U.S.A. v. Gee & Norris

• Citation: 226 F.3d 885
• Decision Date: 11 September 2000
• Docket Number: 99-2622,99-2623,99-3093,Nos. 99-2348,s. 99-2348
• Parties: (7th Cir. 2000) United States of America, Plaintiff-Appellee/Cross-Appellant, v. Jim Gee and William C. Norris, Defendants-Appellants/Cross-Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 885

226 F.3d 885 (7th Cir. 2000)

United States of America, Plaintiff-Appellee/Cross-Appellant, v. Jim Gee and William C. Norris, Defendants-Appellants/Cross-Appellees.

Nos. 99-2348, 99-2622, 99-2623, 99-3093

In the United States Court of Appeals For the Seventh Circuit

Argued April 3, 2000

Decided September 11, 2000

Appeals from the United States District Court for the Northern District of Indiana, South Bend Division. No. 393-CR-13RM--Robert L. Miller, Jr., Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Flaum, Chief Judge, and Bauer and Williams, Circuit Judges.

Williams, Circuit Judge.

The United States government charged William C. Norris and Jim Gee in a 32-count indictment in connection with a scheme to assist in the unauthorized reception of cable television signals.¹ Before submitting the case to the jury, the government dropped two of the counts against Norris. The jury returned guilty verdicts on all remaining counts. Defendants appeal their convictions and their sentences. The government appeals defendants' sentences. For the reasons stated below, we reverse defendants' convictions on mail fraud, wire fraud, and conspiracy. We affirm Norris's conviction for assisting unauthorized reception of cable service, but we remand for resentencing consistent with this opinion.

I

Little of the evidence at trial was in dispute. The government charged, and the defense readily admitted, that Gee and Norris were involved in the production of equipment that buyers could use to transform cable television converters into devices that could descramble all encrypted cable programming. A cable television subscriber who acquires a descrambler from a source other than the cable company can access premium programming without paying the cable company any additional fees. The evidence showed that Bryan Corrigan, a cooperating witness, developed chips and modules that could modify cable converter boxes to descramble all encrypted cable programming. Gee took Corrigan's work product and sold it to Norris and other after-market dealers. Norris sold these chips and modules, and cable boxes modified by these chips and modules, to home viewers. These devices allow the user to, among other things, descramble and view premium cable television channels without the cable provider's permission.

A jury found Norris guilty of thirteen counts of wire fraud, violating 18 U.S.C. sec. 1343; five counts of mail fraud, violating 18 U.S.C. sec. 1341; seven counts of misdemeanor assisting unauthorized reception of cable service and four counts of felony assisting unauthorized reception of cable service, violating 47 U.S.C. sec. 553(a)(1); and one count of conspiracy, violating 18 U.S.C. sec. 371. The same jury found Gee guilty of ten counts of wire fraud and one count of conspiracy.

The district court sentenced Norris to 37 months of home confinement and imposed a fine and special assessments totaling $16,325. The court sentenced Gee to 37 months of imprisonment and imposed a fine and special assessments totaling $8,050.

II

A. Material Falsehood

Norris and Gee claim that their convictions on wire and mail fraud should be reversed because the government did not properly allege or prove materiality and because the court did not properly instruct on materiality. We review de novo the sufficiency of an indictment. See United States v. Agostino, 132 F.3d 1183, 1189 (7th Cir. 1997).

In 1999, the Supreme Court ruled that a "scheme to defraud" under the wire and mail fraud statutes must include the element of a material falsehood. See Neder v. United States, 527 U.S. 1, 25 (1999). "[A] false statement is material if it has 'a natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed.'" Id. at 16 (quoting Kungys v. United States, 485 U.S. 759, 770 (1988)).

Earlier in this case, in 1997, defendants filed an unsuccessful motion to dismiss, arguing, inter alia, that the indictment failed "to allege any false or misleading statements" to customers or cable companies. In response to that motion, the government acknowledged that the indictment does not base fraud charges on any misleading statements or fraudulent omissions.² Under the law at that time, the district court correctly ruled that a material falsehood was not an essential element of the wire or mail fraud statutes.³

On appeal, the government argues that the indictment does in fact allege false and misleading statements.⁴ However, as the government acknowledged in 1997, the indictment does not allege that defendants misrepresented or concealed a material fact in aid of their scheme. All the government can point to is the language in the indictment and argue that the court should view it as a whole, rather than in a hypertechnical manner.⁵ The government acknowledges that the indictment does not use the words "material," "misrepresentation," or "concealment" but suggests that the indictment sufficiently apprized defendants of the nature of the charges and all essential elements, including materiality. The indictment merely alleges a "scheme to defraud," however, which the Neder court ruled insufficient. See id. at 20.

The government next argues that even if material falsehoods were not in the indictment, it introduced sufficient evidence of material falsehoods at trial to support the verdict. We review sufficiency of the evidence under a substantial evidence standard. See United States v. Durrive, 902 F.2d 1221, 1229 (7th Cir. 1990). We "view the evidence in the light most favorable to the government and accept circumstantial evidence as support, even sole support, for a conviction." Id. If we find insufficient evidence to support the verdict, we must reverse with instructions that the district court grant a judgment of acquittal. See United States v. Locklear, 97 F.3d 196, 199-200 (7th Cir. 1996).

The government claims that it introduced evidence that end-users misrepresented and concealed the use of the illegal descrambler units from cable operators. This evidence does not prove, however, that defendants misrepresented or concealed material facts. Furthermore, the government did not proffer any evidence that Norris or Gee ever induced any of their customers to make false or misleading statements to their customers' cable companies.

The government also points to trial testimony that demonstrated that the chips and descramblers sold by Norris and Gee were designed to allow free access to premium cable channels and to block the subscriber's descrambler unit from receiving electronic authorization instructions from the cable operator. The devices' capabilities do not, however, prove material falsehoods by Norris and Gee. The government did not proffer any evidence that defendants made any false or misleading statements. Therefore, even after viewing the evidence in the light most favorable to the government, no rational jury could have found the essential element of a material falsehood.

We find that the government not only failed to allege but also failed to prove that Norris or Gee made any false or misleading statements. Consequently, we reverse their mail and wire fraud convictions and remand with instructions that the district court grant a judgment of acquittal on these charges. Accordingly, we find it unnecessary to review whether the district court's jury instructions on material falsehoods were sufficient.

B. Conspiracy

Defendants next argue that their conspiracy convictions should be reversed on two grounds. First, they contend that the government failed to proffer substantial evidence of an agreement between Norris and Gee to violate 28 U.S.C. sec. 553(a)(1).⁶ Second, they argue that the district court's failure to include a buyer- seller instruction is reversible error.

1. Substantial Evidence

As noted above, we review sufficiency of the evidence under a substantial evidence standard. See Durrive, 902 F.2d at 1228. We also note that

a sufficiency of the evidence challenge is hard to win, given the standard of appellate review. We consider the evidence in the light most favorable to the government, and we must affirm the conviction so long as any rational factfinder could have found the essential elements of the offense to have been established beyond a reasonable doubt. We will overturn the verdict "only if the record contains no evidence, regardless of how it is weighed, from which the jury could find guilt beyond a reasonable doubt."

United States v. Menting, 166 F.3d 923, 928 (7th Cir. 1999) (internal citations omitted) (quoting United States v. Granados, 142 F.3d 1016, 1019 (7th Cir. 1998)).

The trial evidence establishes that: 1) Gee programmed chips that descrambled premium cable programming; 2) Norris regularly purchased these chips from Gee; 3) Norris installed the chips into descrambling equipment and sold the equipment or just the chips to customers and distributors; 4) Gee programmed different kinds of chips, depending on Norris's order; 5) Norris and Gee established a routine for their joint venture; 6) Norris and Gee had regular contact with each other via telephone and facsimile; 7) Gee visited Norris's shop on at least two occasions; 8) Norris and Gee collaborated by sharing instructions, warnings, and disclaimers and by having Norris train Gee's employee; and 9) after Gee found out that authorities raided Norris's shop, Gee shipped all of his cable supplies out of state. Defendants counter, however, that this circumstantial evidence suggests only that they had an arm's-length business relationship, not a conspiracy.

A conspiracy requires the government to prove (1) the existence of an agreement to commit an unlawful act; (2) that defendants knowingly and intentionally became members of the conspiracy; and (3) the commission of an overt act that was committed in furtherance of the...