United States Court of Appeals, Eleventh Circuit.
No. 94-5240.
UNITED STATES of America, Plaintiff-Appellee,
v.
Paul MORRIS, Defendant-Appellant.
April 23, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 93-6133-CR-KLR), Kenneth L. Ryskamp,
Judge.
Before HATCHETT and BARKETT, Circuit Judges, and OAKES*, Senior
Circuit Judge.
OAKES, Senior Circuit Judge:
This appeal is from a judgment of conviction entered on
October 24, 1994 by the United States District Court for the
Southern District of Florida, Kenneth L. Ryskamp, Judge, against
the appellant Paul Morris ("Morris") for violation of 18 U.S.C. §
1029(a)(4) (1988). On appeal, Morris argues that § 1029(a)(4) does
not criminalize the possession and sale of altered cellular phones
that access cellular services without charge. He also contests the
sentence he received as improperly calculated under the Federal
Sentencing Guidelines. We agree with Morris that § 1029, as it
read at the time of Morris's conviction, cannot be extended to
reach the conduct for which he was convicted. Accordingly, we
reverse.
BACKGROUND
Morris was indicted in July 1993 under the Credit Card Fraud
Act, 18 U.S.C. § 1029(a)(4) (1988), for selling a cellular phone to
*
Honorable James L. Oakes, Senior U.S. Circuit Judge for the
Second Circuit, sitting by designation.
an undercover Secret Service agent. The phone had been altered so
that its electronic serial number ("ESN") could be reprogrammed
from the phone's keypad.
An ESN is an eight-digit number that is programmed onto a
microchip in an individual phone and is designed to identify
permanently the instrument just as a vehicle identification number
identifies an automobile. A cellular phone connects a call by
transmitting its ESN, its mobile identification number ("MIN") (a
ten-digit number identifying the subscriber), and the number being
called to a nearby cell, which in turn transmits it through local
or long distance telephone lines. If the call is local, the local
carrier confirms that the ESN/MIN combination corresponds to a
subscriber's account.
In order to accommodate long distance calls, local carriers
have "roamer" agreements with other carriers that permit customers
to place calls from outside their local service area. The local
carrier for the geographic area where the call originates relays
the phone's ESN/MIN combination to a computer clearing house which
subsequently verifies that the combination matches a valid account.
If an ESN/MIN combination is not matched with an account, no
further service is allowed. Because the clearing houses cannot
instantly verify an ESN/MIN combination, however, there exists a
window of time in which calls can be made from the phone even if
the combination is invalid.
A cellular phone can be used to circumvent normal billing
procedures by "tumbling," or changing the ESN/MIN combination to
take advantage of this free-call window. A "tumbling" cellular
phone is one in which the phone's original ESN microchip has been
replaced with one that allows the phone's ESN to be changed from
the keypad. Calls made from such phones are untraceable because
the ESN is not connected to any subscriber's account. The caller
can use a fictitious ESN until the clearing house recognizes the
ESN/MIN combination as invalid, and then repeat the process by
"re-tumbling" the ESN and MIN to create a new combination.
The government indicted Morris in July 1993 for one count of
1
violating 18 U.S.C. § 1029(a)(4) by selling a tumbling cellular
phone complete with instructions for reprogramming the phone's ESN.
Following a three-day trial at which Morris introduced no evidence,
a jury found him guilty. The court sentenced Morris to 14 months
imprisonment in October 1994.
DISCUSSION
In this appeal, Morris seeks reversal of the jury verdict on
the ground that § 1029 did not criminalize the use of tumbling
cellular phones at the time of his indictment. Morris also
contends that the district court misapplied the Federal Sentencing
Guidelines in determining his sentence. We agree with Morris that
§ 1029(a)(4) does not apply in his case and therefore do not
address his sentencing arguments. We review the district court's
analysis of § 1029's applicability de novo. James v. United
1
The indictment charged Morris with a "violation of Title
18, United States Code, Section 1029(a)(4) and 2." The parties
disagree on the meaning of "and 2." We note, however, that the
jury was charged only on the elements of § 1029(a)(4) and the
judgment entered by the district court reflects that Morris was
found guilty only of a single violation of § 1029(a)(4). We
therefore do not need to resolve any ambiguity in the language of
the indictment.
States, 19 F.3d 1, 2 (11th Cir.1994) (per curiam); United States
v. Hooshmand, 931 F.2d 725, 737 (11th Cir.1991).
In 1993, § 1029 read in pertinent part:
(a) Whoever—
(4) knowingly, and with intent to defraud, produces,
traffics in, has control or custody of, or possesses
device-making equipment;
shall, if the offense affects interstate or foreign commerce,
be punished as provided in subsection (c) of this section.
* * * * * *
(e) As used in this section—
(6) the term "device-making equipment" means any
equipment, mechanism, or impression designed or primarily
used for making an access device or a counterfeit access
device.
"Access device" is also defined by the statute:
(e)(1) the term "access device" means any card, plate, code,
account number, or other means of account access that can be
used, alone or in conjunction with another access device, to
obtain money, goods, services, or other thing of value, or
that can be used to initiate a transfer of funds (other than
a transfer originated solely by paper instrument).
In 1994, Congress amended the statute to address specifically
tumbling cellular phones such as the one at issue here. See 18
U.S.C. § 1029(a)(5) (1994) (criminalizing use, production, sale, or
custody of "a telecommunications instrument that has been modified
or altered to obtain unauthorized use of telecommunications
services."); see also H.R.Rep. No. 827, 103d Cong., 2d Sess. 31
(1994), reprinted in 1994 U.S.C.C.A.N. 3489, 3511 ("[t]his section
amends the counterfeit access device law to criminalize the use of
cellular phones that are altered ... to allow free riding on the
cellular phone system.").
Morris argues that tumbling cellular phones cannot be
considered "device-making equipment" within the definition of 18
U.S.C. § 1029(e)(6) and that therefore his indictment under §
1029(a)(4) cannot stand. He contends (1) that the phone did not
create an "access device" as defined under the statute because the
ESN/MIN combinations generated by the phone did not access
identifiable accounts, and (2) that the phone is "designed and
primarily used" to make calls rather than to make access devices as
required by the statute.
We agree with Morris's second argument. The plain language of
the statute necessitates that the equipment at issue be "designed
or primarily used for making an access device." § 1029(e)(6)
(emphasis added). Here, Morris's phone was not primarily used to
generate ESN/MIN combinations: it was used to make phone calls.
Only when one combination was declared invalid, presumably after
the phone had been used to place as many calls as possible in the
window of time available, did the tumbling phone generate a new
ESN/MIN combination. It is equally clear that the cellular phone
was not designed to generate invalid ESN/MIN combinations, but
rather to permit mobile telephone calls.
Most prosecutions for device-making equipment under §
1029(a)(4) concern credit card embossers. See United States v.
Lee, 815 F.2d 971, 973 (4th Cir.1987); United States v. Mann, 811
F.2d 495, 496 (9th Cir.1987). Embossers fit clearly into the
requirements of the statute because the equipment actually produces
the account-accessing device, namely, the counterfeit credit card.
Here, it is the microchip in the cellular phone, not the phone
itself, which permits the owner to tumble ESN/MIN combinations. It
strikes us, then, that the device-making equipment in a tumbling
phone prosecution under § 1029(a)(4) would have to be the equipment
used to create the microchip and not, as suggested by the
government here, the actual altered cellular phone.
The only two cases which discuss the applicability of §
1029(a)(4) to tumbling cellular phones do not persuade us to reach
a result other than the one we are led to by a commonsense reading
of the statutory language. In United States v. Ashe, 47 F.3d 770,
772 (6th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 166, 133
L.Ed.2d 108 (1995), Richard Ashe was charged with a violation of §
1029(a)(4) for trafficking in tumbling cellular phones. Finding
that § 1029 did reach Ashe's conduct, the Sixth Circuit concluded
that tumbling cellular phones are access "devices that permit and
facilitate the theft of "air time,' " id. at 774, but did not
analyze whether such a phone, in addition to being an access
device, can be considered device-making equipment. The court then
affirmed Ashe's conviction under § 1029(a)(4) without confronting
whether the requirements of that section of the statute had been
met.
Similarly, the Ninth Circuit in United States v. Bailey, 41
F.3d 413 (9th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct.
2563, 132 L.Ed.2d 815 (1995), found that microchips which tumbled
ESNs were an access device for the purposes of § 1029. Although
the defendant in Bailey was indicted both for trafficking in access
devices in violation of § 1029(a)(1) and for possessing
device-making equipment in violation of § 1029(a)(4), the court
confined its discussion to the former and did not address
device-making equipment. Id. at 417-18. In this respect, its
decision, like that of the court in Ashe, offers no assistance in
applying the language of § 1029(a)(4).
We conclude that Morris's tumbling cellular phone was designed
and used primarily to make calls, and cannot reasonably be defined
as device-making equipment. We therefore find that the meaning of
§ 1029(a)(4) cannot be stretched to criminalize the phone's sale.
Moreover, even if the government had chosen to prosecute
Morris under another section of § 1029, we are not convinced that
the statute as then written can be interpreted to reach the
admittedly illegitimate conduct of free riding on a cellular phone
system. Other circuits have disagreed on this very issue.Compare
United States v. Brady, 13 F.3d 334, 340 (10th Cir.1993) (finding
that a tumbling cellular phone is not an access device because it
does not access an identifiable account) with Ashe, 47 F.3d at 774
(disagreeing with Brady and finding that the government must only
prove theft of services) and Bailey, 41 F.3d at 418-19 (disagreeing
with Brady and finding that contract between local and long
distance carriers is an account for the purposes of the statute).
We believe that the Brady court's interpretation of §
1029(a)(4) as applicable only to those devices which access an
individual account, such as a credit card or a long distance
calling card, is the more sound in light of Congress's intent to
address fraud in the credit area. See H.R.Rep. No. 894, 98th
Cong., 2d Sess. 4 (1984), reprinted in 1984 U.S.C.C.A.N. 3689, 3690
(citing credit and bank card fraud and abuse as purpose of
legislation). As noted by the Tenth Circuit, expanding § 1029
beyond those instances in which an identifiable account is accessed
would "turn § 1029 into a general theft statute applicable whenever
a company can document a loss through fraud." Brady, 13 F.3d at
340.
Of course, in light of Congress's decision to amend § 1029 in
1994 to criminalize specifically conduct such as Morris's,
interpretation of the original statute, and our disagreement with
the Sixth and Ninth Circuits over this interpretation, is of
limited import. While the 1994 amendment arguably provides further
support for Brady's narrower reading of § 1029, its primary
significance here stems from the fact it will soon render
unnecessary inquiries like the one presented by this case.
CONCLUSION
In accordance with our reasoning above, we REVERSE Morris's
conviction under § 1029(a)(4).