United States v. Vampire Nation, 451 F.3d 189, is a 2006 decision of the United States Court of Appeals for the Third Circuit regarding the Federal Sentencing Guidelines and asset forfeiture. A three-judge panel unanimously affirmed the conviction and sentence of Frederick Banks, a Pittsburgh man, on numerous felony charges resulting from fraudulent schemes carried out over the Internet. The case takes its title, which has been singled out as memorable and included among lists of amusingly titled cases, from one of Banks' aliases, an electronic music group of which he was the sole regular member. He had filed the appeal under that name while representing himself.
Banks had been offering discounted versions of Microsoft software online under different names as an Amazon.com reseller. His products were either pirated or deficient, costing some customers thousands of dollars, and eventually one complained to the FBI, who arrested Banks after a short investigation. At trial a jury convicted him of mail fraud, criminal copyright infringement and several other charges.
The judge sentenced Banks to five years in prison, varying the sentence upward by three months from the maximum range specified by the sentencing guidelines. An in personam criminal forfeiture judgment was also entered against him. Banks appealed to the Third Circuit, citing those among seven possible grounds for reversing the conviction. Foremost among them, he argued that notice of the possibility of variance was required prior to the sentencing and that the district court lacked the statutory authority to order the criminal forfeiture.
Judge Franklin Van Antwerpen wrote for the panel, which ruled for the government on all the issues. Other circuits had ruled on the variance issue, and he joined four of them in holding that Federal Rule of Criminal Procedure 32(h), which required a court to notify lawyers in advance of a contemplated departure, did not impose the same requirement on a variance. The forfeiture was likewise permitted since the mail fraud statute provided for civil forfeiture and, while it explicitly provided for criminal forfeiture only in cases where a financial institution was victimized, he did not find that Congress intended to limit it only to those cases via "a chain of cross-references."United States v. Vampire Nation, 451 F.3d 189, 200 (3rd Cir. 2006).
Investigation and prosecution Under the names Rick Burgess and John Cain, Banks started offering Microsoft software for resale on Amazon.com in 2002. Amazon's policy, which Banks was made aware of when he opened the account, required that all such products offered for sale through the site by third parties such as himself be the full retail version, not copies or duplicates. Banks sold several copies of software over the next year. "These buyers," Van Antwerpen recounted, "suspected that the software they purchased from Banks was illegally copied because the compact discs ("CDs") they received from Banks contained generic white CDs with fake labels and fake package inserts."Vampire Nation 451 F.3d at 193–195.
Some complained to Amazon, and at the beginning of the following year Amazon terminated the "Cain and Burgess" account for violating its policies. Banks opened a new account under the name Mark Howard and resumed his activities. Court documents identified one buyer as Action Software, Inc., which bought $294,859.00 worth of Microsoft products through the site. Though the order should have filled approximately 50 boxes, only 5 boxes were shipped by Banks via UPS. Even more suspiciously, the CDs in the boxes bore the name of IBM. Action Software was not able to recoup the nearly $50,000 it had laid out since the order was cash on delivery.
When Banks denied any wrongdoing, Action Software contacted the FBI. In May 2003 the FBI obtained a search warrant and combed Banks' house, coming up with "computers, blank CDs, a CD duplicating machine, and empty boxes from Microsoft and IBM software". On the computers were "images of the front and back sides of Microsoft software boxes".
Banks continued offering software for sale on Amazon and later he approached VioSoftware, a Colorado reseller from whom he had purchased Microsoft software the year before. He persuaded Warren Do, the company's chief executive officer, to sell him nearly $60,000 worth of Microsoft products COD. Banks paid with a forged check. When Do found out, he asked for the software back and told Banks he had been talking to the FBI. The two agreed that Do would return the check if Banks returned the software. Do was subpoenaed by a grand jury in the Western District of Pennsylvania the next day, and told Banks via email that he had told the FBI all about their arrangement. In reply Banks pleaded with him not to tell the grand jury anything as "this would all be for nothing."
Instead of returning what he had bought from VioSoftware, Banks shipped some of it to his other customers. What he did return later on was damaged. Do's contact with the FBI led to another search of Banks' house in September, yielding computers with evidence of software piracy and various Microsoft products and packaging.
A week later, a grand jury returned a five-count indictment against Banks that would be amended and superseded twice over the next year. Ultimately, Banks was charged with three counts of mail fraud and one count each of criminal copyright infringement, uttering and possessing counterfeit or forged securities, money laundering and witness tampering, all felonies. The case went to trial for ten days in October 2004. Banks was convicted on all counts. At the sentencing hearing five months later, Judge Thomas Hardiman added three months to the 46–57 month advisory range derived from the Federal Sentencing Guidelines, imposing a prison sentence of 60 months followed by three years of supervised release. The judge also entered an in personam criminal forfeiture judgment against Banks for $70,708.59, the total amount he had made from his crimes.
Appeal
Acting on his own behalf, Banks filed an appeal with the Third Circuit Court of Appeals. He filed under the name of Vampire Nation, an electronic musical ensemble of which he was the sole regular member that had performed in the Pittsburgh area for several years.
He alleged that seven potentially reversible errors had occurred during his trial:
The district court was required under Rule of Criminal Procedure 32(h) to give notice not just when a departure from the sentencing guidelines was contemplated but a variance as well.Vampire Nation, 451 F.3d at 195–198. The district court lacked the statutory authority to order the criminal forfeiture.Vampire Nation, 451 F.3d at 198–201. The district court could not order a forfeiture amount greater than Banks' personal net worth at the time of sentencing.Vampire Nation, 451 F.3d at 201–203. He was improperly convicted of copyright infringement since the government had not proved that the allegedly infringed works were copyrighted.Vampire Nation, 451 F.3d at 203. He was improperly convicted of counterfeiting securities since the court's jury instruction on the charge had amounted to a constructive amendment to the indictment.Vampire Nation, 451 F.3d at 204–206. He was improperly convicted of witness tampering because the jury was not instructed that the government had to show a nexus between the acts constituting the alleged tampering and an ongoing proceeding, as required by the recent Supreme Court decision in Arthur Andersen LLP v. United States. He was entitled to a retrial since the judge had not ruled on one of his motions for self-representation, andVampire Nation, 451 F.3d at 206–207. The judge should have sua sponte recused himself from the sentencing since Banks had filed a misconduct complaint against him beforehand.
A three-judge panel of circuit judges Marjorie Rendell, Franklin Van Antwerpen and senior circuit judge Joseph F. Weis, Jr. was assigned to the case. They heard oral arguments in May 2006. By that time Banks had retained new counsel, David Chontos, who argued his case to the court; Laura Schleich Irwin of the U.S. Attorney's office spoke for the government.
Opinion of the court A month after hearing arguments, the panel handed down its decision, ruling for the government on all the issues presented. Banks' convictions and sentence were upheld.Recent Case: Third Circuit Deepens Split over Notice Requirement for Non-Guidelines Sentences , 120 Harv. L. Rev. 1723 (2007). Circuit Judge Van Antwerpen wrote for the unanimous panel.
Banks' first two claims had been questions of first impression for the circuit. Other appellate circuits had considered whether Rule 32(h) required notice of contemplation for a variance in the wake of the Supreme Court's holding the previous year in United States v. Booker that the Federal Sentencing Guidelines were purely advisory, and come to differing conclusions in mostly unpublished opinions. A district court under the circuit's jurisdiction had held that the criminal forfeiture provisions of the mail fraud statute only applied to cases where a financial institution had been among the victims, but that decision was not appealed and thus did not constitute precedent.
Contemplated variance Since Banks had not raised the objection that the court had failed to provide prior notice of the contemplated upward variance at the time of his actual sentencing, the appeals court was limited to plain error as its standard of review, Van Antwerpen wrote. Under that standard, the alleged error of the lower court would have to be very obvious and serious enough to have conceivably affected the outcome of the proceeding.
Van Antwerpen began by noting that Rule 32(h) had been passed by Congress in response to the Supreme Court's 1991 holding in Burns v. United States that courts did not have discretion to depart upward from the guidelines, which then had the force of law, without notifying the parties.Burns v. United States, . But since Booker had held that the guidelines were advisory, courts were freer to adjust sentences as long as they started from a range derived from the guidelines. "Thus, district courts continue to consider all grounds properly advanced by the parties at sentencing, as they did in the past," the judge wrote. That included all the factors that had always been present in the statute governing sentencing.
Before Booker, defendants had had firmer reasons to expect a sentence within the guidelines. Hence, Rule 32(h) was passed after Burns, requiring that courts give prior notice of a contemplated departure "on any grounds." Van Antwerpen quoted the Seventh Circuit, which had recalled the "unfair surprise" that led to Burns in reaching a similar conclusion about the applicability of Rule 32(h) to contemplated variances prior to Booker.United States v. Walker, 447 F.3d 999, 1007 (7th Cir. 2006) Since the guidelines were now advisory, a court could consider grounds other than those outlined for departures, including the factors in the statute, which had not been repealed.
"Accordingly, given that defendants are aware that courts will consider the broad range of factors set forth in [the law] at sentencing, we perceive none of the 'unfair surprise' considerations that motivated the enactment of Rule 32(h)," Van Antwerpen wrote. Chondos, he added, had conceded the point during oral argument. "[R]equiring advance notice of "any ground" beyond the factors set forth in [statute] would undoubtedly prove to be unworkable." He ended that portion of the opinion by affirming another recent Third Circuit holding that continued, post-Booker, to require prior notice of a contemplated departure from the guidelinesUnited States v. Cooper, 437 F.3d 324 (3rd Cir. 2006) and admonished district courts to state explicitly whether any adjustments to sentences they made outside the ranges fixed by the guidelines were variances or departures.