The opinion of the court was delivered by: SHAPIRO
Defendants Charles Kasper ("Kasper") and Seymour Gray ("Gray") were both named in five counts and each named in three other counts of an eleven count indictment charging violations of three aspects of 15 U.S.C. § 1644, which prohibits the fraudulent use of credit cards. They are both charged with fraudulently transporting stolen and fraudulently obtained credit cards in interstate commerce and with conspiring to do so in violation of 15 U.S.C. § 1644(b); in addition, Kasper is charged in Count Six with using a fraudulently obtained credit card in transactions affecting interstate commerce to obtain goods and services valued in excess of $ 1,000 in violation of 15 U.S.C. § 1644(a).
The gravamen of the facts stipulated for purposes of the motions is that credit cards were obtained by the original cardholders without the intent to defraud the issuing companies, sold or given to Kasper and Gray with the knowledge of the persons to whom the cards were originally issued that Kasper and Gray would use the cards to make charges without paying for them, and then reported as lost or stolen by the original cardholders. The government claims that the schemes constitute violation of 15 U.S.C. § 1644(a) (Count Six) and § 1644(b) (all other Counts)
because the cards, bought or received with the fraudulent intent to make charges without paying for them, were "fraudulently obtained" within the scope of the statute. In opposition, the defendants claim that the cards were neither fraudulently obtained from the issuer by the original cardholder nor fraudulently obtained from the cardholders by defendants and, since the cards were given or sold by the cardholders rather than stolen from them, the credit cards were not "fraudulently obtained" within the scope of the statute.
The fraudulent intent of the defendants on these facts is not at issue; they obtained credit cards intending to use them to obtain goods and/or services without paying for them. The issue is whether or not the cards were also obtained by fraud. The government presumably concedes that defendants did not fraudulently obtain the cards from the cardholders ; the defendants bought or received the cards from cardholders who were not deceived as to the plan to charge goods and not pay for them (Stipulation # 1, 3, 5, and 7; Paper Filed # 10). The government argues that the cards were fraudulently obtained from the card issuers, the holders being bailees of the issuers because the issuers required the original holders to agree in each instance that the cards remained the property of the issuer to be returned on demand.
A credit card gives the holder the privilege of charging items at establishments associated with the issuer; Katz v. Carte Blanche Corp., 496 F.2d 747 (3d Cir. 1974). The statute contemplates that a holder may authorize another to use a card; 15 U.S.C. § 1602(l ). The card, evidence of that privilege, remains the property of the issuer to be returned on demand when the privilege is revoked. The defendants obtained from the cardholders what they had the privilege of charging items at each company's associated establishments as evidenced by its credit card which remained the property of the issuer to be returned on demand. The card issuer's right to demand a card's surrender does not convert an obtaining with fraudulent intent from an assenting cardholder to a fraudulent obtaining from a non-assenting issuer. The credit cards were not fraudulently obtained from the issuers because they were not obtained from the issuers at all. On the facts as stipulated, defendants have not "fraudulently obtained" credit cards within the meaning of 15 U.S.C. §§ 1644(a) or (b).
The fallacy of the government's argument is that it confuses or equates "fraudulently obtained" and obtaining with "fraudulent intent." Fraudulent obtaining and fraudulent intent are two separate and distinct elements of this offense. The requirement of a false act distinct from a fraudulent intent is implicit in the texts of §§ 1644(a) and (b), which state "fraudulent intent" and "fraudulently obtained" as separate elements. It is an elementary rule of statutory construction that Congress would not have used different phrases had it not intended different meanings. See, Colautti v. Franklin, 439 U.S. 379, 392, 99 S. Ct. 675, 58 L. Ed. 2d 596 (1979).
Courts which have examined the meaning of "fraudulently obtained" in § 1644 have uniformly found some deceitful or false action by the obtainer with regard to the one from whom the card was actually obtained. United States v. Chapman, 591 F.2d 1287 (9th Cir. 1979) (false statements of financial status on application for credit cards); United States v. Kay, 545 F.2d 491 (5th Cir. 1977), cert. denied, 434 U.S. 833, 98 S. Ct. 119, 54 L. Ed. 2d 94 (1977) (defendant made false representations on applications for credit cards, including a false representation that he intended to pay for charges); United States v. Mikelberg, 517 F.2d 246 (5th Cir. 1975), cert. denied, 424 U.S. 909, 96 S. Ct. 1104, 47 L. Ed. 2d 313 (1976) (false information as to names, jobs, and the like given at time of application for cards by some defendants with knowledge of the other co-conspirators that cards were so obtained). In each of these cases, the card was fraudulently obtained by the cardholder directly from the issuer.
In cases where the card was obtained by third parties from the original cardholder, some deception of or theft from the original cardholder has been deemed necessary for conviction. In United States v. Lomax, 598 F.2d 582 (10th Cir. 1979), the third parties "surreptitiously obtained" or stole the credit card from the cardholder to whom it had been issued. In the only other case we have found considering a card obtained from a cardholder instead of an issuer, the court assumed no culpability under § 1644(b) if the defendant had not stolen the credit card but had been given it by a bona fide cardholder (even if the defendant had obtained the card from the cardholder with the intent not to pay the issuer for its use); United States v. Colyer, 571 F.2d 941 (5th Cir. 1978). The Court, holding that certain limitations imposed upon the defendant's cross-examination of a witness at trial constituted harmless error because the testimony would have been irrelevant, and affirming a conviction under 15 U.S.C. § 1644(b), stated "the crucial question" to be whether the defendant had been given the credit card or had stolen it; 571 F.2d, at 946-947 n.7.
Construction of a statute requires that the Court look first to the language of the statute to determine if there is any ambiguity. Where there is ambiguity in a criminal statute, doubts are resolved in favor of the defendant; Adamo Wrecking Co. v. United States, 434 U.S. 275, 98 S. Ct. 566, 54 L. Ed. 2d 538 (1978). It is not for the Court to expand the scope of a statute; criminal statutes are to be strictly construed and any ambiguity must be resolved in favor of lenity. United States v. Enmons, 410 U.S. 396, 399, 93 S. Ct. 1007, 35 L. Ed. 2d 379 (1973); Rewis v. United States, 401 U.S. 808, 812, 91 S. Ct. 1056, 28 L. Ed. 2d 493 (1971); United States v. Allen, 566 F.2d 1193, 1195 (3d Cir. 1977). As the Supreme Court stated in United States v. Maze,
(if) the Federal Government is to engage in combat against fraudulent schemes not covered by the statute, it must do so at the initiative of Congress and not of this Court.
414 U.S. 395, 405 n.10, 94 S. Ct. 645, 38 L. Ed. 2d 603 (1974) (fraudulent use of credit card does not violate the mail fraud statute unless the mails are used to execute the scheme).
The government's argument fails for three reasons. First, the legislative history of the 1974 amendments to the Truth-In-Lending Act, though limited, manifests a clear Congressional intent to protect cardholders, yet is completely ...