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United States v. Birks

September 2, 2008

UNITED STATES OF AMERICA
v.
FREDERICK J. BIRKS, CORNELIA ELDRIDGE, AND ROBERT BEURET DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

OPINION

I. INTRODUCTION

This matter came before the Court on the motion of Defendant Robert Beuret to dismiss the Second Superseding Indictment for lack of venue, pursuant to Federal Rules of Criminal Procedure 12 and 18. Co-defendants Cornelia Eldridge and Frederick J. Birks joined in the motion.

The Second Superseding Indictment (the "Indictment" or the "Second Superseding Indictment") alleges, in general, that Defendants Frederick J. Birks, Cornelia Eldridge and Robert Beuret conspired to commit securities fraud in connection with the purchase and sales of eContent stock, in violation of 18 U.S.C. § 371. The alleged object of the conspiracy was to issue free-trading eContent stock to an individual denominated as CW-1 in order to compensate him and others working with him for their illegal stock promotion activities in the public market for eContent stock. The Second Superseding Indictment, as presently pled, alleges that this transfer of free-trading eContent stock to CW-1 occurred on June 3, 2002.

During the briefing on the venue motion, which the Government opposes, it came to light that there is a material error in the Indictment as to the date of the accomplishment of the object of the conspiracy. Specifically, the Indictment charged that the transfer of eContent stock to CW-1 occurred on or about June 3, 2002, but the Government seeks to prove that actually occurred on or about June 26, 2002, which would thereby become the corrected date for the achievement of the object of the conspiracy. The Government does not seek to alter the alleged object of the conspiracy but it concedes that a change of date for accomplishing this object would alter the whole analysis of whether the Court has venue. That date change alters the venue analysis because the only overt acts alleged in the Second Superseding Indictment to have occurred in New Jersey occurred after the accomplishment of the conspiracy on June 3, 2002, as presently alleged, but before (and presumably in furtherance of) the proposed corrected date of June 26, 2002 for accomplishment of the object of the conspiracy.

The Court heard oral argument on May 1, 2008. At that time Defendant Frederick J. Birks joined in the motion to dismiss the Second Superseding Indictment, but indicated that if the case were to go forward he would prefer to be tried in the District of New Jersey.

Although this motion was filed as a motion to dismiss for lack of venue, because the Government now concedes that the Second Superseding Indictment contains an error and because it intends to prove at trial facts that differ from those alleged in the indictment, the more important and threshold issue for the Court to determine is whether Defendant may be tried on the erroneous Indictment. That is, the Court must decide whether that change at trial would constitute an impermissible constructive amendment of the Second Superseding Indictment.

Because the Court finds that the date on which CW-1 was allegedly compensated for illegal stock promotion activities is material to the charges against Defendants, the Court is unable to determine the question of venue upon the present record, and shall temporarily stay this case for the purpose of enabling the United States to seek clarification from the grand jury in the form of a Third Superseding Indictment.

The Court will not opine on whether it would have venue over the charges as they might be alleged in the future, given that no new indictment has yet been issued. Such an opinion would be advisory and speculative. If there is a Third Superseding Indictment filed in this case and if Defendants raise a venue challenge to that indictment, the Court can adjudicate any venue challenge at that time.

II. SUMMARY OF THE SECOND SUPERSEDING INDICTMENT

Defendants Robert Beuret, Cornelia Eldridge and Frederick J. Birks are charged with one count of violating 18 U.S.C. § 371 by conspiring (1) to "employ manipulative and deceptive devices and contrivances in connection with the purchase and sale of securities . . . contrary to [15 U.S.C. §§ 78j(b), 78ff(a) and 17 C.F.R. § 240.10b-5]"; and (2) "to . . . make untrue statements of material fact, and to omit to state material facts" "in a registration filed under the Securities Act, namely a Form S-8 registration statement authorizing the issuance of 1.1 million free-trading shares of eContent stock to CW-1," contrary to 15 U.S.C. § 77x. (Indictm't ¶ 2.)

The Second Superseding Indictment alleges the object of the conspiracy as follows:

It was an object of the conspiracy for defendants FREDERICK J. BIRKS, CORNELIA ELDRIDGE, and ROBERT BEURET, [and other co-conspirators] to issue free-trading eContent stock to CW-1, pursuant to a materially false and fictitious Form S-8 registration statement, in order to compensate CW-1 and others who worked with him, including Defendant FREDERICK J. BIRKS [and unindicted co-conspirators], for illegal stock promotion activities regarding eContent's publicly traded stock.

(Indictm't ¶ 3.)

In paragraph 15, the indictment alleges that Cornelia Eldridge and others caused the shares to be transferred to an ...


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