summarizing record evidence of false

television advertising). Both of the courts below relied

in part on those television communications in rejecting

petitioner’s challenge to venue in the Southern District

of Illinois. See App., infra, 4a (district court explains

that, “[bJased on the pleadings, the situs of the Defen-

dants’ acts include causing the delivery and sale of

defective batteries by Sears’ distribution centers in the

Southern District of Illinois and causing specific acts of

concealment to facilitate the scheme, including but not

limited to false advertising in the Southern District of

Illinois”); Pet. App. B at 9 (court of appeals observes

that petitioner and his co-defendant were “charged

with wire fraud, including use of the wires to promote

the sale of defective batteries through false advertising

in the Southern District of Illinois”).

It is true that the substantive wire fraud count of

petitioner’s indictment (see Pearson Separate C.A.

App. SA61-SA62) did not specifically identify the false

advertising as a wire or television communication by

means of which the fraudulent scheme was executed.’

The conspiracy count of the indictment alleged, how-

ever, that “[a]s a further part of the conspiracy, * * *

Exide, acting together with the defendants and others,

would and did misrepresent and cause to be repre-

sented material facts to the consumers” about the

characteristics of the DieHard batteries that Exide had

7 Rather, the only use of the wires that was described in the

wire fraud count was a transfer of funds to a bank located in the

Northern District of Illinois. Pearson Separate C.A. App. SA62;

see p. 4 & note 2, supra.

14

manufactured. Jd. at SA55. The conspiracy count also

alleged, as an overt act, that television advertising was

aired to consumers in the Southern District of Illinois.

Id. at SA60. The indictment’s allegations relating to

the conspiracy were expressly “reallege[d] and reincor-

porate[d] by reference” in the wire fraud count. Jd. at

SA61. The government in opposing the defendants’

motion to transfer, and the district court in denying

that motion, relied in part on the indictment’s allega-

tions of false advertising in the district of prosecution.

See p. 5, supra.

The indictment’s description of the false television

advertising in this case as an overt act in furtherance of

the defendants’ conspiracy to commit wire fraud is, for

purposes of determining venue, functionally equivalent

to treating that advertising as a communication under-

taken “for the purpose of executing [the] scheme or

artifice” to defraud. 18 U.S.C. 1343. The venue inquiry

turns on the substance of the criminal conduct alleged,

not on formal labels. See Rodriguez-Moreno, 526 U.S.

at 279 (“[T]he locus delicti [of the charged offense]

must be determined from the nature of the crime

alleged and the location of the act or acts constituting

it.”) (internal quotation marks omitted; bracketed mate-

rial added by the Court). And the trial proof indis-

putably established that the scheme was executed by

the use of the wires, in the form of television com-

munications, within the district of prosecution.

Thus, even under the venue analysis adopted by the

Ninth Circuit in Pace, petitioner’s claim would fail. The

absence of any specific reference in the wire fraud

count to false advertising as a means of executing the

scheme was at most a technical defect that would not

have prevented the jury from finding that venue was

proper in the district of prosecution. See p. 6, supra

15

(quoting jury instructions on venue). Because the out-

come would be the same under the approach taken by

the Ninth Circuit, this case presents an unsuitable

vehicle for resolving the analytical disagreement bet-

ween the courts of appeals about permissible venue in

federal wire fraud prosecutions.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

CHRISTOPHER A. WRAY

Assistant Attorney General

DANIEL S. GOODMAN

Attorney

MAY 2004

APPENDIX

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ILLINOIS

No. 01-CR-30006-DRH

UNITED STATES OF AMERICA, PLAINTIFF

Vv.

ARTHUR M. HAWKINS, ALAN E. GAUTHIER, AND

DOUGLAS N. PEARSON, DEFENDANTS

[Filed Nov. 7, 2001]

MEMORANDUM AND ORDER

HERNDON, District Judge

I. Introduction and Background

On January 19, 2001, the Grand Jury returned the

initial Indictment in this matter (Doc. 1). That same

day, Magistrate Judge Clifford J. Proud ordered that

indictment sealed (Doc. 4). On March 22, 2001, the

Grand Jury returned a sealed Superseding Indictment

(Doc. 9). The Court unsealed the Superseding Indict-

ment on March 23, 2001 (Doc. 11). Subsequently, the

Grand Jury returned a Second Superseding Indictment

(Doc. 73). The Second Superseding Indictment contains

two counts against Arthur M. Hawkins, Alan E.

(la)

2a

Gauthier and Douglas N. Pearson. Count One charges

Defendants with conspiracy to commit wire fraud in

violation of 18 U.S.C. § 371 and Count Two charges De-

fendants with wire fraud in violation of 18 U.S.C.

§ 1343. Specifically, Defendants are charged with par-

ticipating in a scheme to defraud and defrauding con-

sumers in connection with the distribution, sale and

marketing of automotive batteries.

Now before the Court are Defendants’ motion to

change venue (Doc. 41-1); Defendants’ motion to dis-

miss the superseding indictment as time barred and

based on duplicity (Doc. 41-4) and Defendants’ supple-

mental motion to dismiss Second Superseding Indict-

ment as containing a third independent theory which is

duplicitous (Doc. 79). The Government objects to De-

fendants’ motions. Based on the pleadings and the

applicable law, the Court denies Defendants’ motions.

II. Motion to Transfer

Trials must be held in the state and district in which

the offense was committed. See U.S. Const. art. III,

§ 2, cl. 3; FED.R.CRIM.P. 18. For crimes that occur in

more than one state or district, venue is constitutionally

and statutorily proper in any district in which part of

the crime was committed. See 18 U.S.C. § 32387(a);

United States v. Tingle, 183 F.3d at 719, 726 (7th Cir.

1999). Thus, the traditional rule is that a conspiracy

charge may be tried in any district in which an overt act

of the conspiracy occurred. See United States v.

Rodriguez, 67 F.3d 1312, 1318 (7th Cir. 1995); United

States v. Molt, 772 F.2d 366, 369 (7th Cir. 1985) (“As

long as one overt act in furtherance of the conspiracy is

committed in a district, venue is proper there.”).

3a

“(Where a crime consists of distinct parts which

have different localities the whole may be tried where

any part can be proven to have been done.” United

States v. Rodriguez-Moreno, 119 S. Ct. 1239, 1244

(1999). “Proper venue is not limited to districts where

the defendants were physically present when they

committed unlawful acts. So long as an overt act in

furtherance of the conspiracy is intended to have an

effect in the district where the case is finally brought,

venue is proper.” United States v. Brown, 739 F.2d

1136, 1148 (7th Cir. 1984). The Government need prove

facts supporting venue only by a preponderance of

evidence. Id.

Defendants maintain that venue is not proper in the

Southern District of Illinois under either Count One or

Count Two.' Specifically, Defendants maintain that

venue is not proper in Count Two because none of the

wire frauds occurred or passed through the Southern

District of Illinois; and that venue is not proper in

Count One because the overt acts were performed by

Sears and or EXIDE, who have not been named as co-

conspirators, therefore, the alleged acts cannot be

attributable to Defendants. The Court does not agree.

As to Count One, the conspiracy count, the Court

finds that the conspiracy occurred, in part, in the

Southern District of Illinois. First this Court has

continuing jurisdiction over the companion case, United

States v. EXIDE Illinois, et al; 01-CR-30035-DRH,

which arose out of the same set of facts as this case.”

1 The Court notes that Defendants do not cite to any case law

or statutes to support its argument of why venue is not proper

under Count Two.

2 The three defendants in 01-CR-30035-DRH are EXIDE

Illinois, Joseph C. Calio and Gary Marks.

4a

The defendants in the companion case have pled guilty

to one count of wire fraud and one count of conspiracy

to commit wire fraud and sentencing is pending. As to

Count Two, the wire fraud count, the Second Super-

seding Indictment alleges that the wires were used in

interstate commerce, including the Southern District of

Illinois, to promote the sale of known defective bat-

teries through the use of false advertising. In addition,

the audit conducted in the Southern District of Illinois

revealed the problem to Sears. Furthermore, the

Second Superseding Indictment alleges that illegal

payments were made in an effort to influence the inde-

pendent judgment buyer of the Sears battery, which

allowed EXIDE to continue to do business in the

Southern District of Illinois.

Applying the “substantial contacts analysis” found in

United States v. Reed, 773 F.2d 477, 480 (2nd Cir. 1985),

the Court finds that venue is proper in this Court as to

both Counts One and Two of the Second Superseding

Indictment. Based on the pleadings, the situs of the

Defendants’ acts include causing the delivery and sale

of defective batteries by Sears’ distribution centers in

the Southern District of Illinois and causing specific

acts of concealment to facilitate the scheme, including

but not limited to false advertising in the Southern

District of Illinois. As stated earlier EXIDE, a defen-

dant in a companion case, pled guilty to charges con-

taining allegations of delivering known defective

products in the Southern District of Illinois and causing

false advertising in this judicial district in furtherance

of the unlawful agreement. The Second Superseding

Indictment alleges that overt acts in furtherance of the

conspiracy took place in this judicial district and num-

erous alleged acts comprising the scheme to defraud

5a

occurred in the Southern District of Illinois. There

need not be a personal “tie” to any of the three De-

fendants to the Southern District of Illinois. The Court

concludes that venue for Counts One and Two is proper

in the Southern District of Illinois.

Lastly pursuant to FEDERAL RULE OF CRIMINAL

PROCEDURE 21, Defendants move the Court to trans-

fer the case to either the Northern District of Illinois or

the Eastern District of Pennsylvania. Rule 21(b) pro-

vides that “[flor the convenience of the parties and

witnesses, and in the interest of justice, the court upon

motion of the defendant may transfer the proceeding as

to that defendant or any of the courts thereof to

another district.” The decision to transfer a case pur-

suant to Rule 21(b) is within the sound discretion of the

trial judge. See United States v. Zylstra, 713 F.3d 1332,

1336 (7th Cir. 1983).

Here, the facts do not compel transfer to another

venue. The facts demonstrate that the Defendants, the

witnesses, the lawyers and the location of the Govern-

ments’ evidence are in different locations throughout

the country. The crimes charged were committed in

the Southern District of Illinois and the Government’s

evidence is located here. Further, the interests of

justice do not mandate transfer and Defendants failed

to provide any reason for doing so. Despite the fact

that the Court finds Defendants’ argument that trans-

fer is necessary in light of the horrific events that

occurred on September 11, 2001 compelling, the Court

rejects Defendants’ argument. One could easily infer

that persons traveling to and around the East coast are

most at risk. Traveling to or from St. Louis could, as a

consequence, be the safest destination point or origina-

tion location. The Court does not accept Defendants’

6a

rhetoric in this regard. Thus, the Court denies the

motion to transfer venue.

III. Motion to Dismiss based on Duplicity

Defendants maintain that if Sears is an unindicted co-

conspirator both Counts One and Two of the indictment

are duplicitous and must be dismissed. The Court re-

jects Defendants’ argument.

Duplicity is the “joining of two or more offenses in a

single count.” United States v. Marshall, 75 F.3d 1097,

1111 (7th Cir. 1996). The adverse effects a duplicitous

count can have on a defendant include “improper notice

of the charges against him, prejudice in the shaping of

evidentiary rulings, in sentencing, in limiting review on

appeal, in exposure to double jeopardy, and of course

the danger that a conviction will result from a less than

unanimous verdict as to each separate offense.” /d.; see

also United States v. Kimberlin, 781 F.2d 1247, 1250

(7th Cir. 1985), cert. denied, 479 U.S. 938 (1986).

Duplicity is not always fatal to an indictment, as

corrective instructions and other measures can cure

any prejudice that might exist. See, e.g., Kimberlin, 781

F.2d at 1251. Nonetheless, the court must first deter-

mine whether the counts at issue are duplicitous.

Duplicity exists if a count contains “more than one

distinct and separate offense.” United States v.

Berardi, 675 F.2d 894, 897 (7th Cir. 1982). It does not

exist if the count merely charges the “commission of a

single offense by different means.” I/d.; see also United

States v. Kramer, 711 F.2d 789, 797 (7th Cir.), cert.

denied, 464 U.S. 962 (1983). FEDERAL RULE OF

CRIMINAL PROCEDURE 7(c) specifically permits a

count to allege that the offense was committed by “one

or more specified means.” Rule 7(c) has been inter-

Ta

preted to contemplate the joining of two or more acts,

each one of which would constitute a violation of the

same offense standing alone, without offending the rule

against duplicity. Berardi, 675 F.2d at 898. While it is

often a fine line to draw, a count is not duplicitous

where it alleges multiple acts, which independent of

each other constitute separate violations of the same

statute, if the multiple acts are part of a continuing

course of conduct. IJd.; see also United States v. Bruce,

89 F.3d 886, 890 (D.C. Cir. 1996) (involving a bank fraud

scheme comprised of several transactions); United

States v. Shorter, 809 F.2d 54, 57 (D.C. Cir.), cert.

denied, 484 U.S. 817 (1987) (involving an ongoing

scheme to evade taxes).

A single act or purpose of the conspiracy is alleged

herein. Ultimately, consumers were to be deprived of

the kind of product they were led to believe they would

receive. The allegations suggest that as time went

along, person were added to the conspiracy and it was

broadened, but remained the same conspiracy. See

United States v. Varelli, 407 F.2d 735, 742 (7th Cir.

1969) (Agreement may continue for a long period of

time and include the performance of many transactions

in which new parties join the agreement at any time

. .). The Court finds that the second superseding

indictment is not duplicitous. Therefore, the Court

denies the motion to dismiss based on duplicity.

Further, Defendants argue that the Second Super-

seding Indictment should be dismissed because the

Government introduces a new and independent con-

spiracy relating to Hawkins (Doc. 79). Specifically, De-

fendants maintain that this new conspiracy has a wholly

different objective and that it commenced more than

two years after the conclusion of the earlier conspiracy.

8a

The Government responds that Defendants misstate

the law of conspiracy and the standard for determining

whether two separate conspiracies have been charged

in the same count and that the Second Superseding

Indictment charges only one continuous conspiracy.

The Court agrees with the Government.

In Grunewald v. United States, 353 U.S. 391 (1957),

the Supreme Court held that acts performed after the

accomplishment of the primary purpose of the con-

spiracy that furthered the conspiracy only by disguising

its existence generally are not considered part of the

conspiracy. Relying on its decisions in Lutwak v.

United States, 344 U.S. 604 (1953) and Krulewitch v.

United States, 336 U.S. 440 (1949), the Supreme Court

concluded that “after the central criminal purposes of a

conspiracy have been attained, a subsidiary conspiracy

to conceal may not be implied from circumstantial

evidence showing merely that the conspiracy was kept

a secret and that the conspirators took care to cover up

their crime in order to escape detection and punish-

me it.” Grunewald, 352 U.S. at 402. Further, the

Supreme Court stated that “[a]cts of covering up, even

though done in the context of a mutually understood

need for secrecy, cannot themselves constitute proof

that concealment of the crime after its commission was

part of the initial agreement among the conspirators.

For every conspiracy is by its very nature secret; a case

can hardly be supposed where men concert together for

crime and advertise their purpose to the world. And

again, every conspiracy will inevitably be followed by

actions taken to cover the conspirators’ traces.” Id. at

402. To hold that later acts of concealment are part of

the original conspiracy, the Supreme Court said, “would

result in a great widening of the scope of conspiracy

9a

prosecutions, since it would extend the life of a con-

spiracy indefinitely” and would “wipe out the statute of

limitations in conspiracy cases, as well as extend

indefinitely the time within which hearsay declarations

will bind co-conspirators.” Id.

However, Grunewald did recognize that some acts of

concealment can serve as conspiratorial acts and thus

constitute part of the original conspiracy. Grunewald

distinguished “acts of concealment done in furtherance

of the main criminal objectives of the conspiracy”

—which are considered part of the conspiracy—from

“acts of concealment done after these central objectives

have been attained, for the purpose of covering up after

the crime”—which are not considered part of the

conspiracy. Jd. at 405. The Seventh Circuit has indi-

cated that whether a particular act of concealment

constitutes part of the original conspiracy depends on

the nature of the conspiracy’s objective. In United

States v. Maloney, 71 F.3d 645 (7th Cir. 1995), the

Seventh Circuit held that where the conspiracy’s objec-

tive was never “finally attained,” acts of concealment

may be considered to be part of the conspiracy. Jd. at

659. According to the Seventh Circuit, “[a] conspiracy

ends when its main criminal objective has been accom-

plished or abandoned, 7.e., ‘when the design to commit

substantial misconduct ends.’” Jd. (quoting Midwest

Grinding Co. v. Spitz, 976 F.2d 1016, 1024 (7th Cir.

1992)). But “w]here a conspiracy contemplates a con-

tinuity of purpose and a continued performance of acts,

it is presumed to exist until there has been an affirma-

tive showing that it has been terminated. .. .’” Id. at

660 (quoting United States v. Elwell, 984 F.2d 1289,

1293 (1st Cir. 1993)).

10a

Here, the conspiracy as charged did not end with the

last wire transfer. The Second Superseding Indictment

charges that the conspiracy and the continuing success

of the conspiracy depended on the ability to continu-

ously conceal the truth about the product from con-

sumers and to prevent shareholders in the marketplace

from learning the truth about the quality of the product

being supplied by a publicly traded corporation,

EXIDE. The Second Superseding Indictment alleges

that acts of concealment began before the wire trans-

missions (i.e., falsifying internal quality assurance re-

ports) and continued as part of the wire transmissions

(i.e., falsifying corporate books and records) to conceal

the true status of the payments. The Second Super-

seding indictment also alleges that the later acts of

concealment “relate back” to the original decision to

defraud. See United States v. Mackey, 571 F.2d 376,

384 (7th Cir. 1978). As alleged, the acts of concealment

are inextricably interrelated to the functioning of the

scheme and the continued exploitation charged in the

indictment. Based on these allegations, the Court finds

that the Second Superseding Indictment alleges a

continuing conspiracy including the acts of concealment

and not three separate conspiracies. Thus, the Court

denies Defendants’ supplemental motion to dismiss

Second Superseding Indictment as containing a third

independent theory which is duplicitous.

Next, Defendants argue that superseding indict-

ments are time barred unless they properly relate back

lla

to the January 19, 2001 indictment.’ The Government

responds that the superseding indictments relate back

to the timely original indictment. The Court agrees

with the Government.

“A superseding indictment that supplants a still-

pending original indictment relates back to the original

indictment’s filing date so long as it neither materially

broadens nor substantially amends the charges initially

brought against the defendant.” United States v. Ress,

77 F.3d 1525, 1537 (7th Cir. 1996) (citations omitted).

The Court reviewed the original sealed January 19,

2001 indictment. The Court concludes that the super-

seding indictments do relate back to the original

indictment, which was only amended in the manner

represented by the Government. Thus, the charges

brought against Defendants are not time barred.

Neither of these superficial changes amounts to the

kind of broadening or amendment that would prevent

relation back to an earlier pending indictment. The

Second Superseding Indictment contains additional

language regarding the Defendants at bar, but Defen-

dants do not claim that the additional language does not

relate back. Even so, such a claim would be frivolous as

it clearly relates back and simply provides more details.

Thus, the Court denies Defendants’ motion to dismiss

the second superseding indictment as time barred.

VI. Conclusion

Accordingly, the Court DENIES Defendants’ motion

to change venue (Doc. 41-1); Defendants’ motion to dis-

miss Superseding Indictment as time barred and based

3 Defendants maintain that the statute of limitations for con-

spiracy to commit wire fraud and wire fraud are five years.

12a

on duplicity (Doc. 41-4) and Defendants’ supplemental

motion to dismiss second superseding indictment as

containing a third independent theory which is duplici-

tous (Doc. 79).

IT IS SO ORDERED.

Signed this 7th day of November, 2001.

/s/) DAVID R. HERNDON

DAVID R. HERNDON

United States District Judge