United States District Court, D. Maryland, Northern Division
For Richard Shusterman, Defendant: Kathleen Balthrop Havener, LEAD ATTORNEY, The Havener Law Firm LLC, Chagrin Falls, OH; David Benowitz, Price Benowitz LLP, Washington, DC.
For Jonathan E. Rosenberg, Defendant: Elizabeth Genevieve Oyer, Lucius Turner Outlaw III, LEAD ATTORNEYS, Office of the Federal Public Defender, Baltimore, MD; Emily Lange Levenson, Kevin D. Docherty, Brown, Goldstein & Levy LLP, Baltimore, MD.
For USA, Plaintiff: Martin Joseph Clarke, LEAD ATTORNEY, Joyce K McDonald, Leo Joseph Wise, Rod J Rosenstein, Office of the United States Attorney, Baltimore, MD.
William D. Quarles, Jr., United States District Judge.
Richard Shusterman and Jonathan E. Rosenberg (the " Defendants") are charged with wire fraud and conspiracy to commit wire fraud. Pending is the Defendants' motion to dismiss for lack of venue, or, in the alternative, for transfer to the District of New Jersey or the Southern District of Florida. ECF Nos. 68, 71. No hearing is necessary. Local Rule 105.6 (D. Md. July 2014). For the following reasons, the motion will be denied.
I . Background
1. Overview of the Alleged Fraudulent Scheme
Shusterman was shareholder and president of International Portfolio, Inc. (" IPI"), a Delaware Corporation. ECF No. 1 ¶ 1. In 2009, Robert M. Feldman became part owner of IPI. Id. ¶ 3. Shusterman and Feldman " represented IPI to be a company with expertise and experience in the field of medical accounts receivable." Id. ¶ 4. Rosenberg and Douglas A. Kuber were members and operators of Account Receivable Services, LLC, (ARS"), a Nevada limited liability company with its principal place of business in New York. Id. ¶ 5. ARS was involved in " the business of investing in medical accounts receivable purchased from IPI using funds borrowed from investors interested in asset-based lending." Id. Rosenberg was managing member and president of JER Receivables, LLC (" JER") and International Portfolio Access, LLC (" IPA"); both New Jersey limited liability companies were located in New Jersey. Id. ¶ 6.
IPI purchased medical accounts receivable from two Florida hospitals and one Washington State hospital. Id. ¶ 13-15. The accounts receivable were composed of past due accounts the hospitals had been unable to collect, and included patient identifying information and their payment histories. Id.
In June 2007, Shusterman, Rosenberg, Feldman, and Kuber (collectively, the " co-conspirators") began promoting an investment model involving " the sale and management of investment portfolios containing medical accounts receivable acquired and managed by IPI." Id. ¶ 16. Investors included (1) Platinum Partners (" Platinum"), a New York-based investment advisor; (2) Roundstone Healthcare Investments, LLC, and Roundstone Healthcare Partners I, LP (together, " Roundstone"), which operated out of Massachusetts; (3) Greenfish Fund, LP, Greenfish II, LP, and associated entities, Delaware limited liability partnerships located in Pennsylvania; (4) Eton Park Capital Management, LP, a New York-based hedge fund; and (5) the Institute of Tropical Agriculture (" IITA"), a Nigerian nonprofit organization. Id. ¶ ¶ 8-12. IITA was governed by a Board of Trustees, and had its principal place of business in Ibadan, Nigeria. Id. ¶ 11. However, one of the Board's members, " D.L., " resided in West River, Maryland. Id. ¶ 11(a). D.L. " reviewed short term investment opportunities for IITA's operating capital" and " directed his own personal investments, " which included " investments in IPI debt portfolios." Id.
The co-conspirators implemented the investment model by batching accounts receivable from IPI's inventory into discrete debt portfolios with specified outstanding balances, which they offered for sale to investors. Id. ¶ 17. Shusterman, Rosenberg, and Kuber " inflated the purchase prices for IPI debt portfolios that ARS purchased with loan proceeds" from investors. Id. ¶ 22. They negotiated and agreed upon (1) the actual purchase price IPI charged for each debt portfolio financed by investors for ARS, and (2) the inflated purchase price communicated to the investors. Id. ¶ 23. IPI " kickedback" the difference between the actual and inflated prices to Rosenberg and Kuber through one of their companies, such as Portfolio Scope. Id. ¶ ¶ 25, 28.
When IPI debt portfolios were unable to generate sufficient collections to fund interest payments ARS owed Platinum, IITA, and other investors, IPI wired money to ARS to conceal the shortfall. Id. ¶ 31. IPI advances were also used to inflate collection history. Id. ¶ ¶ 32, 33. The co-conspirators generated " false and misleading collection reports" for investors and potential investors to " create the false impression that collections from IPI debt portfolios were much higher than they actually were." Id. ¶ 36.
2. Specific Acts Relevant to the Venue Inquiry The overt acts alleged in furtherance of the conspiracy include: (1) a September 16, 2008 email from Kuber to D.L. containing false collection reports for an IPI debt portfolio, id. OA ¶ 45; (2) that on September 23, 2008, Rosenberg caused the emailing of a purchase agreement to D.L. about the purchase of a $200, 000 IPI debt portfolio through JER, id. OA ¶ 46; (3) that on October 22, 2008, Rosenberg caused the emailing of a signed purchase agreement from D.L. about the purchase of a $600, 000 IPI debt portfolio through JER, id. OA ¶ 51;  (4) a February 27, 2009 wire transfer by Shusterman and Feldman, wherein they transmitted an advance of over $2 million to a bank account for an IPI debt portfolio bought by ARS with IITA financing, id. OA ¶ 57; and (5) a March 10, 2009 email from Kuber to an IITA representative stating that a new IPI debt portfolio had been bought with " funds generated from the collections on the existing debt portfolios"; in fact, the new debt portfolio was bought with funds advanced by IPI, id. OA ¶ 58.
In connection with the substantive wire fraud charges, the government further alleges that: (1) on September 14, 2008, D.L. emailed S.S., an IITA representative in Nigeria about " IITA's due diligence before investing in medical accounts receivable via ARS, " id. at 35;  (2) on September 16, 2008, D.L. emailed S.S. a summary of a meeting held about " IITA's proposed $10 million asset-based investment in medical accounts receivable via ARS"; S.S. emailed D.L. about the IITA's Board of Trustee's consideration of that investment; and D.L. emailed Kuber " requesting a letter of recommendation from Platinum vouching for its experience with investments in medical accounts receivable via ARS, " id.; (3) on September 17, 2008, Kuber emailed D.L. an " executive summary of proposed investment[s] in medical accounts receivable, " id. at 36; (4) on September 18, 2008, D.L. emailed S.S. a summary of IITA's proposed investment, id.; (5) on May 14, 2009, D.L. emailed S.S. " the terms of IITA's proposed $5 million investment in an IPI debt portfolio via a loan to IPA, " id.; (6) on May 22, 2009, D.L. emailed S.S. the closing document for the $5 million loan to IPA, id.; and (7) on May 27, 2009, D.L. emailed S.S. a confirmation of " IPA's receipt of a $5 million wire transfer from IITA's bank account, " id.
B. Procedural History
On September 4, 2013, the Defendants were indicted on one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349,  and eight counts of wire fraud in violation of 18 U.S.C. § 1343. ECF No. 1. On October 4, 2013, the Defendants were arraigned and pled not guilty. ECF Nos. 16, 17.
On September 23, 2014, Rosenberg moved to dismiss the indictment for lack of venue. ECF No. 68. On October 28, 2014, Shusterman moved to join and to adopt, in part, Rosenberg's motion, and to provide additional support. ECF No. 71. On October 31, 2014, the government opposed Rosenberg's motion. ECF No. 72. On November 7, 2014, Rosenberg replied. ECF No. 73.
A. Motion to Dismiss for Lack of Venue
The Defendants contend that count one (conspiracy to commit wire fraud) should be dismissed because the Indictment does not allege overt acts in the District of Maryland. ECF No. 68 at 4. The Defendants also contend that counts two through ten (wire fraud) should be dismissed because wire communications sent or received from the District of Maryland were not foreseeable. Id. at 5-7. The government contends that the Indictment alleges overt acts in the District, and that foreseeability is not a requirement for venue. ECF No. 72 at 5-9.
Under Fed. R. Crim. P. 12(b)(3)(B), " a motion alleging a defect in the indictment" must be made before trial. Alleged defects include improper venue. Unless otherwise authorized by law, " the government must prosecute an offense in a district where the offense was committed." Fed. R. Crim. P. 18. An offense " begun in one district and completed in another, or committed in more than one district, " may be tried " in any district in which such offense was begun, continued, or completed." 18 U.S.C. § 3237(a) (2012).
When Congress does not include a specific venue provision in a criminal statute, venue must be " determined from the nature of the crime alleged and the location of the act or acts constituting it." United States v. Cabrales, 524 U.S. 1, 6-7, 118 S.Ct. 1772, 141 L.Ed.2d 1 (1998) ( quoting United States v. Anderson, 328 U.S. 699, 703, 66 S.Ct. 1213, 90 L.Ed. 1529 (1946)). This inquiry focuses on " the 'essential conduct elements' of the charged offense." United States v. Ebersole, 411 F.3d 517, 524 (4th Cir. 2005)( quoting United States v. Bowens, 224 F.3d 302, 311 (4th Cir. 2000)). The government bears the burden of proving by a preponderance of ...