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Virginia Pushes to Rival New York for Fraud Cases

U.S. prosecutors in Virginia plan to step up pursuit of financial fraud cases, taking advantage of a court holding two years ago that their district has jurisdiction over crimes linked to federal securities filings.

The Justice Department, Virginia’s Attorney General, and the Securities and Exchange Commission will comprise a new Virginia Financial and Securities Fraud Task Force, seeking to bring more cases and benefit from the district’s fast-moving federal docket.

“We have the legal authority to prosecute cases of national significance in the Eastern District of Virginia, regardless of where the fraud occurs,” Neil MacBride, the U.S. Attorney for the district, said today at a news conference in Richmond, Virginia.

The 4th U.S. Circuit Court of Appeals ruled in December 2007 that since computer servers for the SEC’s Electronic Data Gathering, Analysis and Retrieval system are located in Virginia, the state could be the jurisdiction for prosecuting a crime involving SEC reports regardless of where the accused company or individuals are based.

The Southern District of New York in Manhattan, with a courthouse blocks from Wall Street, historically has been the primary jurisdiction for securities fraud cases. Prosecutions in Virginia could encroach on cases brought in New York, where the New York Stock Exchange is based, and on Washington, home of the SEC.

‘Stepping on Each Other’

“We do coordinate to ensure districts are not stepping on each other,” MacBride said. While New York has been a leader on these prosecutions, “we’re working to increase the number of cases that we can charge in this district,” he said.

MacBride said there are “a number of cases in the pipeline.” He declined to provide further details.

The task force also will include representatives from the U.S. Commodity Futures Trading Commission, Virginia State Corporate Commission, Federal Bureau of Investigation, U.S. Postal Inspection Service and the Internal Revenue Service.

The task force sets the stage for trials in a district chosen for high-profile terrorism cases, such as that of Zacarias Moussaoui, convicted for his role in the Sept. 11 terrorist attacks, and John Walker Lindh, who pleaded guilty to helping Taliban fighters in Afghanistan.

Jury Pool

“You have a jury pool in Virginia that can be more conservative, more pro-government, more law and order than the average jury in the District of Columbia,” said Barry Pollack, a criminal lawyer at Miller & Chevalier in Washington. “It was a factor in terrorism and also a factor with their ability to do higher-profile white-collar criminal cases there.”

The courts in the Eastern District of Virginia are known for their “rocket docket” because of the speed at which they handle cases. A trial can start within months of its initial filing, while other jurisdictions can have delays of as long as two years.

“They’re used to having them tried on an expedited schedule,” said Edward B. MacMahon Jr., a defense attorney who represented Moussaoui as well as handled while collar criminal trials. “It’s favorable for the prosecutions.”

Prosecutors wanting to quickly “make a splash and make headlines” benefit from the quick trial dates and more conservative juries, said Pollack.

‘Ways of Wall Street’

Still, New York juries may be more experienced and have a better understanding of the issues, McMahon said.

“The only risk is that in some of the more sophisticated white-collar Wall Street cases that they may be more knowledgeable about that -- the ways of Wall Street,” he said.

The Richmond-based appeals court established the district’s jurisdiction in rejecting a challenge by Charles Johnson, founder and chief executive officer of Las Vegas-based Inc., who claimed he couldn’t have foreseen prosecution in Virginia and no links to the area. He was eventually found guilty of securities fraud and other crimes in connection with accounting irregularities at the now-defunct software company.

Defense attorneys will still try to get cases transferred out of the district, though they will likely be unsuccessful if prosecutors are able to show any crime took place in the jurisdiction, Pollack said. The government has wide latitude in deciding where to prosecute offenders.

“You have to demonstrate it is a compelling reason to get it tried elsewhere,” Pollack said. “You have to demonstrate the government has overreached in bringing the case there.”

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