United States v. Edwin David Wood, II

364 F.3d 704, 2004 U.S. App. LEXIS 7458, 2004 WL 828097
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 19, 2004
Docket01-2548
StatusPublished
Cited by54 cases

This text of 364 F.3d 704 (United States v. Edwin David Wood, II) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Edwin David Wood, II, 364 F.3d 704, 2004 U.S. App. LEXIS 7458, 2004 WL 828097 (6th Cir. 2004).

Opinions

GILMAN, J., delivered the opinion of the court, in which DAUGHTREY, J., joined. GWIN, D.J. (pp. 717-27), delivered a separate opinion concurring in part and dissenting in part.

GILMAN, Circuit Judge.

In August 1999, Edwin David Wood, II was indicted on 22 counts of wire fraud, mail fraud, and money laundering. These charges arose out of two loan transactions that Wood arranged in 1994. Wood pleaded not guilty. After a jury found Wood guilty on 21 of the 22 counts, the district court sentenced him to 168 months of imprisonment and ordered him to pay approximately $570,000 in restitution. Wood appeals, arguing that (1) certain jury instructions were erroneous, (2) venue in the Western District of Michigan was improper with regard to five of the seven mail fraud charges, (3) the district court’s restitution order was excessive, and (4) the government failed to produce sufficient evidence concerning one of the loan transactions to support his conviction. For the reasons set forth below, we AFFIRM Wood’s conviction and sentence on all counts other than the mail fraud charges in Counts 17-21, REVERSE Wood’s conviction on these latter counts for lack of proper venue, and, accordingly, REMAND for resentencing.

I. BACKGROUND

The charges against Wood arise out of two loan agreements executed by him in 1994. Wood orchestrated these transactions from the Metropolitan Correctional Center (MCC) in Chicago, a federal prison, between June 15 and October 6 of 1994. While at the MCC, Wood worked through First Financial Acceptance Company, Inc., which had offices in Battle Creek, Michigan. First Financial personnel did not [707]*707disclose to the potential borrowers that Wood was in prison as a convicted felon.

To attract customers, First Financial advertised in publications such as the New York Times, the Wall Street Journal, and Investors Business Daily, offering to lend up to 90% of the value of any eligible stock that the prospective borrower owned. These ads generated a large number of telephone inquiries. Wood kept track of these inquiries by calling First Financial from prison and then having First Financial personnel connect him to the prospective borrower through call forwarding. Interested callers were sent a package of documents compiled by Wood. These documents included a Security and Pledge Agreement, which provided in pertinent part as follows:

Lender [First Financial] shall hold the pledged shares as security for the repayment of the loan and shall not encumber the shares except in accordance with the provisions of this Agreement. ... In the event that Pledgor defaults in the performance of any of the terms of this Agreement, ... Lender may, upon five (5) days advance written notice to Pledgor, sent by certified mail, and without liability for any diminution in price which may have occurred, sell all of the pledged shares in such manner and for such price as Lender may determine, at any bona fide public sale, and Lender shall be free to purchase all or any part of the pledged shares at such sale.

First Financial utilized a technique called “selling short against the box” to fund the loans. (For a detailed description of short-against-the-box transactions, see Edward D. Kleinbard, Risky and Riskless Positions in Securities, Taxes, December 1993, at 788). Neither in the Agreement nor in any other communication with prospective borrowers did First Financial disclose the use of short-against-the-box transactions to fund the requested loans.

The first loan transaction at issue was with Robert Graham. Graham wanted to retire a debt with the $230,000 that he intended to borrow from First Financial. He pledged 70,000 shares of Sonic Environmental Systems stock as collateral. Graham received a loan commitment from First Financial for the $230,000 in June of 1994, but he did not receive any of the loan proceeds until November of that year. At that time, Graham received approximately $31,000. First Financial made no other disbursements on its $230,000 commitment.

Meanwhile, on September 13 and 14 of 1994, a broker acting on Wood’s instructions sold short 35,000 shares of Graham’s Sonic Environmental Systems stock for $173,191. The sale of Graham’s stock was supposed to be a short-against-the-box sale, but because the broker was unable to borrow 35,000 shares of Sonic Environmental Systems stock in the open market, a short-against-the-box transaction could not be executed. Instead, the short position was closed by selling the 35,000 shares on the open market in October of 1994.

Graham was not told that half of his collateral had been sold when he attempted to get his stock back in late 1994. First Financial returned the remaining 35,000 shares of Graham’s collateral to him in January of 1995. Graham later sold the stock and paid the approximately $31,000 balance due on his loan. He never received the rest of his collateral back.

The second transaction at issue in this case arises from a loan First Financial made to Gordon Miller and his mother, Ruth Miller. Ruth Miller pledged 8,167 shares of her Comerica Bank stock as collateral for the loan, and Gordon Miller received approximately $200,000 in loan proceeds in September of 1994. First Fi[708]*708nancial sold Ruth Miller’s 8,167 shares of stock short against the box two days after closing on the Millers’ loan. It received approximately $227,000 from the sale. The government presented evidence at trial that, at Wood’s direction, First Financial closed its short position in Comerica by delivering Ruth Miller’s stock in December of 1994 to the broker who provided the shares sold short. Although the stock was thus disposed of by First Financial within three months of closing the loan transaction, Gordon Miller continued to make loan payments through June of 1996. Ruth Miller never recovered her collateral from First Financial.

In August of 1999, a federal grand jury returned a 22 count indictment that charged Wood with 7 counts of wire fraud in violation of 18 U.S.C. § 1343, 7 counts of mail fraud in violation of 18 U.S.C. § 1341, 3 counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i), 2 counts of money laundering in violation of 18 U.S.C. § 1956(a)(l)(B)(i), and 3 counts of engaging in monetary transactions with proceeds of a specified unlawful activity in violation of 18 U.S.C. § 1957. Arguing that the district court lacked venue to try certain mail fraud charges, Wood sought dismissal of most of the mail fraud counts before trial, at the close of the government’s case, and at the close of all of the evidence. The district court denied all of these motions. Wood also moved for acquittal under Rule 29 of the Federal Rules of Criminal Procedure at the end of the government’s case and at the close of all the evidence. The district court denied these motions as well.

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Bluebook (online)
364 F.3d 704, 2004 U.S. App. LEXIS 7458, 2004 WL 828097, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-edwin-david-wood-ii-ca6-2004.