U.S. v. Mullins, s. 91-50107
| Decision Date | 21 June 1993 |
| Docket Number | Nos. 91-50107,s. 91-50107 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Brenton Neil MULLINS, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Phillip Ross RINKER, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. James Robert WINKLEMAN, Defendant-Appellant. to 91-50109. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Devan M. Mullins, Stockton, CA, for defendant-appellant Mullins.
Sheldon T. Zenner, Katten, Muchin & Zavis, Chicago, IL, for defendant-appellant Rinker.
Fred D. Heather and Judy Clarke, McKenna & Cuneo, San Diego, CA, for defendant-appellant Winkleman.
Gary Lincenberg, Asst. U.S. Atty., Los Angeles, CA, for plaintiff-appellee.
Appeals from the United States District Court for the Central District of California.
Before FARRIS, LEAVY, and TROTT, Circuit Judges.
The memorandum disposition filed January 8, 1993, is redesignated as an authored opinion by Judge Leavy.
Three travel agents were convicted by a jury of mail and wire fraud arising out of their conspiracy to defraud an airline by electronically transferring frequent flyer miles to fictitious accounts and then cashing in those accounts for free airline tickets. On appeal the three agents argue, inter alia, that (1) the district court improperly excluded evidence showing that they did not deprive the airline of anything of value and therefore did not commit mail and wire fraud; (2) the evidence was insufficient to support the convictions; (3) the government used false and misleading evidence; and (4) the district court erred by (a) substituting an alternate juror during deliberations, (b) admitting into evidence electronically intercepted communications in violation of the Fourth Amendment, (c) calculating the amount of loss suffered by the airline, (d) enhancing two of the sentences based on the agents' roles in the scheme, and (e) failing to reduce the sentences on the grounds of the agents' minor or minimal participation. We affirm the convictions and all but one of the sentences. 1
James Robert Winkleman ("Winkleman") and Phillip Ross Rinker ("Rinker") owned and operated a small Los Angeles travel agency called North Ranch Travel, Inc. ("North Ranch"). Brenton Neil Mullins ("Mullins") worked at North Ranch as an independent travel agent, using North Ranch's facilities to service his own clients in exchange for shared commissions with Rinker and Winkleman.
North Ranch leased SABRE computer terminals from American Airlines ("American"). SABRE is American's computerized travel reservations system, enabling travel agents to gather flight information and directly input travel reservations or make changes to existing reservations through the use of Passenger Name Records ("PNRs"). By scanning PNRs a travel agent can obtain information not only about flights but about passengers as well, including their names and whether they are using frequent flyer account numbers.
American assigns each SABRE user-agency a so-called "pseudo-city code" and each SABRE terminal its own identification number. In addition, travel agents with access to SABRE are given passwords, identification numbers, and "sine" codes. An agent logs onto a SABRE terminal by first entering his password and identification number, then "sines" in using his own sine code. Whenever an agent logs onto the system, the user-agency's pseudo-city code, the terminal's identification number, the agent's password personal identification number, and sine code, all appear in American's records.
In June 1987 an American flight from Chicago to Munich was delayed from taking off because the names on the passenger manifest did not match those on the baggage list: Luggage belonging to a passenger named Knoerr was designated for a seat assigned to a passenger named Janice Smith. A spot check revealed that Mr. Knoerr was on the flight and that Janice Smith was not. An examination of the SABRE reservation records for that flight showed that a PNR change substituting Smith for Knoerr had just been made on a SABRE terminal at North Ranch by someone using Winkleman's password, identification number, and sine code.
American personnel immediately notified Margaret Jeter ("Jeter"), American's Senior Security Representative working out of Los Angeles. Jeter's review of the Janice Smith AAdvantage account 2 showed PNR changes on other flights as well, all originating from North Ranch. In addition, the passenger manifests for those flights showed PNR changes made to other AAdvantage accounts, all originating from North Ranch and generally in the names of Smith, Jones, or Johnson. Further investigation revealed that these individuals did not exist and that American's mailing addresses for them were actually mail drops opened by Winkleman and controlled by him or Rinker.
As the result of Jeter's investigation, the FBI executed a search warrant at North Ranch where they found records of phony AAdvantage accounts, keys to various mail drops used for those accounts, records of ticket sales obtained for those accounts, and records of credit card accounts, some in false names, used by Winkleman and Rinker to make those ticket purchases. According to American's records, individuals at North Ranch using passwords, identification numbers, and sine codes belonging to Mullins, Rinker, and Winkleman created some 850 fictitious AAdvantage accounts, 726 of which had accumulated a total of more than 61 million frequent flyer miles, with addresses traced to 29 mail drops and resulting in North Ranch's obtaining for resale 546 free airline tickets. The loss to American was subsequently valued at more than $1.3 million. 3
According to Jeter, the North Ranch frequent flyer scam worked as follows: A travel agent using SABRE would scan American flight manifests for unsecured PNRs (i.e., reservations unprotected against alteration or deletion) that lacked AAdvantage account numbers. Upon finding one, the agent would delete the name appearing on the unsecured PNR and substitute a fictitious one with an existing AAdvantage account number. Once the fictitious individual's AAdvantage account had been credited with enough frequent flyer miles to qualify for a free airline ticket, the agent would obtain a certificate therefor from American, convert the certificate to an airline ticket, and sell that ticket to a third party.
A federal grand jury handed down a 22-count indictment charging Winkleman, Rinker, and Mullins with conspiracy, mail fraud, use of fictitious names in furtherance of a scheme to defraud, and wire fraud. Following a jury trial, Winkleman was found guilty of 15 counts and Rinker and Mullins were found guilty of 10 counts each. The district court sentenced Winkleman to 48 months' imprisonment and imposed a $250,000 fine; Rinker received a 24-month jail term and a $15,000 fine; and Mullins got 21 months and a $5,000 fine. All three have timely appealed and are currently free on bail.
Although a district court's construction of the Federal Rules of Evidence is a question of law subject to de novo review, United States v. Cuozzo, 962 F.2d 945, 947 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 475, 121 L.Ed.2d 381 (1992), we examine its rulings on the admissibility of evidence involving factual determinations for an abuse of discretion. United States v. Wood, 943 F.2d 1048, 1055 n. 9 (9th Cir.1991). We apply the same abuse of discretion standard when reviewing a district court's decision to exclude evidence based on an improper defense. United States v. Slaughter, 891 F.2d 691, 696 (9th Cir.1989) (citing United States v. Cottier, 759 F.2d 760, 763 (9th Cir.1985)), appeal after remand, 956 F.2d 276 (9th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 3053, 120 L.Ed.2d 919 (1992).
The first--and principal--argument raised by all three appellants is that they did not commit mail or wire fraud because they did not deprive American of anything of value. Boiled to its essence, their contention is that credit for miles flown on an airline is the property of the passenger who does the flying, and a passenger who elects not to become a member of an airline's frequent flyer program constructively abandons his property, i.e., his mileage credit, to anyone else who wants it. Since deprivation of property is an essential element of both mail fraud and wire fraud, see 18 U.S.C. §§ 1341, 1343, and the appellants' actions did not deprive American of any of its property, the appellants could not have been guilty of either of those offenses. Accordingly, the district court erred by excluding evidence showing that American not only placed little or no value on those mileage credits, but actually viewed them as a liability.
This argument was rejected by the Tenth Circuit in a case nearly on all fours with the instant appeals. In United States v. Schreier, 908 F.2d 645 (10th Cir.1990), cert. denied, 498 U.S. 1069, 111 S.Ct. 787, 112 L.Ed.2d 850 (1991), the court held that:
The Schreiers' scheme involved the accumulation of mileage for which American would not otherwise be liable because it was not claimed by the passengers who actually flew. When liability is created on American's books, through a transfer of mileage from nonmember passengers to members, the victim is American, because that corporation thereby owes a liability that otherwise would not exist. By their device of replacing nonmember passengers' names in the computer with a fictional name and account number, the Schreiers have victimized American, by fraud, and through use of computer access,...
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