 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued November 16, 2010              Decided June 28, 2011

                       No. 09-5399

         SECURITIES AND EXCHANGE COMMISSION,
                       APPELLEE

                             v.

                  CHARLES JOHNSON, JR.,
                       APPELLEE

                      CHRIS BENYO,
                       APPELLANT

                MICHAEL KENNEDY, ET AL.,
                      APPELLEES


        Appeal from the United States District Court
                for the District of Columbia
                    (No. 1:05-cv-00036)



    Terrance G. Reed argued the cause for appellant. With
him on the briefs was Vernon T. Lankford.

    Luis de la Torre, Senior Litigation Counsel, Securities
and Exchange Commission, argued the cause for appellee
Securities and Exchange Commission. With him on the brief
were David M. Becker, General Counsel, Jacob H. Stillman,
                                 2
Solicitor, and Rada Lynn Potts, Attorney. John D. Worland
Jr., Counsel, entered an appearance.

   Before: SENTELLE, Chief              Judge,    GINSBURG      and
KAVANAUGH, Circuit Judges.

    Opinion for the Court filed by Circuit Judge GINSBURG.

     GINSBURG, Circuit Judge: In this civil enforcement
action, a jury found Christopher Benyo aided and abetted a
securities fraud by his former employer PurchasePro.com,
Inc., in violation of 15 U.S.C. § 78t(e). The district court
fined Benyo $35,000 and barred him from serving as an
officer or director of a publicly held company for five years.
On appeal, Benyo argues the district court erred in allowing
his trial to proceed in the District of Columbia pursuant to the
“co-conspirator theory of venue.” We reverse the judgment
of the district court on the basis of improper venue and do not
reach Benyo’s claims relating to the merits of the case against
him.
                         I. Background *

    From 2000 to 2001, Benyo served as Senior Vice
President for Marketing and Network Development for
PurchasePro, which made software for online “business-to-
business” sales. PurchasePro sold licenses that granted the
holders access to its online “marketplace” where they could


*
 We take the facts in Part I from the evidence at trial, the findings
of the district court, see SEC v. Johnson, 565 F.Supp.2d 82 (D.D.C.
2008); SEC v. Johnson, 530 F.Supp.2d 315 (D.D.C. 2008); see also
SEC v. Johnson, 595 F.Supp.2d 40 (D.D.C. 2009); and the
undisputed findings of the district court for the Eastern District of
Virginia in a related criminal case, see United States v. Johnson,
553 F.Supp.2d 582 (2008).
                              3
buy and sell goods and build a company-specific site using
PurchasePro’s technology.

     Early in 2000, America Online, Inc. (AOL) engaged
PurchasePro to help it build NetBusiness, an online sales
platform for small businesses, and in March of that year,
PurchasePro agreed to pay AOL for advertising and for
referring new customers to PurchasePro. The companies
entered into additional agreements later that year that made
AOL a sales agent for PurchasePro. By the end of 2000,
PurchasePro’s business depended heavily upon the payments
and referrals it received from AOL.

    In September 2000, PurchasePro began to document
sham transactions in order to inflate its reported revenue.
Certain customers referred by AOL agreed to buy licenses to
PurchasePro’s software in exchange for a side agreement for
AOL or PurchasePro to subsidize the purchase. Because
PurchasePro would disclose the sale but not the side
agreement, each transaction appeared on paper to generate a
substantial amount of revenue for PurchasePro.

      PurchasePro also backdated or entirely falsified new
agreements with AOL. The company later attributed $3.65
million in revenue to one of those contracts — an agreement
to integrate an auction platform into AOL’s NetBusiness,
styled as a subcontract under a pre-existing agreement
between AOL and a third company, AuctioNet, Inc. In the
first quarter of 2001, two-thirds of PurchasePro’s announced
revenues of $29.8 million in some way came from the
company’s dealings with AOL, whether through the sham
referrals or the new fraudulent contracts.

    PurchasePro’s auditors and attorneys learned the
AuctioNet deal was phony on May 14, 2001, when AOL sent
PurchasePro’s chief accounting officer a letter stating it had
                              4
no documentation of the deal. Until then the company’s
auditors and attorneys had relied upon a “Statement of Work”
dated February 5, 2001 and apparently executed by AOL and
PurchasePro, but which they had suspected was a forgery.
After AOL confirmed that suspicion, PurchasePro excluded
from its report to the SEC the revenue associated with the
AuctioNet deal and the other fraudulent agreements it had
discovered. On the Form 10-Q it filed on May 29, 2001,
PurchasePro reported only $16 million of the nearly $30
million in revenue it had publicly announced the month
before. PurchasePro declared bankruptcy in 2002.

     In January 2005, the Government filed in the Eastern
District of Virginia a 31-count indictment against Benyo,
three other PurchasePro employees, and two executives of
AOL. By that time, six former executives of PurchasePro had
agreed to plead guilty to charges relating to the fraud and
cover-up and, as part of a deferred-prosecution agreement,
AOL had admitted having aided and abetted a securities
fraud. See Dep’t of Justice, America Online Charged with
Aiding       and       Abetting      Securities      Fraud,
http://www.justice.gov/opa/pr/2004/December/04_crm_790.h
tm (Dec. 15, 2004).

     On the same day, the SEC filed this civil enforcement
action against the same defendants in the District of
Columbia. The SEC alleged Benyo had “worked on drafting
or caused others to draft” the Statement of Work for the
phony AuctioNet deal. The complaint further alleged that, in
order “to create the false appearance ... the [integration]
services described in the Statement of Work had actually been
performed” during the first quarter of 2001, Benyo had
devised a plan to place on the NetBusiness site a hyperlink to
AuctioNet.com. From the alleged facts, the SEC inferred
Benyo “knew or was reckless in not knowing” PurchasePro
                                5
intended to recognize and report revenue associated with the
fraudulent Statement of Work; therefore he had aided and
abetted the company’s fraud, in violation of 15 U.S.C. §
78t(e); * aided and abetted the company’s failure to maintain
internal accounting controls, in violation of § 78m(b)(5);
falsified books and records, also in violation of § 78m(b)(5)
and of 17 C.F.R. § 240.13b2-1 (Rule 13b2-1); and misled an
accountant or auditor, in violation of 17 C.F.R. § 240.13b2-2
(Rule 13b2-2).

     The SEC’s civil case against Benyo went to trial only
after the jury in Virginia had acquitted Benyo of all criminal
charges. The civil jury here then found Benyo liable on the
one count of aiding and abetting PurchasePro’s securities
fraud and absolved him of the other charges. The district
court fined Benyo $35,000 and barred him from serving as an
officer or director of a publicly traded company for five years,
as authorized by § 78u(d).

     In his answer to the SEC’s complaint, Benyo had argued
venue was improper in the District of Columbia. He renewed
that objection in a motion for summary judgment, and again
after trial in a motion for judgment as a matter of law. In each
filing, Benyo argued the allegations showed he had acted only
in Nevada, and, more important, no “act or transaction
constituting the violation[s]” with which he was charged had
occurred in the District of Columbia, as required for venue
under § 78aa. The SEC countered that the District was a
permissible forum under the “co-conspirator venue theory”
because Benyo had been “in league with a defendant who ...




*
  Statutory references hereinafter refer to Title 15 of the United
States Code unless otherwise noted.
                                 6
act[ed] within the [D]istrict.” Johnson, 565 F. Supp. 2d at
92. *

     The district court adopted the Commission’s “co-
conspirator theory of venue,” which it said courts “routinely
apply” when a complaint alleges a securities fraud “involving
multiple defendants acting in multiple districts.” Id. at 92.
Here, the defendant had allegedly “aided and abetted a
scheme, a material part of which occurred in the District of
Columbia,” to wit, PurchasePro’s filing a misleading Form
10-K for 2000 and Form 10-Q for the first quarter of 2001.
Id. at 93; see SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1154
& n.12 (D.C. Cir. 1978) (filings with SEC occur as a matter of
law in the District of Columbia). The district court rejected,
however, the SEC’s assertion the scheme had also reached the
District of Columbia by way of a press release PurchasePro
had sent out nationwide and a nationally broadcast conference
call with securities analysts in which PurchasePro had made
misleading or incorrect statements about the company’s
revenue. Johnson, 565 F. Supp. 2d at 91, n.11.

                           II. Analysis

    The parties’ dispute over the proper interpretation of §
78aa, the special venue section of the Securities Exchange Act
of 1934, clearly raises a question of law. Therefore we
address it de novo. See 5B CHARLES ALAN WRIGHT, ARTHUR
R. MILLER, MARY K. KANE, & RICHARD L. MARCUS,
FEDERAL PRACTICE & PROCEDURE § 1352 (3d ed.); see also
Armstrong v. Geithner, 608 F.3d 854, 857 (D.C. Cir. 2010).



*
  The SEC also argued the District was a permissible forum under
the doctrine of pendent venue, but the district court did not address
that argument and the SEC does not renew it on appeal.
                               7
     Venue for a civil action under the securities laws lies “in
the district wherein the defendant is found or is an inhabitant
or transacts business,” or “in the district wherein any act or
transaction constituting the violation occurred.” § 78aa. By
the reference to “any act,” the statute permits a plaintiff to
bring suit in any district where any person has committed any
act that “constitute[s]” the offense with which the defendant is
charged.

     The co-conspirator theory of venue is but a gloss upon
and an extension of § 78aa. The question presented in this
case is whether that extension is consistent with the terms of §
78aa. Benyo contends it is not, relying in particular upon
Central Bank of Denver v. First Interstate Bank of Denver,
511 U.S. 164 (1994), in which the Supreme Court held there
was no private right of action for aiding and abetting
securities fraud and strongly implied there could be no cause
of action for any form of “secondary liability” for fraud that
does not require proof of each of the elements of the primary
violation, see id. at 180, 184. After Central Bank of Denver
was decided, the Congress enacted § 78t(e) to give the SEC
express authority to pursue a person who has aided and
abetted a securities fraud. See Private Securities Litigation
Reform Act of 1995, § 104, Pub. L. 104-67, 109 Stat. 737,
757 (1995); Stoneridge Investment Partners, LLC v.
Scientific-Atlanta, Inc., 552 U.S. 148, 158 (2008). Because §
78t(e) did not similarly authorize the SEC to sue for
conspiracy to commit securities fraud, Benyo reasons, an
allegation of conspiracy is not by itself — that is, without
proof of his actual participation in a fraud — a sufficient basis
for liability under Central Bank of Denver and therefore
cannot be a sufficient basis for venue.

    The SEC responds, “[f]irst, conspiracy liability is
available to the Commission” because Central Bank of
                               8
Denver concerned an implied private right of action and
therefore “did not apply to” the SEC, and, second and “[m]ore
fundamentally,” the scope of venue does not turn upon the
scope of liability. Indeed, we are told, the co-conspirator
theory of venue “is often used” by the SEC, “serves important
purposes,” and has been adopted by “at least” three other
circuits. All the circuit court decisions in question, however,
pre-date Central Bank of Denver, see SIPC v. Vigman, 764
F.2d 1309, 1317 (9th Cir. 1985); Hilgeman v. Nat’l Ins. Co. of
Am., 547 F.2d 298, 302 & n.12 (5th Cir. 1977); Wyndham
Assocs. v. Bintliff, 398 F.2d 614, 620 (2d Cir. 1968), and
hence the SEC’s reliance upon them begs the question
whether Central Bank of Denver precludes the co-conspiracy
theory of venue.

     We believe § 78aa by its terms forecloses use of the co-
conspirator theory of venue; a suit simply may not be brought
in a forum where there is no statutory basis for venue. We
cannot countenance any so-called theory that “add[s] a gloss
to the operative language of the statute quite different from its
commonly accepted meaning.” Ernst & Ernst v. Hochfelder,
425 U.S. 185, 199 (1976).

     Benyo’s case is paradigmatic: The SEC did not identify
in the complaint or in its evidence at trial “any act or
transaction” of Benyo’s occurring in the District of Columbia
and “constituting the violation” of § 78t(e), §78m(b)(5), Rule
13b2-1, or Rule 13b2-2 with which he was charged. Instead it
argues the filing of a Form 10-Q with the SEC was an act in
the District constituting “a securities fraud violation” by
PurchasePro. That is not the violation attributed to Benyo,
however, as § 78aa requires; the revenue item he allegedly
falsified was not included in the Form 10-Q. If the only act
allegedly done in this district is not linked to Benyo in any of
the ways listed in § 78aa, then no “theory” can supply the
                                9
deficiency. In other words, at least one statutory basis for
venue, no matter how broadly or narrowly that particular
requirement might be construed, must have occurred in the
chosen forum.

     We note the Supreme Court has rejected the co-
conspirator theory as a basis for venue in a suit under the
antitrust laws, which permit a plaintiff to sue only in a district
wherein the defendant “resides or is found or has an agent.”
15 U.S.C. § 15. In Bankers Life & Casualty Co. v. Holland,
the Supreme Court condemned the theory as “a frivolous
albeit ingenious attempt to expand the statute,” 346 U.S. 379,
384 (1953) (dictum). That, as a practical matter, was the end
of the co-conspirator theory of venue in antitrust. See, e.g.
Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d
491, 494-95 (9th Cir. 1979); San Antonio Tel. Co. v. AT&T,
499 F.2d 349, 351 n.3 (5th Cir. 1974); H.L. Moore Drug
Exchange, Inc. v. Smith, Kline & French Labs., 384 F.2d 97,
98 (2d Cir. 1967); see also In re Cotton Yarn Antitrust Litig.,
505 F.3d 274, 283-84 (4th Cir. 2007) (citing Bankers Life and
noting antitrust plaintiffs have no “statutory right” to try all
antitrust co-conspirators in the same district).

     After the Bankers Life decision and their own antitrust
cases following it, the Second, Fifth, and Ninth Circuits again
approved use of the co-conspirator theory under § 78aa. The
Second and the Ninth Circuits did so based expressly upon
“[t]he strong policy favoring the litigation of related claims in
the same forum.” Vigman, 764 F.2d at 1318; Wyndham
Assocs., 398 F.2d at 617, 619 (similar); see generally Rhett
Traband, The Case Against Applying the Co-Conspiracy
Venue Theory in Private Securities Actions, 52 Rutgers L.
Rev. 227, 246-47 (1999) (“the avoidance of duplicative
litigation has been the chief policy argument invoked in favor
of the [co-conspirator] Theory”).
                               10
     The Supreme Court has repeatedly made clear “[p]olicy
considerations cannot override our interpretation of the text
and structure of the [Exchange] Act.” Central Bank of
Denver, 511 U.S. at 188. Indeed, the Court has refused to
consider policy arguments in the interpretation specifically of
§ 78aa. See, e.g., Leroy v. Great Western United Corp., 443
U.S. 173, 181-82 & n.14 (1979) (rejecting plaintiff State’s
argument for broad reading of venue under § 78aa offered to
facilitate policy of Exchange Act generally favoring
plaintiffs); Radzanower v. Touche Ross & Co., 426 U.S. 148,
156 & n.12 (1976) (holding § 78aa did not supersede
narrower venue provision in National Bank Act and rejecting
amicus SEC’s suggestion § 78aa should apply nonetheless to
facilitate consolidation of litigation as a “policy argument[] ...
more appropriately addressed to Congress”); see also Leroy,
443 U.S. at 184 (“The desirability of consolidating similar
claims in a single proceeding ... does not justify reading [28
U.S.C. § 1391] to give the plaintiff the right to select the place
of trial that best suits his convenience”); Olberding v. Illinois
Cent. R.R. Co., 346 U.S. 338, 340 (1953) (“The requirement
of venue is specific and unambiguous; it is not one of those
vague principles which, in the interest of some overriding
policy, is to be given a ‘liberal’ construction”).

    Accordingly, we hold the SEC failed to lay venue in the
District of Columbia under “the straightforward language of
[§ 78aa].” Leroy, 443 U.S. at 182 n.14.

                          III. Remedy

    There remains the question of remedy. The SEC argues
the improper venue in this case was a harmless error, not
prejudicial to Benyo, and should be overlooked, whereas
Benyo argues reversal is the appropriate remedy for improper
venue, even after a jury trial. That was the judgment of the
                              11
Supreme Court in Olberding v. Illinois Central, 346 U.S. at
340 (reversing verdict for plaintiff after jury trial in a venue
improper under 28 U.S.C. § 1391(a)), and despite the passage
of time, Olberding remains the law. See Lexecon Inc. v.
Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 41
(1998) (“reversal with new trial is required [where] venue is
precluded by the governing statute” (citing Olberding));
Leroy, 443 U.S. at 181, 184 & n.18 (citing Olberding and
reversing declaratory judgment for improper venue).

     The SEC ignores Olberding notwithstanding Benyo’s
reliance upon it. The Commission instead suggests we can
affirm the judgment on the ground the error is harmless, as it
says we did in Whittier v. Emmet, 281 F.2d 24 (D.C. Cir.
1960), where sailors’ claims for life insurance benefits owed
them by the Government had been erroneously consolidated
in this district. Although we noted there in a dictum that none
of the parties had been prejudiced by the error, id. at 30, we
actually held objections to venue must be “timely and
sufficient” and no party had made and preserved that
objection, id. at 31; see Freeman v. Bee Mach. Co., 319 U.S.
448, 453 (1943) (venue must be “seasonably asserted”).
Whittier therefore cannot carry the weight the SEC would
have us place upon it for, as we have seen, Benyo preserved
his objection to venue at every opportunity. See also Cottman
Transmission Sys., Inc. v. Martino, 36 F.3d 291, 297 (3d Cir.
1994) (describing Whittier facts as “somewhat unique” [sic]
and venue question as “really only of academic interest”).

     The judgment below is accordingly reversed and the
district court is instructed to dismiss the case without
prejudice.

                                                    So ordered.
