US v. Norris

• Decision Date: 21 July 1993
• Docket Number: No. SCr. 93-13.,SCr. 93-13.
• Citation: 833 F. Supp. 1392
• Parties: UNITED STATES of America v. William C. NORRIS.
• Court: U.S. District Court — Northern District of Indiana

833 F. Supp. 1392

UNITED STATES of America v. William C. NORRIS.

No. SCr. 93-13.

United States District Court, N.D. Indiana, South Bend Division.

May 21, 1993.

Memorandum and Order on Reconsideration July 21, 1993.

Ruth M. Hennage, Asst. U.S. Atty., South Bend, IN, for U.S.

Charles A. Asher, South Bend, IN, for William C. Norris.

MEMORANDUM AND ORDER

MILLER, District Judge.

This cause comes before the court on defendant William Norris' motions to dismiss the indictment and for a bill of particulars. The dismissal motions requires the court to determine whether the alleged scheme to defraud cable television companies of revenues by selling equipment that allowed customers a vehicle for the covert reception of premium cable programming states offenses under the mail fraud and wire fraud statutes in the absence of an allegation of any actual misrepresentation, and whether equipment that facilitates the descrambling of coaxial cable transmissions violates 47 U.S.C. § 605(e)(4). For the reasons that follow, the court answers the first question affirmatively and answers the second in the negative, and so dismisses Counts 11 through 15 of the indictment.

I.

Mr. Norris has moved the court to dismiss all fifteen counts of the indictment against him. Before addressing his motion, a brief background regarding the mechanics of the cable television industry, drawn from the parties' briefs, is necessary.

Communications satellites are fundamental to the distribution of television and cable transmissions. Satellite programmers sell their programming at wholesale rates to distributors, including cable companies. A cable company receives these signals at the cable system control center (the "headend"), and processes and retransmits the signals over coaxial cable to subscribers using closed circuit radio frequency transmissions. Satellite programs are also sold directly to private viewers or commercial establishments at retail rates. In 1986, satellite programmers began to scramble or encrypt their signals to protect themselves from the theft of their services. A person receiving the signal would need equipment to descramble or decrypt the signal to make use of the signal.

Cable television service involves the simultaneous receipt and forwarding of a number of broadcast television and satellite signals. A cable television subscriber receives basic cable service, which includes local broadcasts and other programming, for a monthly fee. The subscriber generally is provided a converter box which allows the subscriber to view only those channels for which he pays a monthly fee. The subscriber must pay an additional monthly fee to view premium channels, such as HBO, Showtime, or Cinemax. To prevent the interception of these premium channels, the cable companies transmit premium programming to subscribers in an encrypted form, and furnish the paying subscriber with a descrambler to decode the encrypted transmission. A subscriber who acquires a descrambler from a source other than the cable company can access premium programming without paying the cable company the additional monthly fee.

Here, the government alleges that Mr. Norris purchased cable converter boxes, remote controls, miscellaneous converter box parts, chips (integrated circuits), and modules from a number of sources. Mr. Norris then sold converter boxes and modifying kits containing chips or modules. These modifying kits came with instructions on how to install the chip or module into a converter box to make the box a descrambler.

Mr. Norris and his employees also are alleged to have modified cable converter boxes into descramblers that enabled people to receive premium cable television channels without paying the required fee. According to the indictment, Mr. Norris and his employees broke security tabs to open the converter box, and, after modification of the box, installed new security tabs. Mr. Norris and his employees allegedly also removed bar codes containing the box's serial number and other information identifying the box's origin.

The indictment alleges that Mr. Norris usually shipped orders for descramblers or modifying kits COD by United Parcel Service ("UPS"), but shipped a few orders via the United States mail; payments were mailed to Mr. Norris' residence. Mr. Norris also allegedly conducted transactions by use of a facsimile machine. Mr. Norris is alleged to have advertised the sale of his descramblers in national publications, such as Nuts and Volts, Radio Electronics, and Video Review.

A.

In general, the indictment alleges that Mr. Norris:

knowingly devised a scheme and artifice to defraud cable television companies of subscription fee revenues. The scheme and artifice to defraud included the manufacture, assembly, modification, sale and distribution of cable television descramblers and other devices which assisted cable television customers in the receipt of premium cable programming without the knowledge of the cable television companies.

Counts 1-9 charge Mr. Norris with violating the wire fraud statute, 18 U.S.C. § 1343¹; Count 10 charges Mr. Norris with violating the mail fraud statute, 18 U.S.C. § 1341.² Because the mail and wire fraud statutes share the same language in relevant part, the court will apply the same analysis to both sets of offenses. Carpenter v. United States, 484 U.S. 19, 25 n. 6, 108 S.Ct. 316, 320 n. 6, 98 L.Ed.2d 275 (1987).

Mr. Norris contends that the indictment improperly charges a "scheme or artifice to defraud" because there is no claim that he "made any false representation of existing fact or any false statement of future performance", or that he "made any false statements to, or even had any privity or contact with, any cable company", or that he "stood in a fiduciary relationship with any cable company". Mr. Norris claims that the use of the mail and wire fraud statutes to make a federal crime out of every dishonest act offends due process.

United States v. Coyle, 943 F.2d 424 (4th Cir.1991), a case factually indistinguishable from the present case, rejected the same arguments. Coyle built and sold descramblers that enabled cable television customers to receive additional cable channels without paying the required fee to the cable company. Coyle advertised the descramblers in national publications, received orders for descramblers over the phone, and distributed the descramblers via UPS and the United States mail. Coyle received payment through the United States mail, either directly from his customers or from UPS (which collected the purchase price from customers upon delivery). Coyle was convicted of "knowingly, unlawfully, and willingly devising a scheme to defraud cable companies of money, and using the mails to execute his scheme." 943 F.2d at 425.

On appeal, Coyle argued that to prove a violation of the mail fraud statute, the government had to prove one of the following: (1) an affirmative misrepresentation of existing fact, (2) a false promise as to the future, (3) the failure of a fiduciary to make disclosure, or (4) a failure to make disclosure under an independent statutory duty. The court flatly rejected Coyle's argument:

The mail fraud statute is not as restrictive as Coyle contends. Durland v. United States, 161 U.S. 306, 313 16 S.Ct. 508, 511, 40 L.Ed. 709 (1896), teaches that "any scheme or artifice to defraud" is to be construed broadly. As the Court recently reiterated, "the words `to defraud' commonly refer `to wronging one in his property rights by dishonest methods or schemes,' and `usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'" The mail fraud statute does not by its terms define fraud. It generally leaves to other statutes the specifications of what conduct constitutes a scheme to defraud. Title 47 U.S.C. § 553,³ which was enacted to protect the revenue of television cable companies from unauthorized reception of their transmissions, is such a statute.

United States v. Coyle, 943 F.2d at 427 (citations omitted); see also United States v. Cherif, 943 F.2d 692, 696 (7th Cir.1991) (the words "to defraud" in the mail fraud statute have the "common understanding" of "wronging one in his property rights by dishonest methods or schemes"), cert. denied, ___ U.S. ___, 112 S.Ct. 1564, 118 L.Ed.2d 211 (1992).

The court found it immaterial that Coyle did not use the mail to make any misrepresentations or false statements to his customers, because the victims of the mail fraud, the cable companies, need not be the recipient of the material that was mailed. 943 F.2d at 427 (citing Pereira v. United States, 347 U.S. 1, 8-9, 74 S.Ct. 358, 362-63, 98 L.Ed. 435 (1954)). Moreover, it did not matter that Coyle could have been prosecuted under 47 U.S.C. § 553; the discretion to charge the defendant with a violation under that statute vested with the United States Attorney. 943 F.2d at 427.

Coyle also argued, as does Mr. Norris, that construing the mail fraud statute to encompass his conduct would mean that any criminal act that uses the mail constitutes mail fraud. The court rejected Coyle's contention:

The Supreme Court exposed the fallacy of this argument more than 60 years ago. Conduct must involve fraud to fall within the coverage of the Act. Even though the concept of fraud within the meaning of the mail fraud statute is broader than common law fraud, it is not limitless. It is characterized by "trick, deceit, chicane, or overreaching ... and dishonest methods or schemes. The United States Supreme Court has expressly rejected the notion that mail fraud can encompass deprivation of property by such crimes as `theft by violence ... robbery or burglary.' Coyle's conviction does not open the floodgates of federal criminal jurisdiction.

United States v. Coyle, 943 F.2d at 427 (citing Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924)).

Attempting to distinguish Coyle, Mr. Norris contends that the...