U.S. v. Manzer

• Decision Date: 27 October 1995
• Docket Number: No. 95-1455,95-1455
• Citation: 69 F.3d 222
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jan MANZER, doing business as V.C. Hacker, also known as Don Davis, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 222

69 F.3d 222

36 U.S.P.Q.2d 1520

UNITED STATES of America, Plaintiff-Appellee, v. Jan MANZER, doing business as V.C. Hacker, also known as Don

Davis, Defendant-Appellant.

No. 95-1455.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 12, 1995.

Decided Oct. 27, 1995.

Rita Looney, argued, Little Rock, AR, for appellant.

Claude S. Hawkins, argued, Fort Smith, AR, for appellee.

Before FAGG, FLOYD R. GIBSON, and HENLEY, Circuit Judges.

FLOYD R. GIBSON, Circuit Judge.

Appellant Jan Manzer appeals his convictions ¹ for two counts of mail fraud in violation of 18 U.S.C. Secs. 1341 and 1342 (1988), two counts of wire fraud in violation of 18 U.S.C. Secs. 1343 and 1342 (1988), and one count of copyright infringement in violation of 17 U.S.C. Sec. 506(a) (1988). Manzer also appeals his sentence under the United States Sentencing Guidelines. We have jurisdiction over this appeal pursuant to 28 U.S.C. Sec. 1291 (1988), and we affirm.

I. BACKGROUND

This appeal deals with the business of unauthorized decryption of premium channel broadcasts. Premium channel broadcasters such as HBO transmit programming to subscribing individuals and cable affiliates across the United States via satellite. In order to prevent nonsubscribers from accessing their programming, they encrypt or "scramble" their electromagnetic broadcast signals. A descrambling device such as the Videocipher II unit (VCII unit), manufactured and sold by General Instrument Corporation (General Instrument), is necessary to decrypt the scrambled signals. When a viewer subscribes to a premium channel, the premium channel broadcaster programs that viewer's electronic "unit address" into its satellite transmissions. Each VCII unit has its own unique coded "unit address" contained within the copyrighted "Controlled Microprocessor Software" stored in an integrated circuit identified as the "U-30 Chip" which ensures that only authorized addresses are able to decrypt the broadcast transmissions.

In 1988, General Instrument hired a private investigator, Robert Bottorff, to investigate persons involved in the illegal modification of VCII units. Bottorff obtained a copy of The Blank Box Newsletter, an underground newsletter devoted to the unauthorized decryption of cable satellite transmissions, containing an advertisement by "V.C. Hacker." Bottorff called the number listed in the advertisement and spoke to an individual who called himself Don Davis. That individual was later identified as Jan Manzer. During the course of a subsequent phone conversation on April 18, Manzer agreed to modify five VCII units to enable them to receive encrypted broadcasts in exchange for $525.00 per unit. Bottorff shipped the units along with the proper payment to an address in Little Rock, Arkansas provided by Manzer. Manzer shipped the five VCII units back to Bottorff a few days later, modified as agreed.

On April 27, Manzer and Bottorff made plans over the phone for Bottorff to deliver an additional 270 VCII units to Manzer's place of business for modification. In exchange, Manzer was to receive three Videocipher units for each one modified. On May 4, Bottorff delivered seventy VCII units to Manzer in Hot Springs, Arkansas. Manzer modified the units as agreed and returned them to Bottorff the next day. Later that day the FBI executed a search warrant on Manzer's place of business, seizing computer equipment, computer chips, computer discs, modified and unmodified VCII modules, advertisements, and business records.

On June 19, 1992, a six-count superseding indictment was returned against Manzer. Counts I and II charged him with mail fraud for placing advertisements in the March and April 1988 issues of the Blank Box Newsletter advertising products and services used for the unauthorized decryption of cable satellite programming as part of a scheme or artifice to defraud General Instrument, HBO, and others in violation of 18 U.S.C. Secs. 1341 and 1342. Counts III and IV charged Manzer with two violations of wire fraud based on the two telephone conversations between Manzer and Bottorff occurring on April 18 and 27, 1988, in violation of 18 U.S.C. Secs. 1343 and 1342. Count V charged Manzer with knowingly selling and servicing VCII units modified for the unauthorized decryption of cable satellite programming in violation of 47 U.S.C. Sec. 605(e)(4). Count VI charged Manzer with knowingly infringing a copyright for the purpose of commercial advantage or private financial gain by copying the copyrighted "Controlled Microprocessor Software" contained in the U-30 Chip in violation of 17 U.S.C. Sec. 506(a). Count V was dismissed prior to trial because 47 U.S.C. Sec. 605(e)(4) did not become effective until January 1, 1989, more than six months after the charged conduct took place. ²

It was established at trial that Manzer had been operating a business out of Hot Springs, Arkansas since August of 1987 under the alias "V.C. Hacker." As part of his business, Manzer sold cloned chips containing the unit addresses from authorized VCII units to both individual customers and satellite dealers. By replacing the existing U-30 chip with a "cloned" chip containing an authorized unit address, unauthorized viewers were able to receive premium channel broadcasts without having to pay the required subscription fee. Manzer's business also sold "cloning packages" or discs containing the information and unit addresses needed to clone additional counterfeit chips. Dealers who did not wish to modify their own VCII units were able to send their VCII circuitboards directly to Manzer, whose technicians would then modify them and return them to the dealer.

After a three day jury trial, Manzer was convicted of all five remaining counts. Applying the 1987 version of the United States Sentencing Guidelines, the district court sentenced Manzer to forty-six months imprisonment to be followed by a three-year term of supervised release and ordered him to pay $2.7 million in restitution. On appeal, Manzer challenges the sufficiency of the evidence supporting all five of his convictions, the district court's calculation of the amount of loss, the district court's restitution order, and the district court's imposition of three years supervised release. Manzer also claims that he was denied effective assistance of counsel in violation of the Sixth Amendment of the United States Constitution. We address each issue seriatim.

II. DISCUSSION

A. Sufficiency of the Evidence

Manzer challenges the sufficiency of the evidence supporting each of his convictions. "When reviewing such a claim, we consider the evidence in the light most favorable to the government, giving it the benefit of all favorable inferences." United States v. Quintanilla, 25 F.3d 694, 699 (8th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 457, 130 L.Ed.2d 365 (1994). A conviction will be upheld unless no reasonable factfinder could have found Manzer guilty beyond a reasonable doubt. Id.

1. Mail and Wire Fraud

Intent to defraud is an essential element to establishing both the substantive mail and wire fraud counts. United States v. Andrade, 788 F.2d 521, 527 (8th Cir.), cert. denied, 479 U.S. 963, 107 S.Ct. 462, 93 L.Ed.2d 408 (1986). Manzer argues that the government failed to prove that he acted with intent to defraud because 47 U.S.C. Sec. 605(e)(4), the federal statute criminalizing the knowing manufacture, modification, and sale of devices used for the unauthorized decryption of satellite cable programming, was not in effect at the time the allegedly fraudulent acts took place.

Manzer's argument is misdirected. Mail and wire fraud are substantive offenses which do not depend on the violation of another statute. In order to sustain charges of mail or wire fraud, the government need only prove: (1) the existence of a scheme to defraud, and (2) the use of the mails or wires for purposes of executing the scheme. Id. As we observed in United States v. Costanzo, 4 F.3d 658, 664 (8th Cir.1993), an appeal involving mail and wire fraud convictions stemming from the diversion of pharmaceuticals, "[t]he critical inquiry is not whether defendants intended to break the law, but, rather, whether they intended to defraud drug manufacturers." It is therefore immaterial whether Manzer intended to violate 47 U.S.C. Sec. 605. The relevant inquiry is whether Manzer acted with intent to defraud General Instrument and premium channel producers such as HBO who rely on Videocipher technology to protect their signals from nonpaying viewers.

While Manzer concedes that he sold the materials and information needed to "modify" and "clone" VCII units to receive premium channel broadcasts without having to pay the subscription fees, he contends that the government failed to prove that he did so with the requisite intent to defraud. Manzer essentially argues that he could just as easily have intended to sell the technology for nonfraudulent testing or educational purposes.

It was established at trial that Manzer knew the computer chips and discs he sold would allow his customers, many of whom were cable dealers, to modify VCII units to receive premium pay channel broadcasts without having to pay the required subscription fees. It was also established that technicians directly under Manzer's supervision and in his employ similarly modified and resold large numbers of VCII units. Manzer also took great pains to conceal both the location of his business (employing a Little Rock address while actually working out of Hot Springs) and his identity (operating under the aliases V.C. Hacker, Don Davis, and J.J. Sims). The type of technology sold, the volume of sales, the nature of his clientele, the level of secrecy employed, and the fact that his operation directly modified VCII's to intercept decrypted broadcast signals all support the reasonable inference that Manzer acted with intent to defraud. We conclude that the evidence of Manzer's intent to defraud was...