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UNITED STATES v. MILLER

December 6, 1994

UNITED STATES OF AMERICA
v.
BARRY MILLER, MARC TELLER, ASHIM KAPADIA, GARY DUBIN, CHRISTOPHER ROSS, and ALAN DAVIS


Stewart Dalzell


The opinion of the court was delivered by: STEWART DALZELL

Dalzell, J.

 I. Introduction1

 The defendants in this criminal action perpetrated a rather unusual form of wire fraud. In late 1992, defendants Barry Miller and Marc Teller formed Standup Communications ("Standup"). Standup bought at a discount and collected at a premium rejected credit card debt. Of all the kinds of debt they could have selected, Miller and Teller focused on telephone chat lines debt. *fn2" Of all the lines they could have selected -- phone lines for sports, horoscopes, stock quotations, lottery numbers, celebrities -- Miller and Teller chose phone sex lines. *fn3"

 Miller and Teller assembled a team of telemarketers (among them defendants Ashim Kapadia, Gary Dubin, Christopher Ross, and Alan Davis) who would call the debtors and seek payment. From the beginning of the scheme, Standup's collectors would simply lie to the victims, trying to convince them that they had made more calls or had run up a higher bill than was true. If a victim balked, the collectors would resort to threats to tell the victims' spouses, families, and employers that they had used a phone sex line. The collectors might also threaten to reveal that a victim had used a gay chat line, regardless of whether that fact was true. Finally, Standup's collectors would make repeated and harassing phone calls to the victims, yelling and calling them degrading names such as pervert, deadbeat, or "chatboy".

 The scheme was a spectacular success. Although some defendants dispute the exact figures, it appears from Standup's records that Standup took in roughly $ 3,800,000 on debt worth roughly $ 300,000. Secret Service analyses of Standup's computer records reveal the names of almost 20,000 debtors in three separate databases. The individual cases of fraud before us are quite dramatic. One victim, R.L., owed $ 5.94. Standup collected payment after payment from him, $ 2,345 in all. Another victim, D.M., paid Standup sums totalling over $ 11,000 on an original debt of $ 35.64. *fn4" The defendants have admitted that a victim's debt rarely exceeded forty dollars.

 In September of this year, all six defendants pleaded guilty to two counts of wire fraud, 18 U.S.C. § 1343. This Memorandum addresses whether the facts of this case warrant a two-level enhancement of defendants' sentences pursuant to the application of United States Sentencing Guideline § 3A1.1. All six defendants have objected to the enhancement. We have concluded that the facts of this case do satisfy the guideline, and will overrule the defendants' objections.

 II. Legal Analysis

 Section 3A1.1 establishes a two-level enhancement

 
if the defendant knew or should have known that a victim of the offense was unusually vulnerable due to age, physical or mental condition, or that a victim was otherwise particularly susceptible to the criminal conduct . . . .

 U.S.S.G. § 3A1.1. On its face, the guideline creates two obvious inquiries, i.e., into the defendant's state of mind and the victim's special qualities. *fn5" There is also a third important inquiry, less obvious from the language of the guideline but crucial in its interpretation: a court must also examine the criminal activity itself. Certain victims might be "particularly susceptible" to certain schemes, though not generally. *fn6" The nature of the scheme creates the connection between a defendant's actual or imputed knowledge and a victim's particular susceptibility. Defendants who create a scheme that selects certain kinds of victims either may actually know -- or may be charged with -- the knowledge of the special qualities that their chosen scheme exploits.

 Thus, we believe that the best approach for implementing this guideline would focus on the "totality of the circumstances", with special emphasis on the "victim's individual vulnerability". United States v. Hershkowitz, 968 F.2d 1503, 1506 (2d Cir. 1992). If the totality of the circumstances reveals "the extra measure of criminal depravity which § 3A1.1 intends to more severely punish", *fn7" United States v. Moree, 897 F.2d 1329, 1335-36 (5th Cir. 1992), then enhancement under § 3A1.1 is proper. See United States v. Astorri, 923 F.2d 1052, 1055 (3d Cir. 1991) (noting that the inquiry mandated by § 3A1.1 "inherently involves factual determinations").

 This three-step inquiry -- into a victim's special qualities, a defendant's state of mind, and the nature of the scheme -- comports with the policies of § 3A1.1 as well. In United States v. Lallemand, 989 F.2d 936, 940 (7th Cir. 1993) (Posner, J.), the Seventh Circuit aptly described the two policies of § 3A1.1 as "practical" and "moralistic":

 
[Section 3A1.1] appears to have a two-fold purpose. One, the practical, is to recognize the lower cost to the criminal of committing a crime against such a victim than against a victim of ordinary robustness. A vulnerable or susceptible victim is (1) less likely to defend himself, (2) less likely perhaps to be aware that he is a victim of crime, [and] (3) less likely to complain. . . . The guideline's other purpose, the ...

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