US v. Riggs

• Decision Date: 05 June 1990
• Docket Number: No. 90 CR 0070.,90 CR 0070.
• Citation: 739 F. Supp. 414
• Parties: UNITED STATES of America, Plaintiff, v. Robert J. RIGGS, also known as Robert Johnson, also known as Prophet, and Craig Neidorf, also known as Knight Lightning, Defendants.
• Court: U.S. District Court — Northern District of Illinois

739 F. Supp. 414

UNITED STATES of America, Plaintiff, v. Robert J. RIGGS, also known as Robert Johnson, also known as Prophet, and Craig Neidorf, also known as Knight Lightning, Defendants.

No. 90 CR 0070.

United States District Court, N.D. Illinois, E.D.

June 5, 1990.

COPYRIGHT MATERIAL OMITTED

Ira H. Raphaelson, Acting U.S. Atty. by William J. Cook, Colleen D. Coughlin, David Glockner, Asst. U.S. Attys., Chicago, Ill., for plaintiff.

Sheldon T. Zenner, Ted S. Helwig, Daniel A. Kaufman, Kenneth M. Kliebard, Katten Muchin & Zavis, Chicago, Ill., for defendants.

MEMORANDUM ORDER

BUA, District Judge.

Over the course of the past decade, advances in technology and growing respect and acceptance for the powers of computers have created a true explosion in the computer industry. Quite naturally, the growth of computer availability and application has spawned a host of new legal issues. This case requires the court to wrestle with some of these novel legal issues which are a product of the marriage between law and computers.

The indictment charges that defendants Robert J. Riggs and Craig Neidorf, through the use of computers, violated the federal wire fraud statute, 18 U.S.C. § 1343, and the federal statute prohibiting interstate transportation of stolen property, 18 U.S.C. § 2314. Neidorf argues that the wire fraud statute and the statute prohibiting interstate transportation of stolen property do not apply to the conduct with which he is charged. Therefore, he has moved to dismiss the charges against him, as set forth in Counts II-IV of the indictment, which are based on those statutes.¹ Neidorf has also filed various other pretrial motions. For the reasons stated herein, Neidorf's motions are denied.

I. THE INDICTMENT

A. Factual Allegations

In about September 1988, Neidorf and Riggs devised and began implementing a scheme to defraud Bell South Telephone Company ("Bell South"), which provides telephone services to a nine-state region including Alabama, Georgia, Mississippi, Tennessee, Kentucky, Louisiana, North Carolina, South Carolina, and Florida. The objective of the fraud scheme was to steal Bell South's computer text file² which contained information regarding its enhanced 911 (E911) system for handling emergency calls to policy, fire, ambulance, and other emergency services in municipalities. The text file which Riggs and Neidorf planned to steal specifically details the procedures for installation, operation, and maintenance of E911 services in the region in which Bell South operates. Bell South considered this file to contain valuable proprietary information and, therefore, closely guarded the information from being disclosed outside of Bell South and its subsidiaries. Riggs and Neidorf wanted to obtain the E911 text file so it could be printed in a computer newsletter known as "PHRACK" which Neidorf edited and published.

In about December 1988, Riggs began the execution of the fraud scheme by using his home computer in Decatur, Georgia, to gain unlawful access to Bell South's computer system located at its corporate headquarters in Atlanta, Georgia. After gaining access to Bell South's system, Riggs "downloaded"³ the text file, which described in detail the operation of the E911 system in Bell South's operating region. Riggs then disguised and concealed his unauthorized access to the Bell South system by using account codes of persons with legitimate access to the E911 text file.

Pursuant to the scheme he had devised with Neidorf, Riggs then transferred the stolen computer text file to Neidorf by way of an interstate computer data network. Riggs stored the stolen text file on a computer bulletin board system⁴ located in Lockport, Illinois, so as to make the file available to Neidorf. The Lockport bulletin board system was used by computer "hackers"⁵ as a location for exchanging and developing software tools and other information which could be used for unauthorized intrusion into computer systems. Neidorf, a twenty-year-old student at the University of Missouri in Columbia, Missouri, used a computer located at his school to access the Lockport computer bulletin board and thereby receive the Bell South E911 text file from Riggs. At the request of Riggs, Neidorf then edited and retyped the E911 text file in order to conceal the fact that it had been stolen from Bell South. Neidorf then "uploaded"⁶ his revised version of the stolen file back onto the Lockport bulletin board system for Riggs' review. To complete the scheme, in February 1989, Neidorf published his edited edition of Bell South's E911 text file in his PHRACK newsletter.

B. Charges

The current indictment asserts seven counts. Count I charges that Riggs committed wire fraud in violation of 18 U.S.C. § 1343 by transferring the E911 text file from his home computer in Decatur, Georgia to the computer bulletin board system in Lockport, Illinois. Count II charges both Riggs and Neidorf with violating § 1343 by causing the edited E911 file to be transferred from a computer operated by Neidorf in Columbia, Missouri, to the computer bulletin board system in Lockport, Illinois. Counts III and IV assert that by transferring the E911 text file via an interstate computer network, Riggs and Neidorf violated the National Stolen Property Act, 18 U.S.C. § 2314, which prohibits interstate transfer of stolen property. Finally, Counts V-VII charge Riggs and Neidorf with violating § 1030(a)(6)(A) of the Computer Fraud and Abuse Act of 1986, 18 U.S.C. § 1030(a)(6)(A), which prohibits knowingly, and with intent to defraud, trafficking in information through which a computer may be accessed without authorization.

II. DISCUSSION

A. Motion to Dismiss Count II

Neidorf claims that Count II of the indictment is defective because it fails to allege a scheme to defraud, one of the necessary elements for a wire fraud claim under 18 U.S.C. § 1343. See Lombardo v. United States, 865 F.2d 155, 157 (7th Cir.) (holding that the two elements of a wire fraud claim under § 1343 are a scheme to defraud and the use of wire communications in furtherance of the scheme), cert. denied, ___ U.S. ___, 109 S.Ct. 3186, 105 L.Ed.2d 695 (1989). All Count II charges, says Neidorf, is that he received and then transferred a computer text file, not that he participated in any scheme to defraud.

Unsurprisingly, Neidorf's reading of the indictment is self-servingly narrow. The indictment plainly and clearly charges that Neidorf and Riggs concocted a fraud scheme, the object of which was to steal the E911 text file from Bell South and to distribute it to others via the PHRACK newsletter. The indictment also clearly alleges that both Riggs and Neidorf took action in furtherance of the fraud scheme. Riggs allegedly used fraudulent means to access Bell South's computer system and then disguised his unauthorized entry. Neidorf allegedly furthered the scheme by redacting from the E911 text file references to Bell South and other information which would reveal the source of the E911 file, transmitting the redacted file back to the Lockport bulletin board for Riggs review, and publishing the redacted text file in the PHRACK newsletter for others' use. Moreover, both Neidorf and Riggs allegedly used coded language, code names, and other deceptive means to avoid the detection of their fraud by law enforcement officials. These allegations sufficiently set forth the existence of a scheme to defraud, as well as Neidorf's participation in the scheme. See McNally v. United States, 483 U.S. 350, 358, 107 S.Ct. 2875, 2880-81, 97 L.Ed.2d 292 (1987) (where the Court, quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924), held that "to defraud" as used in the mail fraud statute simply means "wronging one in his property rights by dishonest methods or schemes" usually by "the deprivation of something of value by trick, deceit, chicane, or overreaching"); see also Carpenter v. United States, 484 U.S. 19, 108 S.Ct. 316, 320-21, 98 L.Ed.2d 275 (1987) (applying McNally to the wire fraud statute, the Court held that a Wall Street Journal columnist participated in a scheme to defraud chargeable under § 1343 where he executed a plan under which he disclosed confidential financial information to an investor in exchange for a share of the investor's profits from that information).

Neidorf also argues that Count II is deficient because it fails to allege that he had a fiduciary relationship with Bell South. To support this position, Neidorf relies on cases such as United States v. Richter, 610 F.Supp. 480 (N.D.Ill.1985), and United States v. Dorfman, 532 F.Supp. 1118 (N.D.Ill.1981). In each of those cases, as well as other similar cases cited by Neidorf, the court held that where a wire fraud charge is based on the deprivation of an intangible right, such as the right to honest and fair government or the right to the loyal service of an employee, the government must allege the existence of a fiduciary relationship between the defendant and the alleged victim to state a charge under § 1343.

In the instant case, however, the wire fraud charge is not based on the deprivation of an intangible right. The government charges Riggs and Neidorf with scheming to defraud Bell South out of property—the confidential information contained in the E911 text file. The indictment specifically alleges that the object of defendants' scheme was the E911 text file, which Bell South considered to be valuable, proprietary, information. The law is clear that such valuable, confidential information is "property," the deprivation of which can form the basis of a wire fraud charge under § 1343. See Carpenter, 108 S.Ct. at 320; see also United States v. Keane, 852 F.2d 199, 205 (7th Cir.), cert. denied, ___ U.S. ___, 109 S.Ct. 2109, 104 L.Ed.2d 670 (1989). Therefore, Neidorf's argument misconstrues the wire fraud charge against him. Cases such as Richter and Dorfman are wholly inapposite.⁷...