U.S. v. Adamson

• Citation: 291 F.3d 606
• Decision Date: 23 May 2002
• Docket Number: No. 00-10643.,00-10643.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Richard J. ADAMSON, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

291 F.3d 606

UNITED STATES of America, Plaintiff-Appellee, v. Richard J. ADAMSON, Defendant-Appellant.

No. 00-10643.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 15, 2002.

Filed May 23, 2002.

COPYRIGHT MATERIAL OMITTED

Marcus S. Topel, Daniel F. Cook, Joseph D. Elford, Topel & Goodman, San Francisco, CA, for the defendant-appellant.

Thomas E. Flynn, Assistant U.S. Attorney, Sacramento, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of California, Garland E. Burrell, District Judge, Presiding. D.C. No. CR-99-00393-1-GEB.

Before GOODWIN and TROTT, Circuit Judges, EZRA,^* District Judge.

OPINION

GOODWIN, Circuit Judge.

Richard J. Adamson was convicted of wire fraud and money laundering in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 1956(a)(1)(A)(i). He appeals, contending, inter alia, that the district court erred by (1) restricting his cross-examination of a key government witness and (2) broadening the scope of the indictment. For the reasons that follow, we reverse.

BACKGROUND

1. The Business Plan

From 1992 through 1999, Richard Adamson and his brother John (collectively "the Adamsons") owned and operated "Hardwarehouse," a Dallas, Texas company, which sold used computer equipment, including computer servers.¹ In 1995, Hardwarehouse began purchasing used Hewlett-Packard ("HP") 3000 and 9000 series servers from Deborah Balon, the head of HP's Finance and Remarketing Division ("FRD"). Balon sold used HP servers to Hardwarehouse through a bidding process in which Hardwarehouse was the only bidder. During the course of their business relationship, the Adamsons provided Balon and her fiancé, Marc Loriau, with numerous personal gifts including cash, international vacations, and luxury items. At trial, the government offered testimony tending to show that the Adamsons were bribing Balon in order to get her to sell the used servers to Hardwarehouse. The defense, on the other hand, offered testimony tending to show that Balon was extorting the Adamsons by offering to sell Hardwarehouse used HP servers only so long as the Adamsons continued to provide her with personal gifts.

The servers that Adamson purchased from FRD could be upgraded, and thereby made more valuable, through the use of an HP software utility called "SS—Config." In order to prevent unauthorized upgrades of its servers, HP made SS—Config available only to HP custom engineers and each copy was protected with a secret password. HP had not authorized the Adamsons to make use of or have access to SS—Config. Nevertheless, Richard Adamson was able to obtain a password-disabled copy of SS—Config from Derek Eisenbeis, the owner of a company called Diablo Equipment Technology.

In November 1998, FBI agents serving a search warrant at Hardwarehouse discovered two password-disabled copies of SS—Config. Several weeks after the search, the Adamsons, accompanied by their lawyer, submitted to a tape-recorded interview with two HP investigators. During the course of the interview, Richard asserted that the brothers had legitimately used SS—Config to upgrade HP servers. Richard explained that the warehouse responsible for delivering the HP equipment to Hardwarehouse would sometimes send out "bezels" (the term "bezel" describes the back plate of a server where the series and model number of the server are embossed) with higher capabilities than the processors in the servers. According to Richard, he and his brother used SS— Config only to remedy this disparity (i.e., by upgrading the servers to match the information on the bezels). Richard also told the HP investigators that Balon and Loriau had coerced Richard and John into making payments. For the most part, John was silent during Richard's explication, although occasionally John would affirm what Richard said by stating "exactly" or something similar.

At some point after the HP interview, the brothers had a falling out. In February 1999, Richard "locked-out" John by hiring security guards to prevent John's entry into the Hardwarehouse facility. John testified at trial that the brothers had not spoken since the day of the lock-out.

Several weeks after the lock-out, John entered into a plea agreement with the government. John told the government that he and his brother had bribed Deborah Balon. He also agreed, in expectation of a reduced sentence, to help the government in its investigation and prosecution of Richard.

2. The Indictment and the Proof

On February 25, 2000, a grand jury returned a second superseding indictment charging Richard with the following: twenty-three counts of wire fraud, based on Hardwarehouse's payments to Balon and Loriau; eight counts of wire fraud, based on obtaining a proprietary HP software program, using it to upgrade HP computer equipment, and then tricking HP into transferring licenses for the upgraded equipment; and one count of money laundering.

The wire fraud charges alleged that the defendant had made a particular misrepresentation to HP in the commission of wire fraud, namely: "defendant ADAMSON and others tricked HP into transferring software licenses on these upgraded servers by falsely representing to HP that they had really not been modified or upgraded at all." (emphasis added). During a hearing on a motion for a bill of particulars, defense counsel asked whether this was the only misrepresentation alleged by the government.² The government responded that no other type of misrepresentation was at issue.

At trial, however, the government's evidence proved a misrepresentation different from that specified in the indictment and discussed at the pretrial hearing. After purchasing used HP servers from Balon, the defendant utilized a password-disabled copy of SS—Config to upgrade the servers. In order to sell these upgraded servers to Hardwarehouse customers, the defendant needed to find a way to get HP to issue user licenses that would reflect the upgrades performed by Hardwarehouse. The HP-issued licenses needed to reflect the upgrades performed by Hardwarehouse so that, when HP technicians performed maintenance on the servers, they would not notice any inconsistencies between the servers' capabilities and the servers' licenses.

To solve this potential problem, Balon drew up a form memorandum, known in HP parlance as a "license transfer request" ["LTR"], for transferring ownership rights in the upgraded servers to Hardwarehouse. Hardwarehouse would send Balon the upgraded server specifications that it wanted her to include in the LTR. Balon would include the upgraded server specifications in the LTR, and she would then send copies of the LTR to both Hardwarehouse and HP headquarters. After Hardwarehouse received the LTR from Balon, it proceeded to send it to a sales contract administrator at HP ("HP administrator") who would then issue the purchaser of the server a transfer authorization letter which officially approved the upgraded license and the transfer of the license to the Hardwarehouse customer purchasing the server.

Significantly, the LTRs sent by Hardwarehouse to the HP administrator contained HP model numbers that did in fact reflect the upgrades that had been performed by Hardwarehouse. In other words, the defendant did not misrepresent the fact that the servers had been upgraded. Rather, the evidence tended to show that Hardwarehouse had misrepresented how the servers had been upgraded (i.e., with an unauthorized password-disabled copy of SS—Config). Had the HP administrator known that the defendant and his cohorts had upgraded the servers with an unauthorized copy of SS—Config, the administrator would not have provided the defendant with upgraded user licenses.

This divergence between the misrepresentation alleged in the indictment and the misrepresentation proved at trial was reinforced by the district court's wire fraud instruction, which stated:

Defendant is charged in Counts 24 through 31 of the indictment with wire fraud in violation of Section 1343 of Title 18 of the United States Code. In order for defendant to be found guilty of that charge, the government must prove each of the following elements beyond a reasonable doubt:

First, defendant made up a scheme or plan for obtaining money or property by making false promises or statements, with all of you agreeing on at least one promise or statement that was made;

Second, defendant knew that the promise or statements were false;

Third, the promises or statements were of a kind that would reasonably influence a person to part with money or property;

Fourth, defendant acted with the intent to defraud; and

Fifth, defendant used, or cause to be used, the wires to carry out an essential part of the scheme.

Thus, the district court's instruction did not specify the particular misrepresentation set forth in the indictment.

3. Cross-examination of John Adamson

In accordance with the plea agreement, John testified on behalf of the government at Richard's trial, asserting that he and Richard had fabricated the explanations that they had set forth at the HP interview, i.e., that Hardwarehouse used SS— Config only to match processors to bezels and that the payments to Balon and Loriau were coerced.

On cross-examination, the defense sought to impeach John by establishing that John had implicitly adopted the statements made by Richard during the HP interview and that Richard's statements at the HP interview were inconsistent with John's trial testimony. Defense counsel began by asking John whether he was present at the HP interview when Richard stated that Balon and Loriau had demanded payments. The government objected to the question on hearsay grounds, and the district court sustained the objection. Defense counsel proceeded to ask John some additional questions relating to John's implicit adoption of Richard's statements at the HP interview, and the district court again sustained the government's...