In the securities enforcement world, it is widely understood that the Southern District of New York is the veritable home of securities fraud litigation. Due in part to its proximity to Wall Street, the Southern District’s jurisdiction is far-reaching, leading some to joke that the “Sovereign District” (as it is affectionately known by many) will take exclusive jurisdiction over securities fraud perpetrated anywhere within the sweeping shadow of the Manhattan skyline.
Enter: Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. As Thomas Catan reported in the Wall Street Journal, this year MacBride unveiled a new Financial and Securities Fraud Task Force aimed at enhancing the Eastern District’s ability to prosecute major national securities fraud cases. MacBride’s efforts signal to the Wall Street Journal’s Ashby Jones, among others, that the Eastern District is “making a bid to give the [Southern District] a run for its money.”
But how do MacBride and the Eastern District plan to wrest securities matters from the Southern District? According to MacBride, the answer lies in the Eastern District’s “unique venue options.” On October 26th, at a program hosted by the American Bar Association White Collar Crime Committee, MacBride outlined four unique bases for jurisdiction in the Eastern District.
The media darling:
1. EDGAR. This one has received a lot of media attention. If your company makes mandatory filings to the SEC via EDGAR, it is amenable to jurisdiction in the Eastern District. Earlier this year, McGuireWoods’ own Richard Cullen and Chuck McIntyre explained that “the Eastern District is able to claim jurisdiction over almost all securities fraud and other financial fraud cases involving public companies because the reports those companies are required to file with the SEC are sent to the EDGAR computer server located in Alexandria, Va.”
Three new grounds:
2. TARP (Wire) Fraud. If your company received funds from the Troubled Asset Relief Fund, it is amenable to jurisdiction in the Eastern District. The Eastern District has jurisdiction over TARP-related fraud because TARP funds are wired from the Federal Reserve’s eastern regional clearing house, located in Richmond, Va.
3. Recovery Act Fraud. As with TARP fraud, American Recovery and Reinvestment Act of 2009 funds are wired from Virginia. If your company received stimulus funds, it is amenable to jurisdiction in the Eastern District.
4. Home Mortgage Fraud. Based in Fairfax County, Va., Freddie Mac and Fannie Mae are big players in the mortgage-backed securities market. If your company purchased from, sold to, or otherwise works with Freddie Mac and Fannie Mae in the home mortgage market, it may be amenable to jurisdiction in the Eastern District. Also, fraud related to mortgages registered with the Reston, Va. based Mortgage Electronic Registration System (“MERS”) – of “robo-signer” fame – present a separate basis for the Eastern District to take jurisdiction.
The bottom line: MacBride’s four “unique venue options” give the Eastern District claim to a vast array of securities enforcement matters that surely rivals the Southern District. If you’re used to securities fraud cases requiring frequent journeys through LaGuardia and Penn Station, you might want to check the schedule for roundtrips to Richmond International Airport or Reagan National.
Special thanks to McGuireWoods’ Toby Vick, who posted a useful blog related to the Fraud Task Force on Subject to Inquiry in May 2010.